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.