Terry Sheales

Economic issues affecting the region

Economic issues affecting the region

Deputy Executive Director

KununurraRegional Outlook Conference

Wednesday 20 May 2009

1. Commodity market drivers

2. Key challenges for the future

• climate change and the CPRS

• allocating water

• productivity growth

Real 2004 Dollars

What will be the impact of the CPRS on the farm sector?

Agriculture and the CPRSAgriculture and the CPRS

• 2011: CPRS commences

• agriculture initially excluded from the scheme

• 2013: decision to include agriculture or not

• 2015: earliest possible date of inclusion

Australia’s greenhouse gas emissions, by sector, 2006

3%5%6%7%

14%16%

50%

50

100

150

200

250

300

stationaryenergy

agriculture transport LUCF fugitiveemissions

industrialprocesses

wasteMt CO2-eq

Agriculture and the CPRS: 2010percent change in agricultural input costs

0.1

0.2

0.3

0.4

0.5

wheatand other

crops

mixedlivestock

beef sheep-beef

sheep dairy

%

Percent change in agricultural production with the CPRS

-8

-6

-4

-2

2

4

6

beef &sheepmeat

dairy cattle otheranimals

grains other crops

2020

2030

%

Agricultural production with the CPRSPer cent change relative to no CPRS

without CPRS

without CPRS

Options for reducing emissions from agriculture

• improved feed conversion efficiency

• feed additives

• alter fertiliser applications

• waste management

• carbon sequestration

• GM technologies

Efficient allocation of water

Water availability

• CSIRO

– 11% availability by 2030

• ABARE

– 3% incomes

Lifting productivity

• Remains the key to handling pressure on the farm sector

• Whether it be:

– seasonal variability and drought

– climate change

– CPRS

– global food crisis

– global economic crisis

– protectionist responses

Source: Mullen and Crean 2007

expenditure2007A$million

publicly funded

How do we lift productivity growth?

• Measure productivity and understand its drivers

• Improve R&D effectiveness

– encourage further business R&D

– improve targeting and evaluation of public good R&D

• Remove government impediments to productivity growth

– efficient water allocation

– efficient climate change policies

– efficient drought policies

Conclusions

Unprecedented declines in economic growth but a resilient farm sector response

Long run challenges exacerbated by the global economic crisis

Productivity growth slowing – just when we need it to be accelerating

Further reforms in water allocation systems and R&D policies needed.