Water use in Australian agriculture and farm performance

Research Project

The first stage of this project has concluded with the release of the joint Australian Bureau of Statistics - Productivity Commission publication, Characteristics of Australia's Irrigated Farms 2000-01 to 2003-04 (external link), on 27 September 2006. Preliminary results from the second stage of the project were presented to the Conference of the Australian Agricultural and Resource Economics Society in February 2007, in the paper The responsiveness of Australian farm performance to changes in irrigation water use and trade.

Background

A key objective of COAG’s National Water Initiative is to encourage an expansion in water markets and trade between regions to ensure that water ‘is put to best use’. The achievement of this objective will be influenced by the uses made of water, water trading and land management practices, more generally. To date, the agricultural sector has been the main user and trader of water in Australia. However, limited information relating farm performance to water-use practices, involvement in water trading and other farm characteristics has inhibited an assessment of the net benefits to the community of expanding water markets. This study proposes to use new ABS survey information to examine the linkages between water use water trading, farm characteristics, land management practices and farm performance.

Objectives of the Study

The study has two objectives:

• Identify how water use and involvement in water trading vary according to farm characteristics and land management practices such as: farm size and location, commodities produced, sources of water, method of water use, extent of salinity, conservation measures and works to improve on-farm productivity.
• Use this information in an empirical analysis to evaluate the likely influence of water use patterns and water trading activity on farm productivity and performance, after controlling for other influences. This empirical analysis will contribute to assessments of the implications of expanding water markets for farm productivity and better water use.