You are developing policy. You may decide to complete an economic assessment as part of the policy development process.

Economic assessment is often used to better understand the nature and extent of the problem at the beginning of the policy development cycle.

Specifically, it is used to better understand how the market, community or the environment is affected by an issue and what supporting evidence is available to justify action.

Data can be used to outline the size and possible impact of the problem, and to understand the relationship between key variables and any possible correlation and causality.

Economic assessment is also then used to assess the overall merits of a proposal or compare a set of options to address the issue or problem.

How should I undertake the economic assessment?

If you decide to undertake economic assessment as part of the policy development process, guidance on undertaking economic assessment has been developed to assist when performing, commissioning and evaluating economic assessments. Further guidance on specific processes, methods and variables is also available.

Cost-benefit analysis is recognised as leading practice economic assessment and is the recommended approach across the Victorian Government. In practice it may not be possible to undertake a cost-benefit analysis for all proposals and other methods may be used on an exceptions bases.

All economic assessments should be guided by the principle of proportionality, such that the investment in undertaking an economic assessment should be proportional to the scale and risk of the particular issue, initiative or investment.