Productivity growth in developed countries: Australia Presentation to 2013 IATRC Symposium Peter Gooday Australian Bureau of Agricultural and Resource Economics and Sciences 2 June 2013
Australian agriculture Mechanisation, fertiliser, feed Improved crop varieties, pasture types, livestock breeds Fewer, larger farms Growing resource pressures Ageing farm population Global food and fuel demand 2
Australian agriculture A$52 billion produced in 2011-12 2.4% of Australian GDP and 2.5% of employment Agricultural production zones Beef Grains Broad national presence Two-thirds of production exported Sheep Dairy 3
Productivity in Australian agriculture Broadacre total factor productivity in Australia, 1953-2011 300 1953 to 2011 1.8% 200 Broadacre productivity growth 100 Agricultural terms of trade Index 0 1953 1959 1965 1971 1977 1983 1989 1995 2001 2007 Financial year ended 4
Productivity in Australian agriculture Broadacre total factor productivity in Australia, 1953-2011 300 1953 to 2011 1.8% 1953 to 1994 2.2% 200 Broadacre productivity growth 100 Agricultural terms of trade Index 0 1953 1959 1965 1971 1977 1983 1989 1995 2001 2007 Financial year ended 5
Productivity in Australian agriculture Broadacre total factor productivity in Australia, 1953-2011 300 200 1953 to 2011 1.8% 1953 to 1994 2.2% 1994 to 2011 0.2% Broadacre productivity growth 100 Agricultural terms of trade Index 0 1953 1959 1965 1971 1977 1983 1989 1995 2001 2007 Financial year ended 6
Index Productivity in Australian agriculture: changing input use (1978 2011) 200 150 100 50 Annual average growth TFP 1.0% Materials and services 0.7% Land -0.9% Capital -1.8% Labour -2.1% 0 1978 1984 1990 1996 2002 2008 Financial year ended 7
Challenges for agricultural productivity Technology Resources Society 8
% pa % pa Technology: slowed rate of global progress 3 2,5 2 1,5 1 0,5 0 3 2,5 2 1,5 Crop yield growth 1961-1990 1990-2007 Developed countries Maize Wheat Rice Soybeans World Yield growth slowing for major cash crops Slower rate of technological change Slower uptake of technologies Fewer big gain technologies More complex technologies Lower confidence 1 0,5 0 Maize Wheat Rice Soybeans 9
Technology: changes in R&D Slowing growth in public R&D investment Public agricultural R&D, annual average growth OECD 1980s 1990s World 0 0,5 1 1,5 2 growth rate, percent per year 10
Real Public investment in Agricultural R&D Technology: changes in R&D Slowing growth in public R&D investment Shift away from public extension Changing R&D priorities 1000 900 800 700 600 500 400 Public agricultural R&D investment and intensity Real public R&D investment 3,50 3,00 2,50 2,00 1,50 Research Intensity 300 200 100 Research intensity 1,00 0,50 0 0,00 1953 1961 1969 1977 1985 1993 2001 2009 11
mm million ha Resources: growing resource pressures Land and water availability Climate variability Ageing population Urbanisation Pests and diseases Australian area under agricultural production 500 400 300 Annual rainfall anomaly based on 30 year average (1961-1990) 200 1969 1979 1989 1999 2009 300 200 100 South-eastern Australia Australian locust plague, 2010 0-100 -200-300 1960 1970 1980 1990 2000 12
million ha Society: preferences affect productivity Growing concerns from society Biodiversity and vegetation Animal welfare Health and safety Trade and foreign investment 160 140 120 100 Global adoption of GM crops total developed developing 80 60 40 20 0 Source: ISAAA (2011) 13
International productivity performance 250 200 150 1.8% - United States 1.2% - Canada 1.6% - Australia 100 50 Index (US 1961 = 100) 0 1961 1971 1981 1991 2001 14
International productivity performance 250 200 150 1.8% - United States 1.2% - Canada 1.6% - Australia 100 50 Index (US 1961 = 100) 0 1961 1971 1981 1991 2001 15
Structural change in broadacre Population of broadacre farms 120.000 100.000 80.000 60.000 40.000 20.000 Average farm scale 12.000 10.000 8.000 6.000 4.000 2.000 Farms 0 1977-78 1987-88 1997-98 2007-08 DSE 0 (dry sheep equivalent) 16
Changing sources of growth 1. Many reforms complete 2. Cropping technologies extensively adopted 3. New technologies are required 17
Australia s Research and Development System 18
Research and Development Corporations Model 19
Technology: lifting productivity potential Other Factors 37% Contribution of RD&E to Australian agricultural productivity growth Extension 14% Total Public R&D 49% Domestic 17% Foreign 32% Public R&D and extension account for almost 2/3 of agricultural productivity growth Long lags between R&D investment and productivity payoffs Balance between extension and R&D 20
On-farm determinants of innovativeness & productivity Tertiary education Labour availability Land use intensity Farm size Off farm income Use of contract services 21
On-farm determinants of innovativeness & productivity Tertiary education Labour availability Land use intensity Farm size Off farm income Use of contract services Farmers with university qualifications were 7% more likely to be high innovators (compared with those who had completed year 12 only) A 1% increase in farm size increased the probability of being a high innovator by 4% 22
Conclusion 23
Conclusion Foster research and development Minimise (environmental) regulatory burden Pursue broader reform agenda 24
Conclusion Foster research and development Minimise (environmental) regulatory burden Pursue broader reform agenda R&D becoming increasingly important Sustained effort required 25
Thank you www.daff/abares.gov.au 26