This latest report from ABARES is interesting because it proves two things: a) that a slowdown in agricultural productivity has occurred in Australia; and b) that adverse seasonal conditions and stagnant public research and development expenditure since the late 1970s have both affected this outcome.
The study points to the fact that data from the Food and Agriculture Organization suggests that agricultural productivity growth has slowed in developed economies and accelerated in developing economies. The average annual multifactor productivity (TPF) for all developed economies declined from 1.5% between 1961 and 2007 to 0.9% between 2000 and 2007. In contrast, the TFP for developing and transitional economies grew from 1.0% to 3.8% .
The report indicates that a significant structural change, or turning point, occurred in the total factor productivity in Australia in the mid-1990s. Climate conditions in recent years, in particular drought, were found to be an important factor contributing to volatility and trend change in the TFP index. However, the effects of changing climate conditions alone did not completely account for the observed structural change in the broadacre TFP trend.
In Australia, public investment in agricultural R&D (excluding fisheries and forestry) increased from $140 million in 1952–53 to $829 million in 2006–07 (in 2008 dollars). Despite a spike in investment in 2001, little growth in real public R&D investment has occurred since the mid 1970s. Agricultural research intensity -that is, the ratio of agricultural R&D investment to the gross value of agricultural production- has also declined from 5% per cent in the late 1970s to around 3% in recent years.
The authors state that the structural break detected in the mid-90s would not have occurred if the effect of scarce investment in R&D and climate conditions had been avoided. Of further concern is that, if the Australian Government increased investment in agricultural R&D, the expected growth in productivity would only be measurable 35 years after this policy was put into effect.
The authors also examined the effects of other factors, such as farmers’ education and terms of trade, on the slowdown in Australian broadacre productivity. However, none of these were as significant as climate and R&D investment.
The implications of this study are that “public investment in agricultural R&D has been critical in boosting agricultural productivity in the past and is likely to be just as important in the future. Notably, the innovations needed to address changing climate conditions and future resource constraints in 2050 and beyond are likely to result from investments made in agricultural R&D today“.
Further, “The slowdown in agricultural productivity growth observed across several developed countries raises significant concerns, particularly insofar as it correlates with a general decline in public agricultural R&D investment and stagnant institutional reforms in those countries. A decline in new technologies generated by developing countries could well have spill-over affects for agricultural productivity in developing countries. This will affect their ability to meet growing food production needs“. This truly places some perspective in the significant role that R&D investment in Australia and in foreign countries has in global food security.