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Trends in Australian agriculture

Commission research paper

This paper was released on 5 July 2005 and it examines some of the key trends in Australia's agriculture sector over the last 20 years or so. While continuing to grow in absolute terms, the size and importance of agriculture has declined relative to the rest of the economy.

Within the sector, there have been marked changes in the number and size of Australian farms, the make-up of agricultural activities and the production and marketing strategies employed by farmers.

Some of the key factors shaping these trends have been changes in consumer demands and government policies, technological advances and innovation and emerging environmental concerns.

The unrelenting decline in the sector’s terms of trade (that is, the ratio of prices received to prices paid) has been an important source of pressure for adaptation and change by Australian farmers. The sector has also had to respond to the continuing challenge of variations in seasonal conditions.

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  • Key points
  • Media release
  • Contents

Agriculture has undergone much change over the last few decades. Key drivers have been shifts in consumer demand, changes in government policies, technological advances and innovation, emerging environmental concerns and an unrelenting decline in the sector's terms of trade.

While historically agriculture played a dominant role in the economy — its relative importance has declined in recent decades.

That said, in absolute terms, real agricultural output has more than doubled over the four decades to 2003 04. And agricultural exports have almost tripled in value (real terms) since the mid 1970's.

In 2003 04, the sector directly generated 4 per cent of GDP and employed 375 000 people or 4 per cent of the workforce. It looms larger in Australia's exports, accounting for around 22 per cent of total exports in 2003 04.

Farms are much fewer and larger than twenty years ago. Production is increasingly concentrated on larger farms, accentuating the dual nature of the sector (with a few large commercial farms accounting for the majority of output and many farms accounting for a small share of output).

Agriculture has become increasingly export oriented over the last two decades — around two-thirds of production is now exported. Exports have also become more diverse, with less reliance on traditional commodities such as wool and more on processed products such as wine, cheese and seafood.

The agricultural workforce has a number of distinctive features, including: a high proportion of self-employed, family and casual workers; long job tenure; and a relatively old workforce with relatively low education levels and employee wages.

The last two decades have seen an increase in the number of employees and a fall in employers and contributing family workers. The educational attainment of workers has also improved.

Off-farm employment has become increasingly important to maintaining family farm incomes. Since 1990, the proportion of farm families deriving income from off-farm wages and salaries increased from 30 to 45 per cent, with average earnings rising from $15 000 to $33 500 per year.

Agricultural productivity has exhibited strong growth over the last three decades — more than twice the rate achieved in Australia's market sector as a whole.

Productivity growth has accounted for the entire increase in output by the agriculture sector over the last 30 years.

Performance within the sector has been mixed — over the last three decades the cropping industry recorded the highest productivity gains, and the sheep and sheep–beef industries the lowest.

Australian agriculture has undergone extensive change over the last few decades, according to a research paper released by the Productivity Commission.

The Commission paper, Trends in Australian Agriculture, found that agricultural output, while quite volatile because of droughts and other seasonal variations, increased by around two and a half times in real terms over the last four decades. This increase in output was achieved without an increase in the number of agricultural workers, reflecting strong productivity growth in the sector. In fact, in trend terms, agricultural employment has been relatively flat over the last forty years — declining by less than half of one per cent a year.

But with even more rapid growth in other parts of the economy, notably the services sector, agriculture's share of output has declined from around 14 per cent of GDP in the early 1960s to 4 per cent in 2003-04. Agriculture's share of employment has also more than halved since the late 1960s.

According to the Commission, this relative decline is no cause for concern. Commissioner Mike Woods said, 'Agriculture's output and employment performance is the result of positive factors such as strong productivity growth in the sector and rising demand for services as incomes have risen. This is consistent with the experiences of high-income economies'.

The Commission identifies a number of significant changes in the make-up of the sector over the last two decades. For example:

Australian farms are now fewer but larger, and production has become more concentrated on the larger farms. Australian agricultural industries have become more export oriented. Exports have also become more diverse, with less reliance on traditional commodities such as wool and more on processed products such as wine, cheese and seafood. The agriculture workforce has seen a decline in the proportion of employers and contributing family workers, and an increase in the proportion of employees. Off-farm employment has also become increasingly important to maintaining family farm incomes.

The Commission paper examines the role and performance of Australia's agriculture sector over the long term, tracing key trends in trade, employment and productivity as well as structural changes within the sector.

Cover, Copyright, Foreword, Acknowledgments, Contents, Abbreviations, Key points, Overview

1 Introduction
1.1 Objectives of the study
1.2 Agriculture — what does it cover?
1.3 Agricultural production systems
1.4 Structure of the report

2 Role of agriculture in the economy
2.1 The contribution of the agriculture sector
2.2 Trends in agriculture
2.3 Reasons for the relative decline of agriculture

3 Trends within agriculture
3.1 Fewer and larger farms
3.2 Increased concentration of output
3.3 More intensive farming
3.4 Closer integration in the agri-food chain
3.5 Divergent trends within agriculture

4 Trade in agriculture
4.1 Measuring agricultural exports
4.2 Trade orientation and openness
4.3 Key trends within agricultural trade
4.4 Changes in export market profile
4.5 Barriers to growth in Australia's agricultural exports

5 Agriculture's workforce
5.1 Agriculture jobs
5.2 Trends in agricultural employment
5.3 Some distinctive features

6 Agriculture's productivity performances
6.1 Productivity growth — why is it important?
6.2 Measuring productivity
6.3 Trends in agricultural productivity
6.4 Comparisons with other industries
6.5 Productivity trends within agriculture
6.6 Drivers of productivity growth in agriculture
6.7 International comparisons

A Input-output links for agricultural industries

B Trade data

C Supplementary employment data

D Determining productivity peaks


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