Modelling the potential impacts of lower air transport prices in Australia

This information paper provides two simulations to illustrate the potential benefits of effective competition policy reforms in the market for air transport services in Australia: • S1 A shift in the domestic aviation industry supply curve that results in an initial 10 percent reduction in the domestic price of domestic aviation services; and • S2: Matching shifts in both the domestic and imported aviation supply curves that collectively result in an initial 10 percent reduction in the domestic price of aviation services. The scenarios modelled are those specified by the Treasury Competition Taskforce to support its preparation of the Aviation White Paper. The simulations use the GDyn-FS dynamic multi-region, multi-sector general equilibrium model of the global economy (Gretton 2021). The model is an intertemporal variant of the GTAP comparative static modelling framework used extensively in assessing the impact of economic changes on trade, production and consumption in regional economies and across the