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The Treasury Macroeconometric Model of Australia: Modelling Approach

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Jared Bullen, Benjamin Conigrave, Adam Elderfield, Cecilia Karmel, Larissa Lucas, Chris Murphy, Heather Ruberl, Nicholas Stoney and Hui Yao
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Economy-wide models are an important tool used by fiscal authorities and central banks to support the provision of sound assessment of the economic outlook. The Treasury Macroeconometric Model of Australia (“EMMA”) is a framework to support macroeconomic forecasting, and counterfactual policy and scenario analysis at the Treasury. It has been developed, tested and used within Treasury since 2018.

EMMA plays a central role in preparing the economic estimates which underpin Australian Government fiscal projections and scenario analysis which is used to assess the risks about those estimates. Macroeconomic forecasts and the scenario analysis from the model are also used to inform Treasury’s advice across a broad spectrum of policy areas to assist with both policy formulation and policy costing. The model is also used to develop capability in applied small open economy macroeconomics.

The focus of this paper is to outline the model’s structure and describe its place within the macroeconomic modelling literature. Further details on the model’s equations, empirical properties and dynamics will be published over time. A macroeconomic model is never finished. The model will continue to be developed to ensure that it remains a fit for purpose tool to analyse the evolving economic and policy environment. This paper outlines the first version of the model.

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