Recent projects

Frontier Australia has assisted clients in the following project areas:

Auction theory

The last 10 years have seen an explosion of interest in the use of auctions to allocate scarce resources, be they airport landing slots, radio spectrum, carbon permits, fisheries rights or gambling licences. Auctions appeal to policy makers as they can facilitate revenue extraction, and allocate resources in way that enhances benefits to society. The choice of rules underpinning the auction is critical to achieving desired outcomes. Auction rules must recognise the specificities of the sector and participants to which they apply; some poorly designed auctions have come to grief because they simply attempted to shoehorn off-the-shelf solutions to particular problems without regard to the specific requirements of the sector.Recent examples of our work include:

• Gambling licences – Frontier advised the Department of Justice, Victoria on the choice of suitable auction mechanisms as a function of various regulatory models developed for gambling activities. 
  
• Emissions trading - Frontier has modelled the impact on prices and output of various permit allocation methods, and in this basis provided advice to power producers and state governments in Australia.
  
• Wholesale markets – Frontier has advised the Department of Primary Industry, Victoria, on the design of mechanisms to allocate vendor space at its proposed wholesale market facility. 

Market failure and public goods

Sometimes, the private returns that accrue to an individual or to a firm differ from the returns to society. In such cases, the market is likely to either under or over provide a commodity or service. For example, some of the benefits of investing in research and development may accrue to parties other than the investor and this leakage of benefits may lead to underinvestment in R & D. Frontier has worked with many policy makers on a diverse range of assignments to identify the precise sources of market failure, and how policy can be designed to remedy these.  

Recent examples of our work include:

• Flood risk mitigation – drawing on Monte-Carlo simulations of flood damage, Frontier advised the Launceston City Council on the mix of policies that would yield the greatest cost-benefit balance in addressing flood risk.
  
• Primary Industry Research, Development and Extension – Frontier reviewed proposals for a National Framework for RDE services. Our analysis focused on assessing the structure of incentives embedded within the current architecture for funding and delivery, highlighting those areas where the impact of these incentives were not congruent with public policy aims.
  
• NSW Forests – On behalf of Forests NSW, Frontier Economics has recently reviewed the pricing of native forest and hardwood plantation logs sourced from public forests in NSW. The review included both the pricing system and the price review mechanisms for “at stump” and “delivered” prices for logs.

Review of regulation and programme design

Most governments require that sector-specific regulation be assessed to examine the balance of costs and benefits that ensue. With increasing pressure on official budgets, governments are also keen to review whether particular policy and programme choices have delivered value for money.

Recent examples of our work include:

• Support for computerising customs processes – Frontier was retained by the Swedish International Development Agency to review the effectiveness of a United Nations project to implement information technology in the customs services of a number of countries in Africa, Asia and the Pacific. Frontier assessed the factors determining project success and failure, with a particular emphasis on the impact of different asset ownership structures (joint ventures, arms length arrangements) on the quality of project governance.  
• Review of Valuation of Land Act – Frontier undertook a cost/benefit assessment of proposed changes to the Act. Frontier’s analysis was used by the Department to refine the regulatory framework.
  
• Victorian Auditor-General’s Office – Frontier assisted the Victorian Auditor-General’s Office review the 2004 rail (metropolitan tram and train) refranchising process.
  
• Department of Justice Victoria – Frontier reviewed a proposal to extend the regulatory powers of inspectors as they seek to enforce the Fair Trading Act.
  
• Plumbing Industry Commission – Frontier advised on the costs and benefits of proposed regulatory amendments. Frontier conducted an extensive process of consultation with industry representatives and practitioners in order to evaluate the proposed options.
  
• Infrastructure analysis – Drawing in a computable general equilibrium model, Frontier undertook an economic cost benefit analysis of a proposed bridge and port project in Qeshm Island, Iran.

Infrastructure regulation and policy

Government policy and regulatory approaches towards the energy, water and telecommunications sector are all key areas of public policy. Frontier has undertaken extensive work in these areas.