How will future productivity growth be achieved in Australian agriculture?

The relatively high rates of productivity growth observed in the agriculture sectors of developed nations over the period from 1970 to 1990 appear to have reduced, as the benefits of the post-World War 2 ‘green revolution’ are exhausted. This reduction in agricultural productivity growth rates has limited the rate of growth in total agricultural output in developed nations, and as a consequence constrained the extent to which developed nation agricultural producers have responded to higher prices with increased production. According to ABARES’ latest analysis, Australia’s broadacre farms’ Total Factor Productivity (TFP) is following a similar trend (see Figure 1).

This phenomenon has direct impact on economic growth as well as farmers’ profitability and is all the more important in the current context of population growth and concern over food security.

The Australian Farm Institute raised concerns over the risks created by decreasing public investment in agricultural R&D in its report Private sector investment in agricultural research and development (R&D) in Australia (2010), highlighting the shortcomings of relying on private sector R&D to support future productivity in the Australian agriculture sector. Convinced of the importance of this issue, the Institute is directly tackling the issue of agriculture’s future productivity.

When considering how agricultural productivity growth rates can be maintained or increased in the future, there are a number of important questions to answer. The first is, ‘What is the rate of agricultural productivity growth that needs to be achieved to keep the sector competitive both domestically (in order to secure investment, resources and labour) and internationally?’ The second question is, ‘What are the most promising technological developments that might be available for farmers to help them achieve the required rate of productivity growth?’

In order to tackle these questions, the Institute has recently started a collaborative research project with six researchers. An agriculture-economist tackles the first question and five experts analyse the most promising technologies in plant breeding, livestock, natural resource management, energy and water efficiency, and labour.

This project aims to identify a realistic productivity growth target for Australian agriculture over the next two decades, highlighting the technological changes most likely to achieve this growth. In addition, the report will analyse any existing barriers likely to impede the development of these technologies.

This work is expected to provide a valuable instrument for the Australian agriculture sector to better understand and agree on an ambitious target for future rates of productivity growth required within the sector. The research will act as a base on which to build realistic strategies to achieve the targeted productivity growth.

1.  ABARES broadacre TFP is a modelled estimate of productivity which is designed to eliminate price effect and other unpredictable effects. 

This research is expected to be released by the Australian Farm Institute in Winter 2012. Check the Institute website for more information.