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Proposed agricultural R&D cuts not based on analysis (or logic)

- Wednesday, March 20, 2013

The Institute of Public Affairs (IPA) has proposed cuts to a range of different Australian Government departments and programs, including completely cutting government funding for agricultural research and development. It seems the recommendation are based on a quick and dirty attempt to generate Australian Government budget savings rather than on any proper analysis.

The proposal by the IPA to cut all Australian Government funding for agricultural research and development is being paid some attention by the media, (and here) because of the close links that are said to exist between the IPA and the Liberal Party, and the general understanding that the Coalition parties will need to find substantial savings in the Australian Government budget as part of an election campaign, and in the event they are elected after the September 14 election.

The paper produced by the IPA that contains the recommendation contains no analysis to justify any of the recommendations it makes, and simply recommends de-funding all of the Department of Agriculture, Fisheries and Forestry, including the Rural research and development corporations (RDCs) established under the Primary Industries and Energy Research and Development (PIERD) Act (1989). These include the Grains, Cotton, Grape and Wine, Sugar, Fisheries and Rural Industries research and development corporations. 

The paper makes no mention of the member-owned rural RDCs such as Meat and Livestock Australia, Australian Wool innovations, Dairy Australia, Horticulture Australia Ltd and Australian Pork Limited. These are funded in exactly the same way as the PIERD Act corporations, but operate under under their own separate legislation. The fact that these were missed in the de-funding proposal is clear evidence of a 'quick and dirty' cast around a few Departments for some savings, rather than any detailed analysis.

More importantly, however, the paper's author is seemingly ignorant of the large body of research identifying the positive returns associated with public investment in agricultural R&D, and the nature of the relationship between public and private sector R&D. In justifying the call to de-fund agricultural R&D, the papers author is quoted as saying;

If there is going to be a major breakthrough in wheat or cotton, international companies like Monsanto will be making them, not Australian R&D," 

"If a group of farmers have a good idea (for research) they should pursue it (themselves).

"I haven't seen any credible figures that prove agricultural research has led to productivity gains."

On the first comment, there are numerous examples of the complementary of public and private sector agricultural R&D, especially in a relatively small market such as Australia. For example, the GM cotton varieties that have been enormously successful in northern NSW and dramatically reduced chemical use were first introduced by Monsanto using high performing cotton varieties developed by the CSIRO. There are numerous other examples (as was detailed in an AFI report examining private sector agricultural R&D investment in Australia) that highlight that public and private sector agricultural R&D are complementary rather than competitive.

The author may also not have realised that for a range of different agricultural commodities, Australia has relatively unique production systems and major agrichemical companies have stated that the market in Australia is simply too small for the private sector investment required to develop technologies and systems and to get them through the regulatory processes. In the absence of public R&D investment, new technologies and innovations in these industries would simply not occur.

The throw-away line about farmers funding R&D themselves already happens - in fact farmers fund half the cost of rural R&D corporations, and also provide a lot more in-kind investment in a wide range of different ways. But the 'market failure' problem remains a major challenge for an industry dominated by small businesses, and all the analysis to date highlights the extent of under-investment if agricultural R&D was simply left to the "market".

On the third comment, there is in fact a whole body of economic analysis from a range of different sources identifying the returns on investment from rural R&D in Australia, and even the Productivity Commission had to grudgingly admit in a recent review of rural R&D in Australia that these analyses were credible and did identify significant positive returns from public investment in rural R&D. More recently, both ABARES and others (see here, here, here, here ) have identified the links between public R&D investment and productivity. 

To claim in a throw-away line that none of these analyses (and the many more like them) are credible simply has no factual basis, and begs the question of whether the de-funding proposal is anything more than a quick attempt to come up with some budget cuts in the absence of any real detailed analysis.

The potential major negative implications of the R&D de-funding proposal on the agriculture sector of Australia demands that any responsible organisation proposing cuts like this should also provide detailed analysis to support the proposal. This has clearly not occurred in the case of the IPA proposal.

(Disclosure: The Australian Farm Institute has both public and private sector agricultural R&D organisations as members, and has conducted analyses on a range of issue for many of these organisations)

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