Food for thought in productivity growth report
20 February 2014
A report released today shows that future productivity gains in the agricultural sector will need to be driven by effective research and development (R&D) and not through subsidies or price support schemes.
Minister for Agriculture, Barnaby Joyce, said the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) report, Agricultural productivity growth: past reforms and future opportunities, showed the government’s election commitments were appropriately targeted to improve returns at the farmgate.
“This government’s promise, when it was elected, was to enhance agricultural productivity and profitability through a $100 million investment in rural research, development and extension and through cutting red tape.
This funding is in addition to the $250 million the government provides each year to Australia’s 15 rural research and development corporations,” Minister Joyce said.
“This report, produced as part of Australia’s contribution to an Organisation for Economic Cooperation and Development (OECD) project, looks at the outcomes of historic government policies that were designed to support prices and stabilise farmer returns and finds the policies served to dampen productivity growth.
“Improving productivity is globally recognised as an essential ingredient in maintaining a competitive agriculture sector.
“Over time successive Australian governments have reformed market interventions to the point where our farmers are now the second least subsidised in the OECD.
“This report says most of the productivity wins that can be gained from removing market distortions have already been achieved.
“Instead the productivity gains of the future will need to be driven by effective and efficient R&D investment and reducing the regulatory burden – two planks of the Australian Government’s plan for agriculture.
“We recognise that unless productivity growth continues then the profit margins of our farm businesses will decrease.
“Our additional investment of $100 million in rural R&D and extension from 2014-15 is designed to enhance profitability through productivity gains,” Minister Joyce said.
There is still a case for government support for farm businesses and farm families when times are tough – as they currently are for many managing this drought.
“The key is in ensuring government support does not slow productivity growth – that it does not stop those who are managing well from continuing to do so, that it does not act as a disincentive for better risk management and innovation, or that it does not encourage inefficiency.”
The report is Australia’s contribution to the OECD’s Framework for Analysing Policies to Improve Agricultural Productivity and Sustainability, and will underpin a G20-OECD sponsored discussion following ABARES Outlook conference on March 6 in Canberra.