the model. In later years, the estimates are negative and more in line with ABARES results and expectations. and Williams’ (1982) estimates of price elasticities of demand with respect to import prices were negative, indicating that imported timber and domestically produced timber are complements rather than substitutes. However, over the sample period domestic timber used in housing was predominantly hardwood and imported timber was primarily softwood. As such, the domestically produced and imported timber had different physical properties and were therefore not material substitutes. Ignoring any bias, these previous estimates imply demand for timber is somewhat unresponsive to price changes. The range of ABARES estimates of own-price elasticities of structural pine demand are broadly consistent with these findings albeit somewhat lower. However, taking into account the downward trend in estimated elasticities over time and potential bias, ABARES estimates appear to be consistent with what might be expected using more recent data. International studies Numerous studies present estimates of price elasticities of demand for structural timber in other countries. The majority of these studies focus on demand in North American markets, and employ a range of estimation methods, assumptions and datasets (Table 4 and Table 5). Table 4 Estimates of own-price elasticities of demand for softwood sawnwood, international Source Time frame Comments Elasticity estimate (%) McKillop, Stuart & Geissler (1980) US softwood lumber wholesale price index –0.17 Waggener, Gerard & Howard (1978) US softwood lumber price –0.35 Adams (1977) US softwood lumber index, 1 year lag –0.08 Spelter (1985) 1950 US softwood lumber price –0.29 1960 –0.16 1970 –0.13 1980 –0.11 US softwood lumber price –0.88 –0.39 Rockel & Buongiorno (1982) US Douglas fir wholesale price index –0.91 Robinson (1974) Douglas fir price –0.88 Gellner, Constantino & Percy (1990) US softwood lumber –0.38 Canadian softwood lumber price –0.54
Nagubadi et al. (2004) January 1989–July 2001 US demand for imported Canadian timber in response to changes in domestically produced untreated timber 0.23 US demand for imported Canadian timber in response to price changes in domestically produced treated timber 0.00 This study (ABARES) Q4 2003–Q2 2017 Australian demand for domestically produced aggregate structural pine in response to changes in the price of steel beams and sections used in housing –0.54 to 0.18 Australian demand for domestically produced aggregate structural pine in response to changes in imported structural timber prices –0.01 to 0.20 Note: Q1 refers to March quarter, June quarter, Q3 September quarter and Q4 December quarter.
Moving average: 1 quarter – – – – – –0.26 Model fit Adjusted R-squared 0.83 0.80 0.84 0.85 0.85 0.84 F-statistic 25.09 a 22.46 a 19.30 a 26.70 a 27.00 a 24.84 a a Coefficient significant at the 95 per cent confidence level. b Coefficients for lags of demand are jointly insignificant at the 95 per cent confidence level. c Structural break occurs at the September quarter of 2007. Note: See A1 for description of model types. Table B5 Short-run models of domestic market share in total consumption Model SH1 SH2 SH3 Current price variable coefficients Domestic price –0.38 a – – Import price 0.30 a – – Steel price 0.08 – – Lagged price variable coefficients Domestic price: 1 quarter – –0.42 a – Import 1 quarter – –0.03 – Steel price: 1 quarter – 0.03 – Domestic price: 2 quarters – – –0.21 Import price: 2 quarters – – –0.06 price: 2 quarters – – 0.15 Constant and seasonal dummies Constant –0.02 a –0.01 a –0.02 a quarter 0.03 a 0.02 a 0.02 a June quarter 0.02 a 0.02 a 0.02 a September quarter 0.02 a 0.02 0.02 a Model fit Adjusted 0.54 0.20 0.13 F-statistic 11.41 a 3.20 a 2.24 a a Coefficient significant at the 95 per cent confidence level.