Productivity growthin Australian Broadacre and Dairy

industries

Peter Gooday

Branch ManagerProductivity, water and fisheries

ABARE

Overview…

• Trends in broadacre and dairy productivity growth

• When did productivity growth begin to slow?

• Where has productivity growth slowed?

• Why did productivity slow down?

• What is next?

Broadacre productivity growth

1.4%

Productivity growth has offset declining terms of trade in Australian agriculture…

1.4%

Long term growth rate

Broadacre productivity and terms of trade indices

-1.6%

0

50

100

150

200

1977

-78

1987

-88

1997

-98

2007

-08

ind

ex

Total factorproductivity

Terms oftrade

Broadacre productivity growth has enabled more output to be produced using fewer

inputs…

1.4%

0.8%

- 0.6%

Long term growth rate

Broadacre input, output and productivity indices

0

50

100

150

200

1977

-78

1987

-88

1997

-98

2007

-08

ind

ex

Total factorproductivity

TotalOutputs

TotalInputs

0

50

100

150

200

1977

-78

1987

-88

1997

-98

2007

-08

ind

ex

Total factorproductivity

TotalOutputs

TotalInputs

Broadacre productivity growth was stronger during the 1980s and 1990s…

1.4%

0.8%

- 0.6%

Long term growth rate

Broadacre input, output and productivity indices

1.8% -1.3%

Broadacre input use intensity

0

40

80

120

160

1977-78 1987-88 1997-98 2007-08

inp

ut

use

inte

nsi

ty in

dex

materials andservices

capital

land

labour

Long term growth rate

0.9%

-0.7%

-1.1%

-1.7%

Increased dairy production has been driven by growth in inputs rather than productivity…

0

50

100

150

200

250

19

88

-89

19

94

-95

20

00

-01

20

06

-07

ind

ex

Totaloutput

Totalinputs

Total factorproductivity 0.8%

3.9%

4.7%

Long term growth rate

Dairy input, output and productivity indices

2007

-08

Dairy productivity growth has slowed compared to earlier periods…

-

50

100

150

200

250

19

88

-89

19

94

-95

20

00

-01

20

06

-07

ind

ex

Totaloutput

Totalinputs

Total factorproductivity 0.8%

3.9%

4.7%

Long term growth rate

Dairy input, output and productivity indices

2007

-08

1.2% -1.6%

Change in broadacre productivity,by state

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

WA SA NSW VIC QLD TAS NT Australia

TF

P G

row

th (

%)

1978 to 2002

1978 to 2008

The slowdown has been mostly restricted to cropping and dairy farms…

Long term trends in TFP growth

Note: Dairy trends begin from 1988-89 onwards

-1

0

1

2

3

4

Totalbroadacre

Cropping Mixed Crop-livestock

Beef Sheep Dairy*

TF

P g

row

th (

%)

1978 to 1996

1978 to 2002

1978 to 2008

Do we need to worry?

0

50

100

150

200

250

3001

95

3

19

58

19

63

19

68

19

73

19

78

19

83

19

88

19

93

19

98

20

03

20

08

pro

du

cti

vit

y in

de

x

– Broadacre productivity index

– 5 year moving average

Why might productivity growth be slowing?

Slashed output

Drought? R&D investment?

Higher use of

purchased inputs

Reduced confidence

Slowing growth in

public R&D expenditure

DRIVERS

Growth in public agricultural R&D expenditure has slowed….

Source: Mullen (2009)

0

200

400

600

800

100019

53

1962

1971

1980

1989

1998

2007

A$2

008

0

1

2

3

4

5

6

%

Public R&D expenditure

Research intensity

Why might productivity growth be slowing?

Drought? R&D investment?

DRIVERS

Other factors?

Fewer‘big gain’

technologies

Ageing farm population

Fewer expansion

opportunities

Changing research priorities

Knowledge constraints

Challenges for productivity growth in Australian agriculture…

How much R&D should be public/private funded?

Where should public R&D be allocated?

How much basic/applied research?

How do we better communicate research to users?

What policies are impeding structural adjustment?

How could these policies be improved?

thankyou