Agricultural Policy Monitoring and Evaluation 2022

5. Australia

Support to agriculture

Australia’s support to agricultural producers (PSE) is among the lowest in the OECD, estimated at 3.1% of gross farm receipts for 2019-21, with total support to agriculture (TSE) representing 0.2% of GDP.

Market price support (MPS) to producers ended in 2000 and domestic prices for Australia’s main agricultural outputs have been at parity with world prices since then. More than half of support to producers in 2019-21 was input subsidies. Much of these went to on-farm investments, including in response to adverse events. The bulk of remaining producer support (about 30% of the PSE) went to disaster relief payments, income support, and income-smoothing programmes that address cash flow fluctuations, such as the Farm Management Deposits and income tax averaging arrangements.

During 2019-21, the general services support estimate (GSSE) averaged 2.6% of the value of agricultural production, substantially higher than in the late-1980s (0.7%) and early 2000s (1.9%), but below the OECD average. Australia has an extensive agricultural knowledge and innovation system, with approximately one-quarter of total public expenditure for agriculture directed to support for R&D, innovation and extension services (compared with just 6% in the OECD). Public expenditure on biosecurity inspection and control services, and to develop and upgrade infrastructure (mostly hydrological) represents the bulk of the remaining expenditure on general services.

Recent policy changes

Australia launched the Delivering Ag2030 strategy in May 2021, which aims to support the sector in reaching AUD 100 billion (USD 75.1 billion) in farm-gate output by 2030. The strategy is centred around seven themes: trade and exports; biosecurity; stewardship of land and water; fair, strong and resilient supply chains; water and infrastructure; innovation and research; and human capital. In October 2021, the government released the National Agricultural Innovation Policy Statement, establishing four new priorities for agricultural innovation that target exports, climate resilience, biosecurity and digital agriculture.

Drought preparedness programmes were an important focus for the government in 2021. Additional funding was provided for climate information services under the Future Drought Fund, the development of drought indicators for a new early warning system, and the purchase and installation of on-farm water infrastructure to improve drought preparedness.

The Australian Government Roadmap to Attract, Retain, Upskill and Modernise the Agriculture Workforce was released in March 2021, followed by initiatives to improve employment opportunities in agriculture. The Australian Agriculture Visa was announced in August 2021 to address workforce shortages in the agricultural sector.

Increased funding for the Agriculture Biodiversity Stewardship Package will provide payments to farmers to protect, manage and enhance native vegetation; implement an Australian Farm Biodiversity Certification Scheme; and establish a National Stewardship Trading Platform to connect farmers with buyers of biodiversity outcomes. The Carbon + Biodiversity pilot is trialling a market-based approach to pay farmers for biodiversity improvements on top of income they can earn from the Emissions Reduction Fund for carbon sequestration projects. The National Soil Strategy was launched in May 2021, setting out how Australia will value, manage and improve its soil over the next 20 years. The strategy accompanies the National Soil Package, which provides funding to support soil science, soil data and soil extension in 2021-25.

New support for biosecurity measures will invest in frontline measures to manage the risk of pests and diseases entering Australia (including African Swine Fever), modernise IT systems and data analytics, and improve abilities to detect and manage threats offshore. Funding also facilitates access to export markets, through the Dairy Export Assurance Programme and measures introduced in the context of the COVID-19 pandemic. These include the Busting Congestion for Agricultural Exporters Package, which simplifies export regulations and accelerates exporters’ use of digital services, and the Agri-Business Expansion Initiative, which helps farmers maintain, diversify and expand their export markets. Additional funds were committed to revamp Australia’s trade systems by simplifying regulations and establishing a one-stop shop for trade clearances. The International Freight Assistance Mechanism was extended to June 2022, with additional support to keep international supply chains open in the context of COVID-19 related trade disruptions.

The Regional Comprehensive Economic Partnership (RCEP) agreement entered into force in January 2022 between Australia, the Association of South East Asian Nations (ASEAN), the People’s Republic of China (hereafter “China”), Japan, Korea and New Zealand. A new trade agreement with the United Kingdom was also signed in December 2021, and is expected to enter into force in 2022.

Assessment and recommendations

• Climate change creates growing challenges for Australian agriculture through increased variability of rainfall and temperatures, and greater frequency of extreme weather events. Agriculture accounts for 13% of Australia’s greenhouse gas (GHG) emissions and can help the country to achieve its economy-wide target of net-zero emissions by 2050. While agriculture is included under Australia’s economy-wide emissions reduction targets, setting specific targets for agricultural emissions can be helpful to focus mitigation efforts and measure progress. A stronger policy response will also be needed to reduce methane emissions, which represent 78% of Australia’s agricultural emissions. Joining the Global Methane Pledge, a voluntary initiative signed by over 100 countries (including 29 OECD members) at COP26, would signal Australia’s recognition of the need to reduce methane emissions by 2030 and would align well with ongoing efforts to lower livestock emissions.

• Funding to accelerate the development and commercialisation of technological solutions to cut emissions rightly focuses on reducing methane emissions from livestock. However, the extent to which these technologies can be feasibly deployed at scale to grazing cattle and sheep remains uncertain. To support the red meat industry’s target of carbon neutrality by 2030, an effective policy mix (abatement subsidies, emissions taxes, standards and regulations) will be needed to create sufficient incentives for farmers to adopt new low-emission technologies.

• The Emissions Reduction Fund (ERF) supports projects to reduce or avoid GHG emissions (including agricultural emissions) or store carbon. In the absence of a national carbon pricing scheme, efforts to scale up the ERF (which so far has had a limited impact on agricultural emissions) could strengthen progress on mitigating agricultural emissions.

• While Australian Carbon Credit Units (ACCUs) enjoy a strong reputation both domestically and internationally, questions have been raised regarding the additionality of certain ACCUs, such as those generated by human-induced regeneration and avoided deforestation projects. Efforts to strengthen confidence in the transparency and integrity of ACCUs will be essential to sustain confidence in the ERF and its ability to help Australia meet its emissions reduction targets.

• Australia provides low levels of support to its agricultural sector. Policy settings are characterised by a strong emphasis on market openness, building resilience, and investments in public goods, including R&D, hydrological infrastructure and biosecurity.

• The government faces the formidable challenge of ensuring the continued economic viability of Australian agriculture in the face of growing natural resource constraints. The Drought Response, Resilience and Preparedness Plan launched in 2019 develops a holistic approach that builds long-term resilience and preparedness to drought while providing a safety net for farmers and communities facing financial hardship.

• Support also goes to upgrading hydrological infrastructure and improving water use efficiency at the farm level and in wider water management basins. Water recovery through infrastructure modernisation in the Murray Darling Basin should be closely linked to the achievement of enhanced environmental outcomes, while carefully accounting for the impacts of improved irrigation efficiency on increased water consumption and reduced return flows.

• Research and development are a major component of general services for the sector, while extension services and agricultural education receive smaller funding. The Future Drought Fund and the National Agricultural Innovation Agenda encompass innovation generation and adoption. Knowledge transfer services should receive continued consideration as they facilitate farmers’ innovation uptake, which increases productivity and sustainability, and can build on-farm capacity to manage risks.

Figure 5.1. Australia: Development of support to agriculture

 

 

 

 

 

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

 

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Table 5.1. Australia: Estimates of support to agriculture

Million USD

	1986-88	2000-02	2019-21	2019	2020	2021p
Total value of production (at farm gate)	14 358	19 605	49 789	42 690	47 035	59 642
of which: share of MPS commodities (%)	82.36	74.30	75.19	71.69	75.31	78.57
Total value of consumption (at farm gate)	5 072	7 514	19 826	22 906	17 090	19 483
Producer Support Estimate (PSE)	1 411	761	1 587	1 414	1 600	1 747
Support based on commodity output	1 000	0	0	0	0	0
Market Price Support1	1 000	0	0	0	0	0
Positive Market Price Support	1 002	0	0	0	0	0
Negative Market Price Support	-2	0	0	0	0	0
Payments based on output	0	0	0	0	0	0
Payments based on input use	230	309	1 022	789	1 088	1 187
Based on variable input use	217	14	558	299	657	717
with input constraints	0	4	10	10	9	10
Based on fixed capital formation	4	145	324	331	307	335
with input constraints	0	0	5	6	4	4
Based on on-farm services	9	149	140	160	124	135
with input constraints	0	0	0	0	0	0
Payments based on current A/An/R/I, production required	0	11	271	332	230	251
Based on Receipts / Income	0	11	271	332	230	251
Based on Area planted / Animal numbers	0	0	0	0	0	0
with input constraints	0	0	0	0	0	0
Payments based on non-current A/An/R/I, production required	0	0	0	0	0	0
Payments based on non-current A/An/R/I, production not required	181	442	273	285	255	278
With variable payment rates	181	343	269	282	251	274
with commodity exceptions	0	110	103	149	76	83
With fixed payment rates	0	99	4	3	4	4
with commodity exceptions	0	0	0	0	0	0
Payments based on non-commodity criteria	0	0	21	7	27	30
Based on long-term resource retirement	0	0	0	0	0	0
Based on a specific non-commodity output	0	0	0	1	0	0
Based on other non-commodity criteria	0	0	21	7	27	30
Miscellaneous payments	0	0	0	0	0	0
Percentage PSE (%)	9.65	3.74	3.10	3.21	3.29	2.85
Producer NPC (coeff.)	1.08	1.00	1.00	1.00	1.00	1.00
Producer NAC (coeff.)	1.11	1.04	1.03	1.03	1.03	1.03
General Services Support Estimate (GSSE)	98	370	1 312	1 011	1 398	1 527
Agricultural knowledge and innovation system	95	252	707	695	682	745
Inspection and control	3	39	115	96	119	129
Development and maintenance of infrastructure	0	75	222	139	252	275
Marketing and promotion	0	4	257	68	337	368
Cost of public stockholding	0	0	0	0	0	0
Miscellaneous	0	0	10	12	9	10
Percentage GSSE (% of TSE)	6.48	36.45	45.22	41.68	46.64	46.64
Consumer Support Estimate (CSE)	-513	-116	0	0	0	0
Transfers to producers from consumers	-513	0	0	0	0	0
Other transfers from consumers	0	0	0	0	0	0
Transfers to consumers from taxpayers	0	-116	0	0	0	0
Excess feed cost	0	0	0	0	0	0
Percentage CSE (%)	-10.12	-1.52	0.00	0.00	0.00	0.00
Consumer NPC (coeff.)	1.11	1.00	1.00	1.00	1.00	1.00
Consumer NAC (coeff.)	1.11	1.02	1.00	1.00	1.00	1.00
Total Support Estimate (TSE)	1 509	1 015	2 899	2 424	2 999	3 273
Transfers from consumers	513	0	0	0	0	0
Transfers from taxpayers	996	1 015	2 899	2 424	2 999	3 273
Budget revenues	0	0	0	0	0	0
Percentage TSE (% of GDP)	0.65	0.25	0.20	0.18	0.21	0.20
Total Budgetary Support Estimate (TBSE)	509	1 015	2 899	2 424	2 999	3 273
Percentage TBSE (% of GDP)	0.22	0.25	0.20	0.18	0.21	0.20
GDP deflator (1986-88=100)	100	149	253	247	250	263
Exchange rate (national currency per USD)	1.40	1.83	1.41	1.44	1.45	1.33

Note: p: provisional. NPC: Nominal Protection Coefficient. NAC: Nominal Assistance Coefficient. A/An/R/I: Area planted/Animal numbers/Receipts/Income. 1. Market Price Support (MPS) is net of producer levies and excess feed cost. MPS commodities for Australia are: wheat, barley, oats, sorghum, rice, soybean, rapeseed, sunflower, sugar, cotton, milk, beef and veal, sheep meat, wool, pig meat, poultry and eggs.

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Description of policy developments

Overview of policy trends

Before the 1980s, Australian agriculture was supported by a range of measures designed to maintain and stabilise farm income, and to provide farmers with support to offset the perceived disadvantages of remoteness. In 1980, Australia had 65 statutory marketing boards that used border protection through tariffs and import controls to divide domestic and international markets, and set higher prices in domestic markets (Table ‎5.2).

Price stabilisation schemes assisted export industries such as wheat, manufactured dairy products, sugar, and dried vine fruit. Other policy measures included fertiliser subsidies, income tax incentives, rural credit, subsidies for agricultural research and extension, and public investment in land and water development and rural infrastructure.

Australia’s agricultural policy evolved significantly from the mid-1980s. Competition policy reforms in the 1980s and 1990s led to the removal of policies that distort agricultural production and trade. The National Drought Policy introduced in 1992 formalised the transfer of drought risk management to farmers and repurposed government support towards resilience-strengthening activities. Trade practices and anti-dumping legislation ensured competitive markets across the whole economy, reducing the need for sector-specific measures. Price stabilisation policies were relaxed, with price and output controls removed and centralised marketing schemes gradually dismantled (Gray, Oss-Emer and Sheng, 2014[1]). Tariffs were reduced. Floating exchange rates and trade liberalisation reduced price volatility in agricultural commodities.

Table 5.2. Australia: Agricultural policy trends

Period	Broader framework	Changes in agricultural policies
Prior to 1980s	Closed economy (interventionist agricultural policy)	High tariffs Production quotas Price controls Tariff protection and import controls carried out by 65 statutory commodity marketing boards
1980-Present	Reforms and trade liberalisation	Floating exchange rates Removal of agricultural price and output controls Gradual dismantling of Statutory marketing authorities Reduction of agricultural tariffs on both outputs and inputs Sanitary and phytosanitary (SPS) measures continue

In Australia, total support to the sector is composed of general services and budgetary payments to producers. Market price support disappeared since the late 1990s, and support to producers (PSE) was reduced to one of the lowest in the OECD. Current support is mostly delivered through payments based on inputs and payments not requiring production.

 

Notes: A/An/R/I:Area planted/Animal numbers/Receipts/Income.

Payments not requiring production include Payments based on non-current A/An/R/I (production not required) and Payment based on non-commodity criteria. Other payments include Payments based on non-current A/An/R/I (production required) and Miscellaneous payments.

Source: OECD (2021), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Main policy instruments

Australia’s agricultural sector is strongly market-oriented, and domestic and international prices are generally aligned. Support to agriculture comprises a mix of direct budgetary outlays, concessional loans and tax concessions. Direct support is provided to upgrade on-farm infrastructure that aims to improve the efficiency of natural resource use. Several programmes also support the development and uptake of farming practices to enhance sustainability, including through innovation take-up and pilot testing of certification schemes.1

Concessional loan schemes create incentives for investments in farm businesses, drought resilience and preparedness, plantations and farm succession arrangements. Income stabilisation tools such as the Farm Management Deposits scheme and income tax averaging arrangements further strengthen farm preparedness. For producers experiencing hardship, regardless of the cause, there is the safety net of the farm household income support. This is supplemented with natural disaster assistance2 provided through the Disaster Recovery Funding Arrangements that came into force in 2018. The Drought Response, Resilience and Preparedness Plan was released in 2019, and focuses on immediate action and support as well as long-term resilience and preparedness for farmers and communities affected by drought – including through the AUD 5 billion (USD 3.8 billion) Future Drought Fund launched in July 2020 (Australian Government, 2022[2]). Central and regional funding supports large-scale water infrastructure investments, and programmes support farmers and land managers in pest and weed control during drought.

Since 2018, the Regional Investment Corporation (RIC) administers the Australian Government’s concessional farm business loans. Changes to the portfolio of concessional loans are described in the section on Domestic Policy Developments below.

In contrast to the low level of direct government support to farmers, research and development (R&D) programmes are a major component of Australian support to agriculture. A smaller portion of public expenditure goes to the development and maintenance of large infrastructures and inspection services, including pest and disease control activities. Industry and governments cost-share the eradication of pest and disease outbreaks, while trade-related costs of biosecurity and food safety inspection services are covered by industry.

Rural research and development corporations (RDCs) are one of the Australian Government’s primary vehicles to support rural innovation. RDCs are a partnership between the government and industry created to share funding and strategic direction-setting for primary industry R&D, investment in R&D and subsequent adoption of R&D outputs. A levy system collects contributions from primary producers to finance RDCs, and the Australian Government provides matched funding for the levies, up to legislated caps.

Improving market transparency is also part of the government’s assistance to the food sector. One example is the mandatory dairy code of conduct under the authority of the Australian Competition and Consumer Commission (ACCC), which came into force in January 2020 (Australian Government, 2019[3]).

Australia’s agriculture is trade-oriented with sixteen comprehensive regional or bilateral free trade agreements in force.3 Policies support access to export markets, including helping small exporters overcome market access barriers and costs associated with exports registration. Imports of agriculture and food products, on average, face lower tariff rates than non-agricultural goods (WTO, 2022[4]). A number of SPS measures are in place to manage pest and disease risks that could harm the sector and affect Australia’s plant, animal and human health as well as Australia’s environment more broadly. These SPS measures mean that several conditions are in place for imports of agricultural products and other goods from certain regions.

Climate change mitigation policies in agriculture

In 2019, GHG emissions from agriculture were 69.8 MtCO₂eq, or 12.8% of Australia’s GHG emissions, excluding land use, land-use change and forestry (LULUCF). Methane (CH₄) is the largest component of agricultural emissions, accounting for 78% of emissions from agriculture, followed by nitrous oxide (N₂O) at 18.5%. Agricultural emissions decreased considerably over the past three decades, and were 17.8% lower in 2019 compared to 1990 levels.

Australia submitted its first Nationally Determined Contribution (NDC) under the Paris Agreement of the United Nations Framework Convention on Climate Change (UNFCCC) in 2015, committing to reduce economy-wide GHG emissions by 26-28% below 2005 levels by 2030. An update to the NDC submitted in December 2020 reaffirms this target and outlines Australia’s technology-led approach to emissions reductions. An additional NDC update was submitted in October 2021, maintaining the same 2030 target and committing Australia to net-zero emissions by 2050.

The Department of Industry, Science, Energy and Resources is responsible for the Australian Government’s emissions reduction strategies and policies. In 2021, the Department published Australia’s whole-of-economy Long-Term Emissions Reduction Plan, which sets out the government’s plan to achieve net-zero emissions by 2050. The Technology Investment Roadmap is a cornerstone of the plan, and aims to accelerate the development and commercialisation of new and emerging low-emissions technologies, including in the agricultural sector. However, specific emissions reduction targets for the agricultural sector have not been defined.

The Low Emissions Technology Statement (LETS) 2021 is the second annual statement released under the roadmap, outlining priorities for government investments in new and emerging technologies. One major focus is identifying technological solutions for reducing methane emissions from livestock. Over the next six years, Australia will direct AUD 30.7 million (USD 23.1 million) towards the development of innovative livestock feed technological solutions:

• The three-year, AUD 6 million (USD 4.5 million) Methane Emissions Reduction in Livestock Stage 1 (MERiL Stage 1) grants programme launched in May 2021 and is supporting trials of new livestock feed technologies that reduce emissions and could increase productivity from cattle and sheep. The programme provides grants of between AUD 500 000 and AUD 1.5 million (USD 376 000 to USD 1.1 million) to assess the emissions reduction and productivity benefits of these technologies.

• The five-year, AUD 23 million (USD 17.3 million) Methane Emissions Reduction in Livestock Stages 2 and 3 (MERiL Stages 2 and 3) programme will support development of low-emission feed supplement delivery technologies to reduce enteric methane emissions from grazing cattle and sheep. AUD 20 million (USD 15 million) is available for grants to develop and determine the feasibility of proposed delivery technologies (Stage 2 projects), and undertake large-scale trials to validate them and demonstrate emissions reduction and productivity impacts (Stage 3 projects).

• AUD 1.7 million (USD 1.3 million) helps to scale up production of the red seaweed Asparagopsis as a livestock feed supplement.4 This includes an AUD 1 million (USD 0.75 million) Accelerating Commercialisation grant under the Entrepreneurs’ Programme to scale up production and support the commercialisation of Asparagopsis, and an AUD 675 000 (USD 0.51 million) grant from the Commercialisation Fund to establish a processing and manufacturing facility for this product.

In addition, the government committed AUD 59 million (USD 44.3 million) over 10 years, with an additional AUD 210 million (USD 157.7 million) committed by industry and universities, towards a new Marine Bioproducts Co-operative Research Centre that will develop high-protein seaweed for use as a low-emissions livestock feed.

Bringing down the costs of soil carbon measurement to increase participation in soil carbon projects is a priority in Australia’s Technology Investment Roadmap. The three-year AUD 50.7 million (USD 38.1 million) National Soil Carbon Innovation Challenge launched in October 2021 to identify and fast-track low-cost, accurate technological solutions for measuring soil carbon. This challenge will help industry and researchers achieve soil carbon measurement costs at below AUD 3 (USD 2.25) per hectare per year on average. The five-year AUD 7.9 million (USD 5.9 million) Soil Carbon Data Programme, announced in December 2020, supports partnerships between scientists, industry and landholders to improve soil carbon data and build confidence in low-cost alternatives for measuring and estimating soil carbon. The programme contributes to a nationally accessible soil data repository to support the development of soil carbon measurement technologies and enhance modelling used in the National Greenhouse Accounts.

The Emissions Reduction Fund (ERF), established in 2015 under the Carbon Credits (Carbon Farming Initiative) Act of 2011, is a voluntary scheme providing incentives for businesses to undertake emissions reductions and carbon sequestration projects that meet strict integrity requirements, including in relation to additionality. Agricultural landowners and farmers can earn income by generating Australian Carbon Credit Units (ACCUs) for every tonne of emissions reduced or carbon stored through a project, and selling these to the government or third parties. The ERF is administered by the Clean Energy Regulator, an independent statutory authority responsible for developing technical rules for emissions abatement activities and making emissions reduction purchases on behalf of the government. As of April 2022, the ERF had committed AUD 2.7 billion (USD 2 billion) through 14 auctions for a total of 217 MtCO₂eq of abatement, including 15.2 MtCO₂eq of agricultural emissions (of which just 1.1 MtCO₂eq of abatement has been delivered so far).

The Carbon + Biodiversity Pilot, part of the ongoing Agriculture Biodiversity Stewardship Package, is trialling a market-based approach to pay farmers for long-term biodiversity improvements, on top of income they can earn from the ERF for carbon sequestration projects. Landholders are required to plant, manage and maintain their carbon plantings in line with biodiversity protocols developed by the Australian National University.

Box 5.1. Industry-led initiatives to mitigate agricultural emissions in Australia

The National Farmers’ Federation (NFF) published a Climate Change Policy in August 2020, expressing support for an economy-wide aspiration of net-zero emissions by 2050. The NFF recognises the opportunity for Australian agriculture to contribute to national emissions reduction efforts through innovations that reduce the emissions intensity of production and enable farmers to participate in new markets for carbon and natural capital.

The Red Meat Advisory Council, a federation of Australian red meat and livestock national employer associations and commodity representative organisations, has set a target for the industry to be carbon-neutral by 2030. The initiative is set out in the Red Meat 2030 strategic plan, to be achieved through a combination of pasture-based carbon sequestration, enteric methane emissions reduction, reducing production, processing and consumption waste, and increasing use of renewables in the industry’s energy mix.

Meat and Livestock Australia, the industry marketing and research body for the Australian red meat and livestock industry, set a target to be carbon neutral by 2030. The proposed approach includes a combination of emissions avoidance activities on farm, in feedlots and in processing facilities, plus on-farm carbon storage, integrated management systems, and leadership and capacity building.

Dairy Australia, the national services body for the Australian dairy industry, set a target to achieve a 30% reduction in GHG emissions intensity across the whole industry (to 0.70kg CO₂eq FPCM1 by 2030, from a baseline of 1.03kg CO₂eq in 2015).

Australian Pork Limited, a producer-owned industry body, released a sustainability framework for 2021-2030 underlining the goal of achieving low GHG emissions and adopting “closed loop systems for carbon and water”.

Australia’s 15 Rural Research and Development Corporations (RDCs) established Agricultural Innovation Australia (AIA), a not-for-profit company to facilitate joint investment projects to tackle cross-sectoral challenges facing the industry. AIA’s first investments will be in climate adaptation and resilience.

1. FPCM is milk corrected for its fat and protein content to a standard of 4.0% fat and 3.3% protein. This standard is used to compare milk with different fat and protein contents, and provide a common basis to evaluate milk production of different dairy animals and breeds.

Source: (NFF, 2020[5]); (RMAC, 2021[6]); (MLA, 2021[7]); (Dairy Australia, 2020[8]); (APL, 2021[9]).

Domestic policy developments in 2021-22

The Australian Government launched the Delivering Ag2030 strategy in May 2021, which aims to support the sector in achieving its ambitious goal of reaching AUD 100 billion (USD 75.1 billion) in farm gate output by 2030. The strategy is centred around seven key themes: trade and exports; biosecurity; stewardship of land and water; fair, strong and resilient supply chains; water and infrastructure; innovation and research; and human capital.

Preparing for drought continues to be an important focus for the government, primarily through the AUD 5 billion (USD 3.8 billion) Future Drought Fund, which provides AUD 100 million (USD 133 million) from the fund for investments each year to help farmers and communities build drought resilience. The Mid-year Economic and Fiscal Outlook 2021-22 (MYEFO) introduced new measures to address gaps identified in the 2020 Review of the Australian Government’s Drought Response. An additional AUD 7 million (USD 5.3 million) has been made available to support the continued delivery of the Climate Services for Agriculture programme, an important element of the Future Drought Fund that will expand climate information capabilities to support farmers and farming communities to understand how drought and other climate risks might impact them into the future. The government is also committing AUD 4.1 million (USD 3.1 million) to develop drought indicators as part of a new early warning system to help regional Australia better prepare for, manage and recover from drought. The On-farm Emergency Water Infrastructure Rebate Scheme was extended for a further 12 months, giving farmers impacted by drought until June 2023 to fully utilise the AUD 100 million (USD 75.1 million) in funding for the purchase and installation of on-farm water infrastructure for livestock and permanent plantings to improve drought preparedness.

A new concessional loan product was introduced through the Regional Investment Corporation (RIC) in January 2021. The AgriStarter loan supports sector entry as well as farm succession arrangements with loans of up to AUD 2 million (USD 1.5 million) from the overall AUD 75 million (USD 56.3 million) budget in 2020-21. In December 2021, the government extended the RIC’s existing loan funding for a further three years to FY 2025-26, and expanded its eligibility criteria (from 1 April 2022) to include farmers that share or lease farming land.

The National Agricultural Innovation Agenda (NAIA), announced in September 2020, sets out a plan to modernise Australia’s agricultural innovation system and support the sector in reaching its AUD 100 billion (USD 75.1 billion) target by 2030. In October 2021, the government released the National Agricultural Innovation Policy Statement, establishing four new National Agricultural Innovation Priorities that target exports, climate resilience, biosecurity and digital agriculture. Funding to support the new innovation priorities includes AUD 2.8 million (USD 3.7 million) for Agricultural Innovation Australia to develop strategies to attract investment. The government is also providing AUD 20 million (USD 15 million) in additional funding to the eight Drought Resilience Adoption and Innovation Hubs from 2021-22 to 2022‑23. The new funding will allow the Hubs to expand their current remit of drought resilience to broader agricultural innovation by delivering activities that support uptake of innovation by producers, stimulate collaboration and increase commercialisation outcomes. In addition, the agricultural innovation sharing digital platform growAG was launched in April 2021, allowing participants across the agriculture innovation system to showcase their research and technologies to the world.

The Australian Government Roadmap to Attract, Retain, Upskill and Modernise the Agriculture Workforce was released in March 2021, in parallel with the National Agriculture Workforce Strategy that was developed by the independent National Agricultural Labour Advisory Committee. The strategy contains 37 recommendations and highlights the need to modernise agriculture’s image, attract and retain workers, embrace innovation, build skills for modern agriculture, and treat workers ethically. The Australian Government Response to the National Agricultural Workforce Strategy was released in December 2021.

Several initiatives were launched as part of the 2021-22 budget package to improve employment opportunities in agriculture. AUD 25.2 million (USD 18.9 million) is provided over four years from 2021-25 for the AgATTRACT package, which aims to attract and retain a skilled agricultural workforce, shift perceptions of agricultural work and showcase the diverse career opportunities on offer. This includes AgCAREERSTART, a pilot structured employment programme to give young Australians a way to experience work in agriculture, and the AgUP grants programme, which provides co-financing for industry-led initiatives to support upskilling and develop career progression pathways. The AgFAIR package provides AUD 4.6 million (USD 3.5 million) over four years to help agricultural employers adopt best practice workforce management and planning practices, and to better attract and retain employees.

The total investment in the ongoing Agriculture Biodiversity Stewardship Package has increased to AUD 66.1 million (USD 49.6 million). The 2021-22 budget delivers an additional AUD 32.1 million (USD 24.1 million) in new funding to promote biodiversity stewardship, including:

• AUD 22.3 million (USD 16.7 million) for on-farm trials of the Enhancing Remnant Vegetation Pilot, providing payments to farmers under a long-term agreement to protect, manage and enhance native vegetation by installing fencing, weeding, pest control and replanting.

• AUD 5.4 million (USD 4.1 million) to implement an Australian Farm Biodiversity Certification Scheme, allowing farmers to showcase best practice biodiversity management to communities and markets.

• AUD 4.4 million (USD 3.3 million) to establish a National Stewardship Trading Platform, enabling farmers to connect with buyers of biodiversity outcomes and kick-start private sector biodiversity markets. The platform will provide spatial planning tools to help farms plan and evaluate biodiversity and carbon services through a transparent marketplace.

The package also includes the Carbon + Biodiversity Pilot, which is trialling a market-based approach to pay farmers for biodiversity improvements on top of income they can earn from the ERF for carbon sequestration projects. Furthermore, in December 2021 the MYEFO announced AUD 13.2 million (USD 9.9 million) over 2021-22 to establish a Voluntary Biodiversity Stewardship Market. This will enable farmers who undertake biodiversity activities to gain access to new income streams whilst contributing to environmental outcomes. In February 2022, the government introduced the Agriculture Biodiversity Stewardship Market Bill 2022, establishing a legal framework to underpin a national voluntary agriculture biodiversity stewardship market.

The government launched the National Soil Strategy in May 2021, setting out how Australia will value, manage and improve its soil for the next 20 years. The strategy has three key goals: to prioritise soil health, empower soil innovation and stewardship, and to strengthen soil knowledge and capability. The AUD 215 million (USD 161.5 million) National Soil Package provides a road map to healthier soils, with measures to support soil science, soil data and soil extension over a four-year period from 2021-25. This includes AUD 5.9 million (USD 4.4 million) to implement the National Soil Strategy, AUD 67 million (USD 50.3 million) for the Food Waste for Healthy Soils Fund; AUD 54.4 million (USD 40.9 million) for the two-year Pilot Soil Monitoring and Incentives Programme; AUD 20 million (USD 15 million) for the Soil Science Challenge Grants Programme; AUD 18 million (USD 13.5 million) for soil extension activities via the National Landcare Programme’s Smart Farms Small Grants initiative; and AUD 15 million (USD 11.3 million) to develop the Australian National Soil Information System (ANSIS). Funding was also allocated for a review of existing soil data, for the Enhancing Soil Education and Expertise initiative, and to develop the National Land Management Practices Classification System. This investment reflects the importance of ongoing actions to support Australia’s soil as a natural asset that provides essential ecosystem, climate resilience and agricultural production services that support and contribute to Australia’s economic, environmental, and social well-being.

The government has committed AUD 5.4 million (USD 4.1 million) over four years from 2021-22 under the Improving Market Transparency in Perishable Agricultural Industries programme. The programme will deliver workshops with perishable agricultural industries to understand their market transparency requirements, and deliver a subsequent grants programme to develop and implement tailored mechanisms to improve price and market transparency.

The December 2021 MYEFO also includes AUD 65 million (USD 48.8 million) of funding over four years from 2021-25 to build resilience in the horticulture sector by protecting crops from extreme weather events and fruit fly pests. This includes support for producers to purchase and install new horticultural netting, and funding for states, territories and industry to manage fruit fly pests through new post-harvest treatment infrastructure, upgrading quarantine stations, and investing in Sterile Insect Technique capabilities.

Domestic policy responses to the COVID-19 pandemic

Border closures resulting from the COVID-19 pandemic reduced Australia’s agricultural workforce (in the past, overseas workers filled up to 50% of casual and contract labour positions). The government announced the Australian Agriculture Visa (AAV) in August 2021 to help address workforce shortages and facilitate labour mobility across Australia’s primary industries. The visa will be available to skilled, semi-skilled and low skilled workers across a broad range of agricultural industries (including meat processing), and the fishery and forestry sectors. The AAV will supplement Australia’s existing Pacific Australia Labour Mobility (PALM) scheme, which helps to fill labour gaps in rural and regional Australia by allowing businesses to hire workers from nine Pacific islands and Timor-Leste when there are not enough local workers available.

Trade policy developments in 2021-22

Australia’s trade policy seeks further market opening through multilateral, bilateral and regional trade agreements (DFAT, 2022[10]). Recent developments were mainly related to progress in trade agreements, strengthening biosecurity, and facilitating access to export markets in the COVID-19 context.

The Regional Comprehensive Economic Partnership (RCEP) agreement entered into force on 1 January 2022. Australia ratified RCEP on 2 November 2021 and was an original party to the agreement along with Brunei Darussalam, Cambodia, China, Japan, Laos, New Zealand, Singapore, Thailand and Viet Nam. RCEP is a comprehensive free trade agreement that provides a single set of rules and procedures for Australian exporters to utilise preferential tariffs across the region.

The Australia-United Kingdom Free Trade Agreement (A-UK FTA) was virtually signed on 17 December 2021. The A-UK FTA is expected to enter into force in 2022, and will provide new and enhanced market access for Australian farmers and exporters of beef, sheep meat, wine, sugar, dairy, grains, horticulture and seafood. It will also facilitate the mobility of skilled workers between Australia and the United Kingdom and enhance technical collaboration on biosecurity, animal welfare and antimicrobial resistance.

Australia is currently engaged in FTA negotiations with the European Union (launched in 2018). Negotiations for the Australia-India Comprehensive Economic Co-operation Agreement launched in May 2011, were suspended in 2015, and re-launched in September 2021. Negotiations have been ongoing for an extended period with the Gulf Cooperation Council (GCC), and the Pacific Alliance5 FTA. Australia also engages in the plurilateral Environmental Goods Agreement (EGA) negotiations, undertaken in conjunction with 45 other WTO member countries to reduce tariffs on goods that benefit the environment (DFAT, 2022[10]).

Launched in February 2021, the Dairy Export Assurance Programme (DEAP) provides AUD 14.78 million (USD 11.1 million) in investment over 3-5 years to assist dairy manufacturers to become export ready. The programme supports the Australian dairy industry to enhance its competitiveness in global markets by building capacity, raising awareness, reducing regulatory hurdles, aligning food safety regulatory and commercial assurance, and reducing compliance burdens.

The Australian Standards for the Export of Livestock (ASEL) outline the minimum animal health and welfare conditions exporters must meet when exporting livestock. The standards are reviewed every three years to ensure that the standards remain fit for purpose and reflect the latest science. The latest version of the standards (ASEL 3.2) was published in November 2021.

Biosecurity is a key focus of the 2021-22 budget package, with over AUD 400 million (USD 300 million) in new funding allocated over four years to safeguard Australia from exotic pests and diseases. The package includes:

• AUD 84.1 million (USD 63.2 million) to invest in critical frontline measures to better manage the risk of pests and diseases entering Australia. This includes AUD 58.6 million (USD 44 million) to continue protecting Australia from the biosecurity risk posed by African swine fever.

• AUD 80.9 million (USD 60.8 million) to modernise ICT systems, technology and data analytics.

• AUD 235.1 million (USD 176.6 million) to improve the government’s ability to detect and manage threats offshore and increase the capacity to respond to incursions, by strengthening partnerships with importers, companies, producers and the community.

The 2021-22 budget also delivers AUD 9 million (USD 6.8 million) under the Supporting Trade – extend the Improved Access to Agricultural and Veterinary Chemicals programme. The programme will boost farm productivity, strengthen farmers’ responses to pests and diseases, and ensure competitive supply chains by expanding access to agricultural and veterinary chemicals. It gives farmers more options for trading their products, allows for better management of potential threats to Australian agriculture, and ensures long-term sustainable agricultural growth.

Trade policy responses to the COVID-19 pandemic

The onset of the COVID-19 pandemic saw a number of programmes introduced to facilitate access to export markets, including the AUD 328 million (USD 246.3 million) Busting Congestion for Agricultural Exporters package. Government support to access export markets was also reinforced with the Agri-Business Expansion Initiative announced in December 2020. In December 2021, several components of the initiative were extended for a further 12 months, with an additional AUD 13.2 million (USD 9.9 million) allocated to help Australian agribusinesses maintain, diversify and expand their export markets. This brings the total investment under the initiative to AUD 85.9 million (USD 64.5 million), of which around half is attributed to Austrade to support agri-food exporters to expand and diversify their export markets, with all components scheduled to end by June 2023. The initiative has expanded the Agricultural Trade and Market Access Co-operation programme (ATMAC), enabling the government to partner with industry associations and rural RDCs to improve Australia’s access to overseas markets, by mobilising research, training, competitor analyses, market analyses, export strategy development, relationship development and capital works that support market diversification.

New funding for the expansion and diversification of exports was announced in the December 2021 MYEFO, with an additional AUD 137.7 million (USD 103.4 million) over four years committed to revamp Australia’s trade systems by simplifying regulation, reducing duplication, and creating a one-stop digital shop for trade clearances. AUD 8.5 million (USD 6.4 million) was allocated to expand the use of Australia’s export legislation to provide export certification to non-traditional agricultural products, starting with cosmetics. A further AUD 25.0 million (USD 18.8 million) will support agricultural shows and field days, and showmen and women impacted by COVID-19 restrictions.

The International Freight Assistance Mechanism was established in April 2020 to help keep international supply chains open during COVID-19. A further AUD 260.9 million (USD 195.9 million) in funding was announced in August 2021, bringing the total budget to AUD 1.04 billion (USD 781.1 million) and extending the programme to June 2022. The funding also supports domestic connections for producers and growers in regional and rural areas that rely on airfreight to get their products to existing markets.

Contextual information

Australia is the world’s 18^th largest economy in purchasing power parity (PPP) terms and the sixth largest country by land area, accounting for 12% of all agricultural land in the 54 countries included in this report, but only 0.5% of the total population of these countries. The country’s GDP per capita is more than twice the average of the countries covered in this report (Table 5.3). Agriculture represents a small share of the economy, accounting for just 2.4% of GDP and 2.5% of total employment in 2020. Australia is an important producer of agricultural commodities. In 2020, the country ranked as the world’s second-largest producer of sheep meat and wool, the fifth-largest producer of beef, and is also among the world’s top-ten producers of barley, oats, rapeseed and sugar cane.

Table 5.3. Australia: Contextual indicators

	Australia		International comparison
	2000*	2020*	2000*	2020*
Economic context			Share in total of all countries
GDP (billion USD in PPPs)	539	1 404	1.3%	1.3%
Population (million)	19	26	0.4%	0.5%
Land area (thousand km2)	7 682	7 692	9.4%	9.3%
Agricultural area (AA) (thousand ha)	455 469	362 477	15.1%	12.3%
			All countries1
Population density (inhabitants/km2)	2	3	53	63
GDP per capita (USD in PPPs)	28 305	54 654	9 281	20 929
Trade as % of GDP	17	16	12.3	14.0
Agriculture in the economy			All countries1
Agriculture in GDP (%)	3.8	2.4	2.9	4.9
Agriculture share in employment (%)	4.8	2.5	-	-
Agro-food exports (% of total exports)	23.1	12.3	6.2	8.5
Agro-food imports (% of total imports)	4.3	7.4	5.5	7.7
Characteristics of the agricultural sector			All countries1
Crop in total agricultural production (%)	55	54	-	-
Livestock in total agricultural production (%)	45	46	-	-
Share of arable land in AA (%)	5	8	32	34

Note: *or closest available year.

1. Average of all countries covered in this report.

Sources: OECD statistical databases; UN Comtrade; World Bank, WDI and national data.

After 28 years of uninterrupted GDP growth, the COVID-19 pandemic brought Australia’s economy to a halt in 2020. After a sharp contraction, real GDP growth rebounded to 3.8% in 2021, and the unemployment rate fell from 6.5% to 5.1% (Figure 5.4). Inflation also increased to 2.9% in 2021 as pandemic-related restrictions on economic activity were eased.

Australia is a net exporter of agricultural products and plays an essential role in supplying food to world markets. Seventy per cent of the value of agricultural production is exported, and Australian farmers produce enough food to feed an estimated 80 million people (DAWE, 2022[11]). Australia’s agricultural sector is well integrated into world markets: the country is a major exporter of wheat, barley, oats, cattle, beef, sheep meat, wool, rapeseed, and chick peas. Processed goods for final consumption and further processing make up 60% of the country’s agro-food exports. Approximately three-quarters of Australia’s agro-food imports go to domestic final consumption and the remaining share (24%) is destined for the processing industry (Figure 5.5).

 

Sources: OECD statistical databases; World Bank, WDI; and ILO estimates and projections.

 

 

Note: Numbers may not add up to 100 due to rounding.

Source: UN Comtrade Database.

Over the 2010-19 period, agricultural output grew at 0.7% per year, significantly lower than the world average of 2.2% (Figure 5.6). This was partly due to a slowdown in total factor productivity (TFP) growth, which reached 0.3% per year (compared with the global average of 1.4%), and fell short of the growth rate of 1.6% observed during 1991-2000. Primary factor growth was limited (0.05%), as capital growth was offset by declining contributions from land and labour. Water availability and competition for natural resources with other sectors is a particularly significant constraint, which is likely to be exacerbated by climate change.

The share of agriculture in total energy use has increased since 2000 and was above the OECD average in 2020, despite the small share of the sector in the economy (Table 5.4). Agriculture’s contribution to GHG emissions has also declined, but remains above the OECD level, despite the smaller contribution to GDP. Compared to the OECD area, agriculture accounts for a relatively high share of total water abstractions. Aggregate indicators also suggest that water stress is much less of a problem than in many OECD countries. Estimates also indicate a relatively low nitrogen surplus balance and point to a low phosphorous balance.

 

Note: Primary factors comprise labour, land and capital (livestock and machinery). Intermediate input comprises materials (feed and fertiliser).

Source: USDA Economic Research Service Agricultural Productivity database.

Table 5.4. Australia: Productivity and environmental indicators

	Australia		International comparison
	1991-2000	2010-2019	1991-2000	2010-2019
			World
TFP annual growth rate (%)	1.6%	0.3%	1.7%	1.4%
			OECD average
Environmental indicators	2000*	2020*	2000*	2020*
Nitrogen balance, kg/ha	20.7	19.4	32.1	30.0
Phosphorus balance, kg/ha	1.5	0.9	3.4	2.9
Agriculture share of total energy use (%)	2.3	3.2	1.7	2.0
Agriculture share of GHG emissions (%)	16.9	12.8	8.6	9.7
Share of irrigated land in AA (%)	0.5	0.4	-	-
Share of agriculture in water abstractions (%)¹	67.7	67.0	46.3	43.7
Water stress indicator	5.4	3.6	9.7	8.6

Note: *or closest available year.

1. Data are not comparable between time periods, 2020 data from (Australian Bureau of Meteorology, 2021[12]).

Sources: USDA Economic Research Service, Agricultural Productivity database; OECD statistical databases; FAO database and national data.

References

[9] APL (2021), Australian Pork Limited Sustainability Framework 2021-2030, https://australianpork.com.au/sites/default/files/2021-11/APL-Sustainability-Framework_Web.pdf (accessed on 27 February 2022).

[12] Australian Bureau of Meteorology (2021), Water in Australia 2019-20, Bureau of Meteorology, http://www.bom.gov.au/water/waterinaustralia/files/Water-in-Australia-2019-20.pdf.

[2] Australian Government (2022), Drought Policy, Department of Agriculture, Water and the Environment, https://www.awe.gov.au/agriculture-land/farm-food-drought/drought/drought-policy.

[3] Australian Government (2019), Competition and Consumer (Industry Codes—Dairy) Regulations 2019, https://www.legislation.gov.au/Details/F2019L01610.

[8] Dairy Australia (2020), Climate Change, https://www.dairyaustralia.com.au/land-water-and-climate/climate (accessed on 27 February 2022).

[11] DAWE (2022), Delivering Ag2030, Department of Agriculture, Water and the Environment, Canberra, https://www.awe.gov.au/sites/default/files/documents/delivering-ag2030-feb-2022.pdf.

[10] DFAT (2022), Australia’s free trade agreements (FTAs), Australian Government Department of Foreign Affairs and Trade, https://www.dfat.gov.au/trade/agreements/Pages/trade-agreements (accessed on 26 February 2022).

[1] Gray, E., M. Oss-Emer and Y. Sheng (2014), Australian agricultural productivity growth: past reforms and future.

[7] MLA (2021), Carbon Neutral 2030 (CN30), Meat & Livestock Australia Limited, https://www.mla.com.au/research-and-development/Environment-sustainability/carbon-neutral-2030-rd/cn30/#.

[5] NFF (2020), National Farmers’ Federation Climate Change Policy, https://nff.org.au/wp-content/uploads/2020/08/2020.08.06_Policy_NRM_Climate_Change.pdf (accessed on 27 February 2022).

[6] RMAC (2021), Red Meat 2030, Red Meat Advisory Council, http://rmac.com.au/wp-content/uploads/2021/05/RedMeat2030.pdf (accessed on 27 February 2022).

[4] WTO (2022), Tariff profiles: Australia, World Trade Organization, https://www.wto.org/english/res_e/statis_e/daily_update_e/tariff_profiles/AU_E.pdf.

Notes

← 1.  Examples include The Smart Farms program and Smart Farming Partnerships under the second phase of the National Landcare Program 2019-23 (https://www.awe.gov.au/agriculture-land/farm-food-drought/natural-resources/landcare/national-landcare-program/australian-government-investment-in-landcare) and the Agriculture Biodiversity Stewardship Package (https://www.agriculture.gov.au/about/reporting/budget/sustaining-future-australian-farming).

← 2.  Depending on the scale of the disaster, a range of assistance can be made available to primary producers impacted by natural disasters. For example, in the 2019-20 Black Summer Bushfires and 2022 NSW and Queensland floods, primary producers were eligible for AUD 75 000 (USD 56 300) clean up grants, concessional loans along with continued access to the Farm Household Allowance.

← 3.  These are agreements with New Zealand (ANZCERTA 1983), Singapore (SAFTA 2003), Thailand (TAFTA 2005), the United States (AUSFTA 2005), Chile (ACI-FTA 2009), the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA 2010), Malaysia (MAFTA 2013), Korea (KAFTA 2014), Japan (JAEPA 2015), the People’s Republic of China (ChAFTA 2015), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP 2018), Australia-Hong Kong, China (A-HKFTA 2020), Peru-Australia (PAFTA 2020), Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA 2020), the Pacific Agreement on Closer Economic Relations (PACER Plus 2020), and the Regional Comprehensive Economic Partnership Agreement (RCEP 2022).

← 4.  A recent review of prospective feed technologies found a species of red algae (Asparagopsis) and a chemical inhibitor (3-nitrooxypropanol) have some of the largest mitigation potential, with recent on-farm trials indicating that over 80% of methane emissions can be avoided.

← 5.  The Pacific Alliance is a regional trading bloc comprising Chile, Colombia, Mexico and Peru.