Agricultural Growth and Reforms in Australia

Introduction

Agriculture is a major and most crucial economic activity to all countries in the whole world. It is an art where the soil is cultivated to produce crops while animals are raised with an aim of producing food and other products (Bareja, 2014). He also noted that this practice is carried out for economic gains. He noted that agriculture has a great coverage; starting from science, business, practice and even legal matters. Some people may think that they fully understand what agriculture entails simply because they undertake this practice every day, but in the real sense they don’t. Agriculture is described as both a science in that its foundation is on scientific facts and art in that it need skills. Due to the broad coverage of agriculture, it has been described differently by many researchers. There is no single definition that can cover all its practices; it is mostly limited to crops and animal production, but it covers areas like forestry, fisheries, and many other activities.

Rimando (2004) defined agriculture as a systematic process where useful plants and animals are raised through management by man. Rubenstein (2003) defines it as a practice where a proportion of the surface of the earth is modified through a deliberate effort through crops cultivation and raising of animals aiming at ensuring sustenance or for economic gain.

This research will consider the many factors contributing to the production growth of agriculture industry in Australia. Some of the factors that has facilitated this growth include; the availability of ready markets both at the national and international level which has resulted in an increase price of products; the abolishment of agricultural subsidies which has made the farmers to become more competitive; investment in research and development; the availability of financial support to the small-scale farmers to help them in management of farming risks, etc. Other factors have also contributed to stagnated growth. These include factors such as reduction in investment on R&D, poor climates, pest, and diseases, etc. Both the negative and positive factors will be considered under the agricultural development in Australia. 

History of Agriculture

This practice was started a very l

Many changed have been introduced to the farming methods over the years. Farmers have adapted to the modern methods that have resulted in increased production. Technology has facilitated the mechanization of farming methods (Langridge, Cordell and D’Occhio, 2014).

The climate of Australia does not favor agricultural practices in all its parts; for this reason, agricultural mix of dryland and irrigation farming are used. Some areas receive very little rainfall such that it can’t support agriculture. Farming in these areas has been possible through only irrigation. Areas of rich fertile soils and high rainfall are used for crops and daily farming, whereas those of low soil fertility are used for pastoralism. This explains the difference in the land proportions used for agriculture among the states.

Fig: Distribution of land proportions used for agriculture in the Australian States in 2011.

Source: ABS Agricultural Commodities, Australia, 2010–11 (cat. no. 7121.0)

The higher the proportion of land spent on agriculture, the higher the amount of rainfall received. Queensland in the report was leading in the proportion of land used while Tasmania had the least proportion.

Importance of Agriculture

Agriculture in Australia has had a high percentage contribution to the GDP share. It is the primary source of food for Australian citizens and others outside countries through exportation. 93 % of food consumed in Australia is produced locally (Batt, 2015) It is essential for many people especially those who are low-incomers in that, it provides some income to these people and also saving the money that would otherwise be used to buying food. It is also a source of employment; the advancement in technology has led to extensive farming where a significant number of human resource is an essential input. Batt noted that, in the 2^nd quarter of 2015, the number of people employed in agriculture was 307,000. There are so many people employed in agricultural farms (Gray, Oss-Emer and Sheng, 2014).

Fig: Contribution of agriculture to Australian GDP

It is illustrated above that there has been a rising trend in the contribution of agriculture to the Australian GDP. The contribution was at the lowest level in 2007 (i.e. during the Global Financial Crises), however, it recovered in 2008 when it started rising again. Highest levels were recorded in 2013 and in 2015. The contribution started falling in the 3rd quarter of 2015; there is a falling trend since then.

Problems Facing Agricultural Production in Australia

Many factors have contributed to the prosperity and depression (boom and bust) of agricultural production in Australia (Clark, 2003). These factors are; the fact that Australia has unreliable climate as in the whole world it is the driest continent. The growing season of Australia is mostly below five months, those above five months accounts for only 25 %. The adaptation of plants and animals to Australian conditions were poor. The Australian local population is small and heavily dependent on overseas markets. For a very long time, the range of products the economy has been depending on is limited (i.e. wheat, cattle and sheep). The soils are poor and infertile, and the quality of their pastures are low. Pest’s infestation, weeds, and diseases are a major threat to the farmers. Tools and Machinery used are inadequate, and the inputs and labor costs are high. Demand and supply keep on fluctuating, and farmers lack information, transportation, and communication. Markets are located in distant areas. There are high risks and the income to the farmers is uncertain. The global market is competitive and highly protected. Thus, economic efficiency is needed for competing on the world market.

The other problem facing Australian agriculture is the shortage of skilled labor. Unlike the past where young people engaged in farming activities, currently, it is done by the elderly (Abs.gov.au, 2016). Due to the effects of reduced production owing to the poor climatic fluctuations, graduates are discouraged from pursuing courses in Agriculture. 

Fig: Farmers age profiles

Source: 4102.0 - Australian Social Trends, Dec 2012.

Currently, most of the farmers lie within the range of 45-69 years, but in the past, the range was between 25-59 years.

Sustainability in Australian Agriculture

Clark (2003) noted some requirements for agriculturalist to achieve sustainability in agriculture production in Australia. These requirements include what agriculturalists must do. They must seek more education and training to improve their managerial skills. Must plan for the whole farm to maintain and enhance resources. Must base their production on what the consumers want and also have some long-term planning. Must research on the consumers’ and market requirements and consistently produce high-quality products. Must have access to up-to-date information. Must stabilize income by reducing risks through diversification. The plants and animals used must be suitable to the prevailing environment. The climate must be modified through irrigation, mulching, housing animals, windbreaks, and glasshouses. Must not exceed the land’s capability in use.

Technological developments and innovations must be applied. Resources must be improved, for example through; green manuring, crops rotation, use of fertilizers, minimum tillage operations, legume-based pastures and conservation of oil practices. Must apply sustainable practices such as land care and catchment management. Must add value to the produced products to raise their value. E.g. processing of products. Natural environment, economic and social conditions should be protected and improved, and all the farmed species needs a safeguard on their health and welfare (Saiplatform.org, 2016). Sustainable agriculture according to Gold (2016) is achievable when the current production is able to satisfy the present basic needs, and the resources preserved for supporting the future generation.

Agricultural Developments in Australia

Owing to the many challenges that are facing farmers in Australia, there has been some development aimed at solving the issues preventing the farmers from maximizing their production. Some of the issues have led to the establishment of various reforms. Despite the challenges faced, agricultural production in Australia has remained to be high.

Financial Support

This reform was mainly aimed at stimulating the development of small-scale farmers. The income received by this farmers is uneven and not sufficient for expansion. Johnston and Frengley (1994) argued that, because these farmers have an insured income, it is very difficult for them to access loans from loaning institutions. Due to their poor state, financial institutions believe that their possibility of defaulting on their loan is very high. They are considered to be risky borrowers. Johnson and Forbes (2000) noted that the introduction of microfinance institutions will facilitate the accessibility of loans to these farmers enabling them to expand their production capacity. The greatest problem facing many economies is that they have potential, but yet their production level is below capacity.

Infrastructure

Increased government spending leads to improved infrastructure. Some farmers produce their goods but are not able to get them to the market. Bad roads and communication infrastructure are the major factors responsible for this. Development of infrastructure would enable many farmers to reach the potential buyers. Agricultural products are highly perishable, thus, they require fast means of getting them to the market. Better means of communication will save the costs of looking for buyers and that incurred when the farmers are not able to get buyers on time, consequently resulting in products getting spoiled. 

Minimization of Trade barriers

Foreign markets provide a large market for both imports and exports. Like any other country, Australia has its trading barriers and regulations. To boost agricultural growth, the Australian government has imposed barriers against the importation of agricultural inputs and also agricultural products that are domestically produced. Importation of outputs hinders agricultural growth in an economy in that, when the price of imports is lower compared to domestic price, consumers will prefer importing rather than demanding locally. This causes the farmers to lose the market for their products causing them to end up selling at very low prices. Trade agreements between Australian and some other large countries have been formed allowing for the free flow of commodities across the regions. The easing of the exporting term of trade with this nations enables farmers to sell their products in the international market thereby creating a large market base. Since the exporting firms are able to secure higher prices in the international markets, it is assumed that the price they offer the farmers for their produces tend to be higher. This creates the incentives on the part of the producers to produce more.

Reforms on Taxes

There has been the establishment of Farm Management Deposits (FMDs) legislation aim at containing the financial risks faced by the small scale business owners. There are many factors responsible for subjecting farmers to financial risks. These factors include the climatic changes where poor climates cause low levels of production; market price fluctuation where low market prices result in losses being made by the farmers; and finally the natural disasters. The major concept behind this is the presence of agricultural boom and busts. According to a report by Ato.gov.au (2016), this program is designed to enlighten the farmers on the need to have some saving. They solve their risks by using the saved amount. The legislation allows farmers to deposit some money in the scheme when they make huge profits during a boom period; this deposited amount can be withdrawn during low profits period.

Chan (2014) noted that this scheme is much attractive to the farmers as the money deposited is tax-free; taxation only applies during withdrawal. It is important to primary producers as it complements other strategies used in risk management. The eligibility of joining the scheme are; at the time of making the deposit, one must be operating a primary operating business. Must be an individual as a partnership does not qualify for the scheme. The depositor’s non-primary production taxable income must not be more than $100,000. Initially, $400,000 was the set maximum amount for a single deposit; the minimum amount being $1000. However, there was a proposition on the need to raise this maximum amount to $ 800,000 as from 1^st July 2016 (Agriculture.gov.au, 2015).

Reforms on Water Shortage

Water shortage is a major problem facing many areas of Australia. Due to poor climatic conditions, some areas have not been able to produce crops; some land has been left unused because they are so dry to support agricultural activities. Owing to this reason, some farmers are seeking irrigation methods to support crops life. To encourage agriculture, there was a proposal to build dams in New South Wales and Victoria. The idea of dams construction to boost crop production by making water available is the greatest reform (ABC Rural, 2015). The government is also enlightening citizens on the need to conserve and recycle water. Boreholes drilling in the dry areas is a significant innovation.

Fig: Water consumption level in Australia

Source: 4655.0.55.002 - Information Paper: Towards the Australian Environmental-Economic Accounts, 2013.

The highest proportion of water available in Australia is consumed on Agriculture, forestry and fisheries. The graph above represents 55 % of the total water and 63% of water consumed by this industry.

Agricultural Subsidies

The department of Australian Agriculture and Water Resource and the government are providing financial assistance and grant programs to individual and Australian businesses to raise their productivity and to boost exports. The increasing variable climate faced by farmers and primary producers has led to the introduction of drought and rural assistance to help them in managing and becoming prepared for drought effects and other challenges. A report by Keogh (2011) noted that the level of agricultural subsidies in Australia is too low. In 2010, Australia was recorded to be the second last economy with the least agricultural subsidies; New Zealand being the last. Hopkins (2009) and Turnbull (2014) noted these farmers are among those with the least government support.

Subsidies to boost exports in Australia has been noted to have adverse effects on the farmers (Mather and Earl, 2015). Australian producers of fruits, meat, sugar, wine, cotton, and dairy, could become more competitive with the abolition of subsidies; this was noted by Andrew Robb the Trade Minister. The livelihood of Australian farmers has for decades been threatened by export subsidies. Mather and Earl pointed out that the Australian Trade Policy has since the 1970s aimed at ending these subsidies.

Urban Farming

Food security has been recognized to be a major problem for developing countries. There is a challenge in providing food that is sufficient and easily accessible. Bearing the fact that more than 90 % of Australian live in the cities, food security is a major issue in the urban areas than in the countryside (Burton, 2012). The growth of population has raised the demand for food. Most of the food consumed in the urban cities is that produced in the rural areas. The food requires transportation for it to get to the urban markets and factors such as rising oil prices may raise the cost of shipping. Burton noted that the best idea in curbing this issue of food insecurity would be to by growing more food in the cities. Urban agriculture has been under-developed for many years with few small-scale farmers growing some crops in their backyards. The major challenge facing the expansion of urban agriculture is the land size since more investors are interested in buildings constructions. Carey, Sheridan and Larsen (2015) argued that in an attempt to accommodate the rising population in the Australian cities, the land available for agriculture is diminishing.

Agricultural R&D

In Australia, productivity growth has mostly been influenced by investment in R&D (Mullen, 2007). The report by Neales (2013) noted that there have been a significant reduction in the spending on agricultural research. She noted that this was undermining its ability of becoming a food bowl. The drop was observed since 2000 with the stagnation in production. Most farmers do not have advanced skills in production. R&D investments contribute to instilling knowledge on the farmers on the new and efficient means of production. Dr. Mullen and Mr. Koegh argued that the predicted growth of agriculture by the year 2050 will only be achieved through a significance increase in research and development. Pruning the investment on R&D could not achieve the predicted target. Mr. Koegh argued that agricultural productivity growth may contribute much towards an agricultural boom than an increased use of land or water. The study by Professor Pardey on public investment on agriculture R&D that involved ranking a combination of 126 developing and developed countries revealed that the reduced spending lowered the rank of Australia from 9^th to 16^th (Neales, 2013). 

Conclusions

Many developments have been enriched in the field of agriculture over the years. It has also evolved to require policy regulations by the government. The role of the government in an economy is ensuring that sustainable agriculture is ensured. Sustainability in agriculture entails the efficient production of high quality and safe agricultural products without posing risks to the natural environment, farmer’s economic and social conditions, those of employees and the local communities. The most critical factors identified to have a stagnation in agricultural growth in Australia are; reduced investment in R&D, export subsidies and climatic conditions.

The government has played an important role in promoting agricultural growth, but in some cases, it limited its growth. For instance, when there is low rainfalls and the level of water in the rivers get to low, the government impose a restriction on the use of water for irrigation. This is conflicting with the role of promoting agricultural growth. The government is future-oriented and is thus mostly interested in ensuring that the use of resources does not undermine the future production. It regulates all the farming practices to ensure sustainability. Without the intervention of the government, agriculture in Australia could be underdeveloped. Farmers would care more about profits and less care for the future. This could negatively impact the environmental, economic and social conditions.

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