Productivity growth in Australian Broadacre and Dairy industries Peter Gooday Branch Manager Productivity, water and fisheries ABARE.

Productivity growthin Australian Broadacre and Dairy

industries

Peter Gooday

Branch ManagerProductivity, water and fisheries

ABARE

Overview…

• Trends in broadacre and dairy productivity growth

• When did productivity growth begin to slow?

• Where has productivity growth slowed?

• Why did productivity slow down?

• What is next?

Broadacre productivity growth

1.4%

Productivity growth has offset declining terms of trade in Australian agriculture…

1.4%

Long term growth rate

Broadacre productivity and terms of trade indices

-1.6%

0

50

100

150

200

1977

-78

1987

-88

1997

-98

2007

-08

ind

ex

Total factorproductivity

Terms oftrade

Broadacre productivity growth has enabled more output to be produced using fewer

inputs…

1.4%

0.8%

- 0.6%

Long term growth rate

Broadacre input, output and productivity indices

0

50

100

150

200

1977

-78

1987

-88

1997

-98

2007

-08

ind

ex

Total factorproductivity

TotalOutputs

TotalInputs

0

50

100

150

200

1977

-78

1987

-88

1997

-98

2007

-08

ind

ex

Total factorproductivity

TotalOutputs

TotalInputs

Broadacre productivity growth was stronger during the 1980s and 1990s…

1.4%

0.8%

- 0.6%

Long term growth rate

Broadacre input, output and productivity indices

1.8% -1.3%

Broadacre input use intensity

0

40

80

120

160

1977-78 1987-88 1997-98 2007-08

inp

ut

use

inte

nsi

ty in

dex

materials andservices

capital

land

labour

Long term growth rate

0.9%

-0.7%

-1.1%

-1.7%

Increased dairy production has been driven by growth in inputs rather than productivity…

0

50

100

150

200

250

19

88

-89

19

94

-95

20

00

-01

20

06

-07

ind

ex

Totaloutput

Totalinputs

Total factorproductivity 0.8%

3.9%

4.7%

Long term growth rate

Dairy input, output and productivity indices

2007

-08

Dairy productivity growth has slowed compared to earlier periods…

-

50

100

150

200

250

19

88

-89

19

94

-95

20

00

-01

20

06

-07

ind

ex

Totaloutput

Totalinputs

Total factorproductivity 0.8%

3.9%

4.7%

Long term growth rate

Dairy input, output and productivity indices

2007

-08

1.2% -1.6%

Change in broadacre productivity,by state

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

WA SA NSW VIC QLD TAS NT Australia

TF

P G

row

th (

%)

1978 to 2002

1978 to 2008

The slowdown has been mostly restricted to cropping and dairy farms…

Long term trends in TFP growth

Note: Dairy trends begin from 1988-89 onwards

-1

0

1

2

3

4

Totalbroadacre

Cropping Mixed Crop-livestock

Beef Sheep Dairy*

TF

P g

row

th (

%)

1978 to 1996

1978 to 2002

1978 to 2008

Do we need to worry?

0

50

100

150

200

250

3001

95

3

19

58

19

63

19

68

19

73

19

78

19

83

19

88

19

93

19

98

20

03

20

08

pro

du

cti

vit

y in

de

x

– Broadacre productivity index

– 5 year moving average

Why might productivity growth be slowing?

Slashed output

Drought? R&D investment?

Higher use of

purchased inputs

Reduced confidence

Slowing growth in

public R&D expenditure

DRIVERS

Growth in public agricultural R&D expenditure has slowed….

Source: Mullen (2009)

0

200

400

600

800

100019

53

1962

1971

1980

1989

1998

2007

A$2

008

0

1

2

3

4

5

6

%

Public R&D expenditure

Research intensity

Why might productivity growth be slowing?

Drought? R&D investment?

DRIVERS

Other factors?

Fewer‘big gain’

technologies

Ageing farm population

Fewer expansion

opportunities

Changing research priorities

Knowledge constraints

Challenges for productivity growth in Australian agriculture…

How much R&D should be public/private funded?

Where should public R&D be allocated?

How much basic/applied research?

How do we better communicate research to users?

What policies are impeding structural adjustment?

How could these policies be improved?

thankyou