Central to this report is the microsimulation model which has been developed at the SPRC over the last three to four years. This model builds on detailed income data released by the Australian Bureau of Statistics (ABS) by estimating how economic, demographic and tax-transfer policy changes have impacted upon family incomes. It is possible to use the basic method to construct counterfactual outcomes, i.e. outcomes which would have been observed if economic or policy changes had been different from those which actually took place. By comparing observable outcomes with these counterfactual simulations, it is possible to estimate, for example, the impact of changing levels of unemployment on poverty and income inequality. This Report documents the underlying microsimulation techniques, as they exist in 1992. It is a feature of this research that the methods themselves are constantly being improved as new data and techniques become available. Having explained the methods, the Report analyses changes in income distribution and poverty in Australia in the 1980s and highlights some of the factors contributing to those changes. It is important research and its results are fundamental to an understanding of how Australian families have fared during a time of rapid economic and social change.