Post on 12-Jan-2016
transcript
The Costs of Remoteness
Geoff Frost, Lucy Williams, Adam Malarz & Dennis Byles
1
Trying to understand what costs vary and why
The real costs of living in different areas:
1. Groceries, housing, petrol, clothing & other common goods & services
2. Cost of accessing education & health services
3. Housing
Drivers & responses of consumers to price differentials
2
Why do this?
• Effects of space not just time
• Testing accepted wisdom (freight cost?)
• Well being - complements incomes and wealth work
3
Prices may vary because of: • Distance/cost of transport
• Competition
• Population/demography
• State
• Income
• Industry (structure)
• Local produce
• Tourism/seasonality
4
Locations where data was collected
5
Constructing indices
•Overall Index
•Indices for product groups
•Weighting according to the ABS’s Household Expenditure Survey
•Index compared to capitals
6
Cost is more than just price
•$ Price
•Availability & choice
•Quality differences
7
Poor grocery availability in small towns
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
- 5,000 10,000 15,000 20,000 25,000 30,000
Population of analysed locations (2006)
ava
ila
bil
ity
of
gro
cery
ite
ms
8
Grocery prices higher in small towns
9
80
90
100
110
120
130
140
150
160
170
180
10 100 1 000 10 000 100 000 1 000 000 10 000 000
Population (2006)
Gro
ce
ry i
nd
ex
(2
00
6)
Individual stores: prices and threshold populations
8 19
80
90
100
110
120
130
140
150
160
170
180
- 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 90 000 100 000
Population (2006)
Gro
cer
y i
nd
ex
(20
06
)
10
Individual stores: major retailers have consistent price structures
8 20
80
90
100
110
120
130
140
150
160
170
180
- 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000 90 000 100 000
Population (2006)
Gro
cery
ind
ex (
200
6)
Independent stores Major chain stores
11
Majors & independents compete on price and service
8 21
80
90
100
110
120
130
140
150
160
NT
(vr
)
NT
(r)
QLD
(or
)
NT
(r)
AC
T (
mc)
NT
(or
)
SA
(or
)
TA
S (
ir)
WA
(vr
)
QL
D (
mc)
QLD
(or
)
WA
(or
)
WA
(or
)
TA
S (
or)
TA
S (
or)
WA
(or
)
SA
(or
)
TA
S (
ir)
VIC
(ir)
VIC
(ir)
QLD
(vr
)
WA
(or
)
WA
(or
)
QLD
(or
)
QLD
(ir
)
QLD
(ir
)
WA
(ir)
VIC
(ir)
QLD
(or
)
WA
(r)
NS
W (
or)
NS
W (
mc)
WA
(ir)
NS
W (
or)
VIC
(m
c)
WA
(or
)
NS
W (
ir)
WA
(m
c)
SA
(m
c)
NS
W (
ir)
SA
(or
)
NS
W (
ir)
QLD
(ir
)
State / Territory and remoteness class (2006)
Gro
cer
y i
nd
ex
(200
6)
Independent stores Major chain stores
12
Some groups show similar patterns
13
Hardware
60
80
100
120
140
160
180
200
10 100 1,000 10,000 100,000 1,000,000 10,000,000
Population (2006)
Hard
ware
in
dex
Correlation coefficient = -0.26
Household items
50
100
150
200
250
300
10 100 1,000 10,000 100,000 1,000,000 10,000,000
Population (2006)
Ho
us
eh
old
ite
ms
in
de
x
Correlation coefficient = -0.21
Electricals
50
70
90
110
130
150
170
190
210
230
250
10 100 1,000 10,000 100,000 1,000,000 10,000,000
Population (2006)
Ele
ctr
ica
l it
em
s i
nd
ex
Correlation coefficient = -0.21
80
90
100
110
120
130
140
150
160
170
180
10 100 1 000 10 000 100 000 1 000 000 10 000 000
Population (2006)
Gro
cery
in
dex
Correlation coefficient = -0.20
Groceries
Others behave in different ways
14
Housing
0
20
40
60
80
100
120
140
160
180
200
220
240
260
10 100 1,000 10,000 100,000 1,000,000 10,000,000
Population (2006)
Ho
usin
g c
osts
in
dex
Correlation coefficient = 0.29
Unleaded petrol
90.0
100.0
110.0
120.0
130.0
140.0
150.0
160.0
10 100 1 000 10 000 100 000 1 000 000 10 000 000
Population (2006)
Ind
ex
va
lue
60
70
80
90
100
110
120
130
140
150
10 100 1,000 10,000 100,000 1,000,000 10,000,000
Population (2006)
Lo
cal
se
rvic
es i
nd
ex
Correlation co-efficient = 0.08
Local services
60.00
70.00
80.00
90.00
100.00
110.00
120.00
130.00
140.00
10 100 1,000 10,000 100,000 1,000,000 10,000,000
Population (2006)
En
tert
ain
me
nt
ind
ex
Correlation coefficient = 0.01
Entertainment
Housing costs increase with population
8
0
20
40
60
80
100
120
140
160
180
200
220
240
260
10 100 1,000 10,000 100,000 1,000,000 10,000,000
Population (2006)
Ho
usi
ng
co
sts
ind
ex
Correlation coefficient = 0.29
15
Fuel retail prices may be affected by :
• The cost of the fuel to be sold (delivered wholesale price)
• The number of litres sold (turnover)
• The size of the service station’s overheads
• Competition from other service stations
16
Location affects demand and supply
17
Diesel
Variable
ULP
1.0 Population -0.4
1.0 Remoteness (ARIA+) 0.7
-2.0
On a Freeway Not
significant
18.6 On a Minor Road 16.6
Not significant Distance from Terminal Gate (km) 0.0037
Not significant Nearest Terminal Gate Price 0.8
-1.18 State Fuel Rebates -1.17
0.70 R-squared 0.71
Significant coefficients of variables affecting fuel prices
18
Diesel
Variable
ULP
1.0 Population -0.4
1.0 Remoteness (ARIA+) 0.7
-2.0
On a Freeway Not
significant
18.6 On a Minor Road 16.6
Not significant Distance from Terminal Gate (km) 0.0037
Not significant Nearest Terminal Gate Price 0.8
-1.18 State Fuel Rebates -1.17
0.70 R-squared 0.71
Significant coefficients of variables affecting fuel prices
19
Diesel
Variable
ULP
1.0 Population -0.4
1.0 Remoteness (ARIA+) 0.7
-2.0
On a Freeway Not
significant
18.6 On a Minor Road 16.6
Not significant Distance from Terminal Gate (km) 0.0037
Not significant Nearest Terminal Gate Price 0.8
-1.18 State Fuel Rebates -1.17
0.70 R-squared 0.71
Significant coefficients of variables affecting fuel prices
20
Diesel
Variable
ULP
1.0 Population -0.4
1.0 Remoteness (ARIA+) 0.7
-2.0 On a Freeway
Not significant
18.6 On a Minor Road 16.6
Not significant Distance from Terminal Gate (km) 0.0037
Not significant Nearest Terminal Gate Price 0.8
-1.18 State Fuel Rebates -1.17
0.70 R-squared 0.71
Significant coefficients of variables affecting fuel prices
21
Diesel
Variable
ULP
1.0 Population -0.4
1.0 Remoteness (ARIA+) 0.7
-2.0 On a Freeway Not significant
18.6 On a Minor Road 16.6
Not significant
Distance from Terminal Gate (km)
0.0037
Not significant
Nearest Terminal Gate Price
0.8
-1.18 State Fuel Rebates -1.17
0.70 R-squared 0.71
Significant coefficients of variables affecting fuel prices
22
Diesel
Variable
ULP
1.0 Population -0.4
1.0 Remoteness (ARIA+) 0.7
-2.0
On a Freeway Not
significant
18.6 On a Minor Road 16.6
Not significant Distance from Terminal Gate (km) 0.0037
Not significant Nearest Terminal Gate Price 0.8
-1.18 State Fuel Rebates -1.17
0.70 R-squared 0.71
ULP Price (June 2006) & Urban Centre Population
8 10
120
130
140
150
160
170
180
190
200
0 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000
Urban centre population (2006)
Un
lead
ed
pet
rol
pri
ce (
cen
ts/l
itre
) (2
006)
23
ULP Price (June 2006) & Urban Centre Population
120
130
140
150
160
170
180
190
200
0 10 000 20 000 30 000 40 000 50 000 60 000 70 000 80 000
Urban centre population (2006)
Un
lead
ed
pet
rol
pri
ce (
cen
ts/l
itre
) (2
006)
Less remote towns in sample Most remote towns in sample
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Overall Cost of Living
80
90
100
110
120
130
140
10 100 1,000 10,000 100,000 1,000,000 10,000,000
Population (2006)
Co
st o
f li
vin
g i
nd
ex
25
Location is a key driver of prices
1. Demand side factors (population, passing trade) impact heavily
2. The cost of transporting goods is less important than is commonly assumed
3. Competition (the ability of customers to access other stores) caps prices
4. The overall cheapest place to live may be medium to large towns and regional cities
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The Costs of Remoteness
Geoff Frost, Lucy Williams, Adam Malarz & Dennis Byles
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