2016–2017 (ABS 2018b). Whilst it is unrealistic for Australia to be the ‘food bowl of
Asia’, Australian food exports do provide sufficient calorific intake for 61,536,975
people, based on current average daily calorific intake of people in Asia (Australian
Farm Institute 2017). Whilst Australia is an exporter of agricultural commodities,
many of these markets have been established on premium ‘Australian-branded’
produce for quality assurance and traceability (Woodhead et al. 2015), particularly
high value-added protein foods, fresh fruit and vegetables through to increasingly
niche products, such as guinea fowl.
7.2 On-Farm Productivity Trends
By attempting to meet the increasing demand for high-quality food and fibre in the
Asia-Pacific region, Australia is subject to significant external competition and major
institutional impediments. In contrast to most of the world’s wealthy industrialised
countries who have sought to protect their agricultural producers from competition
by imposing high import tariffs, import quotas and direct price support mechanisms,
Australia has withdrawn many direct producer payment support mechanisms. This
was done with the belief that it would act as a mechanism to drive on-farm
innovation and reduce economy-wide costs. The level of agricultural producer
support in Australia is currently the second lowest in the OECD area at under 3%
of gross farm receipts (ABARES 2014). However, this approach, at face value,
appears to fundamentally contradict the Australian agricultural sector’s declining
productivity. Between 1948–1949 and 2013–2014, the ‘total factor productivity’
(TFP) grew at an average of 2% per annum, driven by technological advances and
innovation (ABARES 2015). During this period, there has also been a reallocation of
resources from inefficient farms to those with higher efficiencies. This has driven
productivity growth in Australian agriculture and led to more than two-thirds of the
growth in agricultural output during the post-war era (Mullen 2010). However, over
the past 20 years, agricultural TFP has fallen, from 2.6% a year, between 1948 and
2000, to 0.9% since the late 1990s (ABARES 2015). Most concerning, TFP declined
at À0.2% for the period between 1999–2000 and 2009–2010 (ABARES 2015). The
productivity slowdown (and decline) is considered to have been heavily influenced
by the Millennium Drought (1996–2010), coupled with declining public investment
in agricultural research and development (Sheng et al. 2010).
Productivity growth is essential to maintaining the competitiveness of Australian
agricultural producers in global markets as well as to offsetting negative impacts to
on-farm profit factors, such as rising input costs. Broadly, the sector is confronted
with high production costs (energy, water, labour), excessive regulation, high
currency exchange and natural resource pressures associated with climate change.
Additionally, for some sectors (namely, animal welfare), increasingly multifaceted
‘social licence to operate’ conditions have led to a reduction in intensity (e.g. the
transition to free-range eggs and poultry). The agricultural sector also continues to
struggle with fluctuating commodity prices; and rising competition from countries
7 Water Security: Challenges to the Irrigation Water-Energy Nexus in Australia
87
Asia’, Australian food exports do provide sufficient calorific intake for 61,536,975
people, based on current average daily calorific intake of people in Asia (Australian
Farm Institute 2017). Whilst Australia is an exporter of agricultural commodities,
many of these markets have been established on premium ‘Australian-branded’
produce for quality assurance and traceability (Woodhead et al. 2015), particularly
high value-added protein foods, fresh fruit and vegetables through to increasingly
niche products, such as guinea fowl.
7.2 On-Farm Productivity Trends
By attempting to meet the increasing demand for high-quality food and fibre in the
Asia-Pacific region, Australia is subject to significant external competition and major
institutional impediments. In contrast to most of the world’s wealthy industrialised
countries who have sought to protect their agricultural producers from competition
by imposing high import tariffs, import quotas and direct price support mechanisms,
Australia has withdrawn many direct producer payment support mechanisms. This
was done with the belief that it would act as a mechanism to drive on-farm
innovation and reduce economy-wide costs. The level of agricultural producer
support in Australia is currently the second lowest in the OECD area at under 3%
of gross farm receipts (ABARES 2014). However, this approach, at face value,
appears to fundamentally contradict the Australian agricultural sector’s declining
productivity. Between 1948–1949 and 2013–2014, the ‘total factor productivity’
(TFP) grew at an average of 2% per annum, driven by technological advances and
innovation (ABARES 2015). During this period, there has also been a reallocation of
resources from inefficient farms to those with higher efficiencies. This has driven
productivity growth in Australian agriculture and led to more than two-thirds of the
growth in agricultural output during the post-war era (Mullen 2010). However, over
the past 20 years, agricultural TFP has fallen, from 2.6% a year, between 1948 and
2000, to 0.9% since the late 1990s (ABARES 2015). Most concerning, TFP declined
at À0.2% for the period between 1999–2000 and 2009–2010 (ABARES 2015). The
productivity slowdown (and decline) is considered to have been heavily influenced
by the Millennium Drought (1996–2010), coupled with declining public investment
in agricultural research and development (Sheng et al. 2010).
Productivity growth is essential to maintaining the competitiveness of Australian
agricultural producers in global markets as well as to offsetting negative impacts to
on-farm profit factors, such as rising input costs. Broadly, the sector is confronted
with high production costs (energy, water, labour), excessive regulation, high
currency exchange and natural resource pressures associated with climate change.
Additionally, for some sectors (namely, animal welfare), increasingly multifaceted
‘social licence to operate’ conditions have led to a reduction in intensity (e.g. the
transition to free-range eggs and poultry). The agricultural sector also continues to
struggle with fluctuating commodity prices; and rising competition from countries
7 Water Security: Challenges to the Irrigation Water-Energy Nexus in Australia
87