HI5003-Economics for Business

In the recent past, the size of the agricultural sector has been going down when compared to the other sectors in the economy in Australia. The sector is however known to have much influence in the economic growth and its exports too. The composition of the farms’ output has shifted from livestock production towards crop production (Lockie & Halpin, 2013, p. 143). The latter has shown an effect on how drought impacts the farm output in Australia. The agricultural sector is of great concern to both the policy holders and farmers since they are directly affected by any swings in the sector.

The firm sector has been having much influence in the economy, particularly the macro economy although it only accounts for about 2.5% of the nominal DGP as recorded in over the last 10 years. The variation in the weather conditions causes a volatility in the outputs of firms which to a greater extend causes noticeable effects on the aggregate GDP.A good example can be deduced from the last 20 years whereby it has not been uncommon for the farm the alterations in the production of the firm to minus almost half a point from the per year gross domestic product (GDP) (Matsuyama, 2012, p. 343).Rainfall in this current year has been above average I  the eastern region and hence there is a likelihood that the output of the firm will have a high contribution in the growth of the GDP. The flooding that occurred recently in the eastern parts of Australia causes a downside risk to the outlook of the agricultural products.

 (Anderson, 2014, p. 143).

Trends in the production

As of 2010, the farm production estimate was approximately $ 23 billion and this represented a 2% of the nominal GDP. The agricultural industry has been declining in Australia in the last 50 years. The sectors share fell from 15.5% in 1960 to 2.5% in the last 10 years. There has been a decline in the rate of employment as compared to the rest of the economy (Pritchard, 2013, p. 134). Research shows that 10% of the workforce in Australia was employed in the agricultural sector in early 1960s as compared to 3% that is employed in the same sector in the last 10 years. Firm production can be divided into crops and livestock related goods. There has been an increase of the share accounted for by farm output coming from crops in the recent past. The rise as in agricultural output has been attributed to the increase in the importance of crops other than grains. The table below shows the farm output in percentage form in the recent past.

 (Friedma & McMichael, 2014, p. 114)

 Despite facing n increase in the agricultural output for the last decade, there has been no change in the gross exports and this is a clear indication that there has been an increased consumption in the domestic market. The latter has caused slow growth rate for the companies that export the agricultural products. The composition of export has shifted from livestock towards crops since 1980s.

 (Altman, 2012, p. 176).

Production in Crops

Crop production mix has changed in the recent past.in the last 20 years, the share of total production that was accounted for by grains matched with that of other crops. However, the production of other crops increased at a faster rate in the last ten years. The share of grains exported has gone down in the recent past while the growth in the domestic demand has outperformed the modest growth in the agricultural production (Armstrong & Read, 2013, p. 78). The decline in the production has been brought about by what and the consistency in the increased use of wheat and other grains as food for animals.

 (Altman, 2012, p. 165).

 (Friedma & McMichael, 2014, p. 187).

There has been an improvement in the production of wheat in the eastern states. The western states are expected to offset lower yields.

Production of Livestock

Livestock production in Australia has gone down over the last 30 years with a decline in livestock products like wool.in 1960s, the production in livestock accounted for about 45% of the total agricultural production. However, the production fell to about 35% in 2000s.the primary drivers to this decline has been the alterations in the market prices (Friedma & McMichael, 2014, p. 187). The demand has then shifted towards the alternate fibres which are relatively cheaper and easily available.

 (Pritchard, 2013, p. 254)

Recommendation

With the decrease in the agricultural output in Australia, the government should come up with a good strategy on how to provide farmers with supplementary animal feed. This will ensure that the number of livestock maintained is not decreasing. The effects of drought is different with respect to the kind of rural production.in the livestock sector, the amount of pasture available is greatly reduced by drought and this has a direct effect on the production per animal. With the government supplying supplementary animal feeds, farmers will not reduce the number of livestock they have and hence meat production will be moderate (Lockie & Halpin, 2013, p. 265). After the long drought is over, farmers will still recover from the drought still keeping the maximum number of livestock that they are supposed to keep.

The government should also take initiative of educating the farmers on the best crops to grow which easily mature and those which can survive adverse climatic conditions. The impact of climate change in crop production patterns is quite varying. Drought makes some farmers stop growing crops and hence the level of crop production goes down. Crop production in the industry tends to go down in a drought years (Lockie & Halpin, 2013, p. 178). However, production can recover relatively quicker than livestock with improved amounts of rainfall and also due to the increase in the nitrogen content in the soil.

The above analysis supports my conclusion in that with the increase in the government keenness to aim at improving the agricultural sector, more labor will be required here and hence this will reduce the rate of unemployment in Australia (Armstrong & Read, 2013, p. 265). The supply of alternative fibre will also lead to maintenance of the number of livestock that the farmers are supposed to rear.

Conclusion

The agricultural sector plays a very important role in determining the pattern of the economic growth. The recent floods in Eastern Australia and also the damage caused by locusts are downside outlooks in the agricultural sector.it is important that the government comes in and look for a remedy for the same. The shift in crop production from animal production has seen great effects in the industry and the animal products are diminishing at a faster rate. For the agricultural sector to be well balanced, both crop production and animal production should be given the same weight.it will be advisable for the government to come up with alternative feeds for the animals and at the same time educate the farmers on the crops that can easily adapt to the adverse climatic conditions.

References

Altman, M. (2012). Staple theory and export?led growth: constructing differential growth. Australian Economic History Review, 34(7), 176-199.

Anderson, W. (2014). Growth of agricultural protection in East Asia. Food Policy, 45(5), 132-156.

Armstrong , H. W., & Read, W. (2013). Trade and growth in small states: the impact of global trade liberalisation. The World Economy, 7, 78-99.

Friedma , H., & McMichael, P. (2014). Agriculture and the state system: The rise and decline of national agricultures, 1870 to the present. Sociologia ruralis, 8(3), 100-130.

Lockie , S., & Halpin, D. (2013). The ‘conventionalisation’thesis reconsidered: Structural and ideological transformation of Australian organic agriculture. Sociologia ruralis, 23(3), 243-256.

Matsuyama, K. (2012). Agricultural productivity, comparative advantage, and economic growth. Journal of economic theory, 54(2), 432-456.

Pritchard, E. M. (2013). The emerging contours of the third food regime: evidence from Australian dairy and wheat sectors. Economic Geography, 5, 243-256.