Amidst a shocking drought, we should be celebrating the remarkable productivity of Australian agriculture, and the key role water trading has played in it.
At a time when even the government admits that Australia’s productivity has slumped on its watch, we could be learning from one of our great productivity success stories — or realising that maybe productivity is not all it’s cracked up to be if you look at it from a different perspective.
Isn’t agriculture currently stricken by the east coast drought? Indeed it is, and that caused a big fall in productivity in 2018-19, according to the Australian Bureau of Statistics, just as it caused a fall the previous year, reversing the huge productivity rise in 2016-17.
But putting aside weather and climatic volatility, Australian agriculture has led the way in efficiency over the last two decades. Agriculture, fisheries and forestry production has increased 34% in real terms in the 20 years to 2017-18, according to government research body ABARES, despite drought lowering production in 2017-18. Exports have increased 37% by value over that period. And productivity growth in the sector significantly improved between 2006-07 and 2014-15.
But here’s the thing: that big increase in production and exports has been achieved with dramatically fewer workers: employees in agriculture have fallen from 380,000 to less than 280,000 since 1999. Large farms, which employ comparatively fewer workers, have significantly increased in number and output in recent decades and have driven productivity gains.
A sector that has dramatically increased production and exports while slashing its workforce by more than a quarter should, in our productivity-obsessed economy, be celebrated. It would be if it was another industry. The workers who had lost their jobs would be assumed to have moved to other industries where their skills, and labour would be deployed more efficiently.
But the narrative around agriculture is different. Lost agricultural jobs aren’t celebrated as evidence of productivity improvements, but rather are seen as a tragedy for regional communities, where small towns are “hollowed out” by population loss and the inevitable consequences — loss of services, closure of facilities, economic decline, drift to larger regional centres. The story of agriculture must always be one of loss and despair even as it moves from success to success.
The other narrative is about water allocation. Most of the focus around water in the eastern states has been driven by outrage from the NSW Nationals and rural communities that a small, and insufficient, proportion of water from a grossly over-allocated river system has been restored for environmental flows and South Australia.
But water trading is also attacked. Companies are attacked for “hoarding” and speculating in water, “water barons” are attacked in the media, opposition MPs attack the government for allowing it, Nationals MPs complain about people “sitting in high rises in Melbourne trading water”, and ACCC investigations have been initiated.
Since the Rudd government removed many of the parochial state-based impediments to water trading, the water market has dramatically expanded, although part of the increase has been for environmental purchases, as well as commercial transactions. But the evidence is that the only driver of water prices is availability. And the Productivity Commission in 2017 found and heard evidence of how water trading had significantly increased the efficiency of water use, enabled more diverse crops to be developed and, crucially, helped farmers with inflexible water needs access water during drought.
But as with productivity gains, there are losers: farmers who are outbid for water by competitors who can obtain better value from it, or use it more efficiently, complain about water trading, or blame the Murray-Darling Basin Plan, or attack the Nationals for failing to stand up for them. Meanwhile, the industry in which they work is prospering; no one hears protests from the farmers who are able to access precious water in a way they couldn’t in the 1990s or 2000s.
There’s a double standard at work here both from politicians and from most of the media: productivity and efficiency gains — the lack of which are lamented elsewhere — are decried in agriculture. Workers in manufacturing, or construction, or retail, are expected to go elsewhere if there’s a cyclical or structural change in their industries. Lost jobs are seen as the price of economic change and greater efficiency.
But in Australian agriculture, productivity is our guilty secret. Which prompts the question: do we really want what we have there applied to every other industry?
Is there a double standard in the narrative around agriculture? Send your thoughts to boss@crikey.com.au. Please include your full name for publication.
You have no bloody idea Bernard. Water trading has certainly not been a universal blessing. It can cause impossible anomalies in allocations and it introduces middlemen who do not farm and who therefore exist only to profit from water. I am happy to see water traded in a general sense the traders can hold to water and force a higher price. I have no objection to water brokers who arrange purchases for a commission or fee. When trading was introduced, farmers overwhelmingly voted against water being held by non users at catchment management meetings, but the crooks and spivs won.
I do not cheer the loss of jobs from my town, I do not cheer the companies who buy bugger all locally. I agree about the nitwit Nationals. But there is a big productivity issue on water. We still use flood irrigation and this results in significant losses. Your big productivity year was of course the wettest winter year for a century. Look around our croplands and tell me this is productivity. It is simply mining the soil. It could be otherwise but “Monsanto management” is the norm now.
Funny how one of the great industrial “successes” is also one of the greatest embarrassments?
“No job? Then you should move away and look for one! …. Oh, wait, you live out in the provinces? You’re special then.”
Meanwhile as farms get bigger, more automated and less labour intensive, ‘big farmer’ Nats are culling their ‘breeding stock’?
“Silver linings” what?
“Water”? What happens when too many, far removed, vested interests get to pulling at threads.
“Who needs an environment?”
Perhaps we aren’t celebrating because there are big downsides. I have always been suspicious of the way economists look at what is quantifiable and then make a positive or negative judgement without considering the social and environmental costs which are regarded as externalities. Perhaps in the Murray-Darling Basin the big profits come at the expense of water for towns, for fodder, for dairying and above all at the expense of the health of the river. Perhaps the water is being used for unsustainable crops requiring large amounts of water all year around, like almonds or extremely large private dams for cotton, across floodplains (many paid for by the Government) which trap water which should go to recharge aquifers and water the land so that the rivers don’t dry up so fast during the next big dry.
Perhaps some agriculture isn’t really productive if the environmental and societal costs are taken into account.
“the way economists look at what is quantifiable ”
Nail and hammer good sir.
My continuing thesis is that western capitalist democracy is doomed because of the primacy of finance and economics in our education and business communities.
Nobody from these professions should ever be allowed near decision making groups, and yet they are our principal actors.
“Externalities”, a word that rivals “ collateral damage’. Yes DB none quantifiable externalities, unquantifiable externalities, no matter how expressed by economists it’s how towns are left without water and fish kills at levels never seen before occur. Externalities left outside the market created by Government fiat.
People moving out of rural and regional areas is an absolute tragedy for the nation. If it keeps on going, electoral boundaries will have to be reduced and the number of country electorates will need to be cut back to avoid a gerrymander (Heavens above! We couldn’t have one of those!). That means fewer seats in parliament for the Nats and fewer seats to keep the LNP coal-ition in power. Not to mention that those who move to the cities might become – shudder – greenies!
Tragedy, I tell you! Tragedy!
‘Redrawn’, not ‘reduced’.
I will make this claim for you Bernie : you seem to have a knack at distributing information that has
been known for decades as “news”.
At around the turn of the 20th century more than half of the population as engaged in an agriculturally-based occupation. Circa 1880 it was something like 80%. By the 1950s the percentage was very much reduced and in ANY first world country, nowadays, it is under 5%. In fact for Primary Industry (Agriculture, Forestry and Mining) the percentage is under 10%. So much for “jobs in mines etc. but let’s not digress”.
Even allowing for a Depression manufacturing (Secondary Industry) increased to about a peak in the mid 60s but by the 1990s low-level manufacturing was untenable in the first world except for specific items or classes
of items. The transition was to a (so called) Tertiary Sector or a service sector where the majority of jobs
are occupied by those who render services of some sort or another.
An argument for Brexit is that the farms in the UK, being larger and being inherited by the elder (or eldest)
son, are considerably more efficient that those of Ireland or the EU where the farms have been divided amongst siblings. Agriculture, if you haven’t noticed, has for the last 40-odd years been (1) very high tech and (2) very high risk. You also could have mentioned Australia’s comparative advantage and Australia being one of three countries that have comparatively high primary sectors AND being also a 1st world country.
The lamenting of the “loss of jobs” is pathetic and uninformed. The tax-doges of the 80s & 90s in respect of primary producers planting shrubs (or anything at all) went nowhere and the water-trading suits only the most
monopolised. The article ought to have commenced from this point.