Agricultural Policy Monitoring and Evaluation 2023

5. Australia

Support to agriculture

Australia’s support to agricultural producers (Producer Support Estimate, PSE) is among the lowest in the OECD, estimated at 4.3% of gross farm receipts in 2020-22, slightly higher than the 3.7% observed 20 years before. 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.

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. Most producer support in 2020-22 was provided in the form of payments based on input use. Much of these went to concessional loans for on-farm investments, including in response to adverse events. The bulk of remaining producer support (about 20% of the PSE) went mainly to disaster relief payments, income support, and income-smoothing programmes that address cashflow fluctuations, such as the Farm Management Deposits and income-tax-averaging arrangements.

The General Services Support Estimate (GSSE) averaged 2.4% of the value of agricultural production during 2020-22, higher than the 1.9% of the early 2000s but below the OECD average of 3.4% for the period. More than half of this went to support for R&D, innovation, and extension services (corresponding to 1.3% of agricultural production value, compared with 1.1% in the OECD on average). Public expenditure to develop and upgrade infrastructure (mostly hydrological) and strengthen biosecurity represented most of the remaining general services expenditure. Overall support to agriculture (Total Support Estimate, TSE) represented 0.3% of Gross Domestic Product (GDP) in 2020-22 and has barely changed since 2000-02.

Recent policy changes

Several climate-related initiatives were introduced. New funding was provided for investments in climate-smart and sustainable agriculture under the next phase of the Natural Heritage Trust. Also, the On-farm Emergency Water Infrastructure Rebate Scheme was extended to 30 June 2024 to allow farmers impacted by natural disasters to repair and replace damaged infrastructure.

Australia set a new target to reduce economy-wide greenhouse-gas (GHG) emissions to 43% below 2005 levels by 2030, and signed up to the Glasgow Breakthrough Agenda on Agriculture, the Forests and Climate Leaders Partnership, and the Global Methane Pledge. A new Carbon Farming Outreach Program offers a training package and tools for farmers to participate in carbon markets and integrate low-emission technologies and practices into their operations.

Increased funding for the Agriculture Biodiversity Stewardship Package supports market-based approaches to pay farmers for biodiversity improvements through the Carbon + Biodiversity Pilot and the Enhancing Remnant Vegetation Pilot. The government also launched a National Stewardship Trading Platform to connect farmers with buyers of biodiversity outcomes, and is exploring options to implement an Australian Farm Biodiversity Certification Scheme to certify farms and farm businesses for their biodiversity management.

The Regional Comprehensive Economic Partnership (RCEP) agreement entered into force on 1 January 2022, establishing a Free Trade Agreement (FTA) between 15 Asia-Pacific nations. An FTA between Australia and the United Kingdom entered into force on 31 May 2023, and the Australia-India Economic Co-operation and Trade Agreement (AI-ECTA) was signed on 2 April 2022. Several initiatives aim to improve transparency in agricultural supply chains. A newly established Inspector-General of Animal Welfare aims to increase accountability and transparency for animal welfare in livestock exports. The National Agricultural Traceability Strategy 2023-33 aims to develop interoperable traceability systems along supply chains to support exports and strengthen biosecurity and food safety.

Biosecurity remains critical for the Australian Government, with the Bolstering Australia’s Biosecurity System package introducing emergency funding to strengthen domestic biosecurity preparedness, support biosecurity outcomes in neighbouring countries, support improvements in livestock traceability systems, and expand detector dog and handler capabilities. Additional funding was allocated to combat pest animals and weeds through the Supporting Communities Manage Pest Animals and Weeds Program and the National Forest Pest Surveillance Program.

Assessment and recommendations

• Adaptation is imperative for Australian agriculture as the sector is increasingly vulnerable to the effects of climate change. The current suite of adaptation policies includes a focus on strengthening drought resilience under the Future Drought Fund. Investment in the Climate Services for Agriculture platform, its online platform My Climate View and the Drought Resilience Self-Assessment Tool are crucial for encouraging long-term adaptation and could support the development of drought insurance markets using new approaches such as index-based insurance. Concessional loans, income-support schemes and ex post drought relief measures should be monitored to ensure they do not inhibit structural adjustment and long-term transformative change.

• Research and development are a major component of support to the sector and play an important role in building farmers’ capacity to adapt to climate change. Extension services and agricultural education receive less funding. Scaling up knowledge-transfer services in partnership with the private sector can facilitate uptake of innovations, support sustainable productivity growth, and strengthen on-farm capacity to manage risks.

• While Australia’s rural research and development corporations (RDCs) are well positioned to support adaptation in traditional crop and livestock production systems, research effort should also be directed towards facilitating long-term resilience and transformative change. New investments in climate-smart agriculture are welcome in this regard. The development of carbon and biodiversity markets could provide farmers with new and diversified sources of income, if carefully designed with robust performance and integrity standards.

• Sustainable management of water resources is essential for Australian farmers to adapt to higher temperatures, lower winter rainfall, and increased frequency of drought and extreme weather events. Support goes to upgrading hydrological infrastructure and improving water-use efficiency at farm level and in wider water-management basins. However, infrastructure modernisation for water recovery in the Murray Darling Basin should be closely linked to environmental outcomes, while accounting for the impacts of improved irrigation efficiency on increased water consumption and reduced return flows to groundwater and surface water. Irrigation infrastructure subsidies should be weighed against alternatives such as direct purchases of water entitlements, which have proven to be more efficient and cost-effective for delivering environmental water recovery.

• The Australian Carbon Credit Unit (ACCU) scheme (formerly known as the Emissions Reduction Fund) supports projects to reduce or avoid GHG emissions or store carbon, but has yet to demonstrate significant impact on reducing agricultural emissions, with just 1.1 MtCO₂eq of abatement delivered as of April 2022. In the absence of a national carbon-pricing scheme, efforts to scale up the ERF could strengthen progress in mitigating agricultural emissions.

• While 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. A recent independent review of ACCUs highlighted these issues and produced a list of 16 recommendations, which the government has accepted in principle. Efforts to strengthen confidence in the transparency and integrity of ACCUs will be essential to sustain confidence in the ACCU scheme and its ability to help Australia meet its emissions-reduction targets.

• Funding to accelerate the development and commercialisation of technological solutions to reduce emissions rightly focuses on methane emissions from livestock, which represent 79% of Australia’s agricultural emissions. However, the extent to which technologies such as feed supplements 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, a stronger policy response, comprising a mix of abatement subsidies, emissions taxes, standards, and regulations will be needed to create sufficient incentives for farmers to adopt low-emission technologies.

Figure 5.1. Australia: Development of support to agriculture

 

 

 

 

 

Source: OECD (2023), “Producer and Consumer Support Estimates”, OECD Agriculture statistics (database), http://dx.doi.org/10.1787/agr-pcse-data-en.

Figure 5.2. Australia: Commodity-specific transfers as a percentage of commodity gross farm receipts, 2020-22

Source: OECD (2023), “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	2020-22	2020	2021	2022p
Total value of production (at farm gate)	14 358	19 605	59 529	50 299	65 873	62 414
of which: share of MPS commodities (%)	82.36	74.30	73.91	72.49	74.33	74.90
Total value of consumption (at farm gate)	5 072	7 514	21 342	19 299	23 063	21 664
Producer Support Estimate (PSE)	1 411	761	2 655	2 085	3 057	2 824
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	2 068	1 590	2 399	2 216
Based on variable input use	217	14	1 057	682	1 294	1 195
with input constraints	0	4	19	30	14	13
Based on fixed capital formation	4	145	869	775	952	879
with input constraints	0	0	1	4	0	0
Based on on-farm services	9	149	143	133	153	142
with input constraints	0	0	0	0	0	0
Payments based on current A/An/R/I, production required	0	11	268	214	307	283
Based on Receipts / Income	0	11	268	214	307	283
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	291	255	321	297
With variable payment rates	181	343	287	251	318	293
with commodity exceptions	0	110	71	76	71	66
With fixed payment rates	0	99	4	4	4	3
with commodity exceptions	0	0	0	0	0	0
Payments based on non-commodity criteria	0	0	28	26	30	28
Based on long-term resource retirement	0	0	0	0	0	0
Based on a specific non-commodity output	0	0	7	2	11	10
Based on other non-commodity criteria	0	0	21	24	20	18
Miscellaneous payments	0	0	0	0	0	0
Percentage PSE (%)	9.65	3.74	4.26	3.98	4.44	4.33
Producer NPC (coeff.)	1.08	1.00	1.00	1.00	1.00	1.00
Producer NAC (coeff.)	1.11	1.04	1.04	1.04	1.05	1.05
General Services Support Estimate (GSSE)	98	370	1 407	1 469	1 605	1 148
Agricultural knowledge and innovation system	95	252	762	721	813	751
Inspection and control	3	39	120	116	130	114
Development and maintenance of infrastructure	0	75	294	354	274	253
Marketing and promotion	0	4	225	270	382	24
Cost of public stockholding	0	0	0	0	0	0
Miscellaneous	0	0	7	9	6	5
Percentage GSSE (% of TSE)	6.48	36.45	34.67	41.34	34.43	28.90
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	4 063	3 554	4 662	3 971
Transfers from consumers	513	0	0	0	0	0
Transfers from taxpayers	996	1 015	4 063	3 554	4 662	3 971
Budget revenues	0	0	0	0	0	0
Percentage TSE (% of GDP)	0.65	0.25	0.25	0.25	0.27	0.24
Total Budgetary Support Estimate (TBSE)	509	1 015	4 063	3 554	4 662	3 971
Percentage TBSE (% of GDP)	0.22	0.25	0.25	0.25	0.27	0.24
GDP deflator (1986-88=100)	100	150	263	249	262	280
Exchange rate (national currency per USD)	1.40	1.83	1.41	1.45	1.33	1.44

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 (2023), “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 starting in 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 strengthened

In Australia, total support to the sector is composed of general services and budgetary payments to producers. Market price support was progressively phased out during the 1990s, and support to producers (PSE) is now among the lowest in the OECD. Producer support is mostly delivered through payments based on inputs and payments not requiring production.

Figure 5.3. Australia: Level and PSE composition by support categories, 1986 to 2022

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 (2023), “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 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 new farm businesses, farm succession arrangements, drought resilience and preparedness, and plantations. The Regional Investment Corporation (RIC) has administered the Australian Government’s concessional farm business loans since 2018. Income stabilisation tools such as the Farm Management Deposits Scheme and income tax averaging arrangements are designed to strengthen financial risk management by helping primary producers to deal more effectively with fluctuations in cash flows. 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 assistance provided through the Disaster Recovery Funding Arrangements that came into force in 2018.2 Primary producers experiencing financial hardship can also access free, confidential financial counselling under the Rural Financial Counselling Services Program. 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 3.5 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.

Research and development (R&D) programmes are a major component of Australian support to agriculture. 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.

A smaller portion of public expenditure goes to the development and maintenance of infrastructure and inspection services, including pest and disease control activities. Industry and governments cost-share actions to address pest and disease outbreaks, while trade-related costs of biosecurity and food safety inspection services are covered by industry.

Australia’s Nationally Determined Contribution (NDC) commits to achieving net zero emissions by 2050 and reducing GHG emissions to 43% below 2005 levels by 2030. While agriculture is included under Australia’s economy-wide emissions reduction targets, no specific emissions reduction targets have been defined for the agricultural sector. Investments in climate-smart and sustainable agriculture projects have increased in recent years, providing support for technological solutions to reduce methane emissions from livestock, improve soil health, build resilience to climate change, and protect natural capital and biodiversity.

The Australian Carbon Credit Unit (ACCU) scheme, formerly known as the Emissions Reduction Fund, was established in 2015 under the Carbon Credits (Carbon Farming Initiative) Act of 2011. The ACCU scheme provides incentives for businesses to undertake voluntary 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 ACCUs for every tonne of emissions reduced or carbon stored through a project and selling these to the government or third parties. As of March 2023, the scheme had committed AUD 2.7 billion (USD 1.9 billion) through 15 auctions for a total of 217.3 MtCO₂eq of abatement, including 14.8 MtCO₂eq of agricultural emissions (of which just 1.1 MtCO₂eq of abatement has been delivered as of April 2022).

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 export-oriented with 18 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 adaptation policies in agriculture

Climate change is impacting Australian agriculture through increased variability of rainfall and temperatures, and greater frequency of extreme weather events, including drought, floods, and bushfires. According to estimates from the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), changes in seasonal conditions over 2001-20 (relative to 1950-2000) reduced annual average farm profits by 23% or around AUD 29 200 (USD 20 253) per farm. Climate conditions have also contributed to increased variability in farmers’ cash income and profits, with the most pronounced impacts observed in south-western and south-eastern Australia.

The government recently scaled up its support for investments in climate-smart and sustainable agriculture. The October 2022-23 federal budget provides AUD 302 million (USD 209 million) over five years for sustainable agriculture investments under the next phase of the Natural Heritage Trust. The climate-smart agriculture package includes AUD 159 million (USD 110 million) for sustainable agriculture projects that encourage climate adaptation practices, emissions reduction technologies, greater engagement in carbon and biodiversity markets, and sustainable management of natural resources. In addition, AUD 36 million (USD 25 million) will be invested to design and deliver a new National Soil Monitoring Program and to facilitate extension services, and knowledge sharing through the Regional Soil Coordinators Program and the National Soil Community of Practice. The package also provides AUD 41 million (USD 28 million) for a network of Sustainable Agriculture Facilitators, and AUD 36 million (USD 25 million) for a network of delivery partners to deliver climate-smart agriculture actions efficiently and at scale. An additional AUD 31 million (USD 22 million) is earmarked for programme design and implementation.

Drought preparedness continues to be a focus for the Australian government, particularly in the context of a changing climate, which is resulting in an increasing frequency and severity of droughts. The October 2022-23 federal budget provided AUD 6.6 million (USD 4.6 million) to improve planning, tools, and systems to help the government and farmers prepare for drought. This includes delivery of two key policies: the next Australian Government Drought Plan and a new National Drought Agreement with states and territories.

The On-farm Emergency Water Infrastructure Rebate Scheme launched in December 2018 and includes AUD 100 million (USD 69 million) in funding for farmers to improve drought preparedness through the installation of on-farm water infrastructure (e.g., buying and laying pipes, installing water storage devices, desilting dams and water bores). The October 2022-23 budget extended the scheme to 30 June 2024, and expanded the scheme to allow farmers impacted by natural disasters to repair and replace damaged infrastructure for improved water-use efficiency and flexibility.

The AUD 5 billion (USD 3.5 billion) Future Drought Fund (FDF) provides AUD 100 million (USD 69 million) in returns from the fund each year to help farmers and communities build drought resilience. Since its establishment in July 2020, the FDF has allocated a total of AUD 420 million (USD 291 million) to drought-resilience initiatives, structured around four themes: better climate information; better planning; better practices; and better-prepared communities.

• Better climate information

  • My Climate View is a free, online platform that makes climate information more accessible, enabling farmers, industry, and regional communities to anticipate future climate conditions, draw comparisons with recent weather, consider the implications for production, and prepare for future drought.

  • The Drought Resilience Self-Assessment (DRSAT) is an online tool that enables farmers to add farm-scale data to regional-scale data, helping them understand their own farm-scale resilience, see farm-level climate-change projections, view satellite data for their farm and see suggested tailored pathways to improve resilience.

• Better planning

  • The Farm Business Resilience Program builds the capacity of farmers to plan for and manage risks, including drought. The programme supports learning and development opportunities in areas such as strategic business skills, risk management, natural-resource management, and personal resilience. It also supports farm-business planning and provides farmers with professional feedback on their plans. The Australian government committed AUD 16 million (USD 11 million) to the programme’s initial rollout and announced an additional AUD 60 million (USD 42 million) in the 2021-22 Federal Budget for the next three years.

  • The Regional Drought Resilience Planning Program supports regions to develop drought-resilience plans to drive proactive management of drought risks. Plans are community-led and owned through partnerships of local governments, regional organisations, community organisations and industry. The Australian Government committed AUD 9.85 million (USD 6.8 million) to the initial rollout of the programme and announced a further AUD 31 million (USD 22 million) in the 2021-22 Federal Budget for the next three years.

• Better practices

  • Eight Regional Drought Resilience Adoption and Innovation Hubs support primary producers in building drought resilience through on-ground extension and adoption activities, and to drive uptake of new on-farm and local innovations.

  • A range of National Enabling Activities help farmers and regional communities build drought resilience through investments in collaboration, greater information-sharing, knowledge management, First Nations engagement, and the Science to Practice Forum.

  • The Drought Resilience Innovation Grants Program provides AUD 29 million (USD 20 million) to support projects that will drive the development and adoption of new and innovative technologies and practices to improve the drought resilience of farmers and agriculture-dependent communities. Three types of grants are offered to cater for projects and ideas at different stages of development: (1) ideas grants providing AUD 50 000 (USD 35 000) to help develop good ideas; (2) proof-of-concept grants providing up to AUD 120 000 (USD 83 000) for 12 months to test the feasibility of innovative projects; and (3) innovation grants providing AUD 30 000 (USD 21 000) to AUD 1.1 million (USD 763 000) per year for up to three years for mature ideas.

  • The Natural Resource Management Drought Resilience Program provides AUD 13.4 million (USD 9.3 million) for the trial and adoption of transformative on-ground practices that contribute to landscape-scale drought resilience.

  • The Drought Resilient Soils and Landscapes Program will invest AUD 23.1 million (USD 16 million) to support projects that focus on demonstrating drought-resilient land management practices at broad scale that will help Australia’s farmers prepare for and recover quicker from drought and make agricultural landscapes more resilient to drought.

  • The Long-Term Trials of Drought Resilient Farming Practices Program will invest AUD 40 million (USD 27.7 million) into establishing a national network of farm laboratories that will conduct trials of drought resilience farming practices until 2028.

  • The new AUD 14.3 million (USD 9.9 million) Extension and Adoption of Drought Resilience Farming Practices Grants Program will deliver grants ranging from AUD 100 000 (USD 69 000) to AUD 3 million (USD 2.1 million) to support adoption of proven drought-resilient farming practices and technologies at a large scale, either across multiple farms, a farming system, landscapes, regions or industries.

  • The Drought Resilience Commercialisation Initiative is a two-year, AUD 10 million (USD 6.9 million) pilot programme designed to help innovators turn their good ideas into commercially viable, drought-resilient products and services. The initiative will help increase market readiness by offering one-on-one facilitation services and commercialisation planning.

  • The Drought Resilience Scholarship Program was developed to recognise and reward innovators and leaders in the field of drought resilience and encourage ongoing learning and uptake within the agricultural sector. The Future Drought Fund is investing AUD 1.6 million (USD 1.1 million) through Nuffield Australia to provide farmers with drought-resilience scholarships valued at up to AUD 35 000 (USD 24 000).

• Better prepare communities

  • The Networks to Build Drought Resilience Program is delivered by the Foundation for Rural and Regional Renewal. Projects support drought preparedness by building the capacity and capabilities of community organisations, holding community events, and strengthening ties across community networks, including through funding for First Nations organisations and projects to benefit rural youth and women.

  • The Drought Resilience Leaders Program provides opportunities for individuals from agriculture-dependent communities in 12 regions to gain leadership knowledge and skills to support their communities in tackling drought and climate change.

  • The Helping Regional Communities Prepare for Drought Initiative is the next phase of investment in community drought resilience and will expand existing programmes to support a national cohort of community organisations to benefit of agriculture-dependent communities.

Domestic policy developments in 2022-23

The Department of Agriculture, Fisheries and Forestry was created in July 2022 following the election of a new federal government. The former Department of Agriculture, Water and the Environment was dissolved, and the water and environment functions were transferred to a new Department of Climate Change, Energy, the Environment and Water.

Australia submitted an update to its Nationally Determined Contribution (NDC) under the Paris Agreement of the United Nations Framework Convention on Climate Change (UNFCCC) in June 2022. The updated NDC reaffirms Australia’s target to achieve net zero emissions by 2050 and commits to reducing GHG emissions to 43% below 2005 levels by 2030. The government continued its support for technological solutions to reduce agricultural emissions, in particular methane emissions from livestock, which made up 79% of agricultural emissions in 2020-21. Under stages 2 and 3.1 of the AUD 29 million (USD 20 million) Methane Emissions Reduction in Livestock (MERiL) programme, AUD 11 million (USD 7.6 million) was awarded through 14 grants to support R&D for low-emissions feed supplements for grazing animals. The government is also investing AUD 8.1 million (USD 5.6 million) over three years in the Australian seaweed industry to progress research, support commercialisation and scale up production of emissions-reducing seaweeds for use as a livestock feed supplement. Furthermore, several grants were awarded under the three-year AUD 38.9 million (USD 27 million) National Soil Carbon Innovation Challenge: stage one provided over AUD 1 million (USD 694 000) for 17 projects to determine the feasibility of proposed technology solutions for soil carbon stock measurement, and stage 2 awarded AUD 29 million (USD 20 million) to 8 projects in an initial funding round, for proof of concept, validation and deployment activities to further test and develop a technology solution in Australian landscapes. A second funding round opened in 2023.

The Carbon Farming Outreach Program was announced in October 2022 and will develop a training package and tools for farmers and land managers, including First Nations peoples, to participate in carbon markets and integrate low-emission technologies and practices into their operations. The programme has an overall budget of AUD 20.3 million (USD 14.1 million) over four years, of which AUD 17.5 million (USD 12.1 million) will be provided as grants for independent and trusted advisers to deliver the training package across Australia.

Australia joined three global initiatives related to climate change in 2022, namely:

• The Glasgow Breakthrough Agenda on Agriculture, which aims to make climate-resilient sustainable agriculture the most attractive and widely adopted option for farmers everywhere by 2030.

• The Forests and Climate Leaders Partnership, which supports the goals of the Glasgow Leaders Declaration on Forests and Land Use, to halt and reverse forest loss and land degradation by 2030, and promote sustainable production and trade.

• The Global Methane Pledge, a voluntary commitment with 122 signatories working collectively to reduce global methane emissions across all sectors by at least 30% below 2020 levels by 2030.

Continued progress was made in implementing the Agriculture Biodiversity Stewardship Package, with the total investment in the programme increasing to AUD 91.6 million (USD 63.4 million). This includes the Carbon + Biodiversity Pilot and the Enhancing Remnant Vegetation Pilot, which are trialling market-based approaches for landholders to improve biodiversity and inform the development of a national nature repair market. A National Stewardship Trading Platform was established allowing landholders to plan and evaluate carbon and biodiversity projects, connect farmers with potential buyers of biodiversity and carbon services, and apply for government-funded biodiversity stewardship pilot programmes. The government is exploring options to implement the Australian Farm Biodiversity Certification Scheme to certify farms and farm businesses for their biodiversity management and is consulting on legislation to support a voluntary biodiversity stewardship market, supporting new income streams for farmers who improve biodiversity outcomes on their land.

Trade policy developments in 2022-23

Australia’s trade policy seeks further market opening through multilateral, bilateral and regional trade agreements (DFAT, 2023[5]). Recent developments were mainly related to progress in trade agreements, export promotion and strengthening biosecurity.

The Regional Comprehensive Economic Partnership Agreement (RCEP) 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 Australian exporters and importers with a single set of rules of origin to access tariff preferences across the region. RCEP also includes improved mechanisms to tackle non-tariff barriers, expand trade in services, support the movement of business people across the region, and improve the investment environment.

The Australia-United Kingdom Free Trade Agreement (A-UK FTA) was signed on 17 December 2021 and passed by the Australian Parliament on 22 November 2022. Following ratification by the UK Parliament and Royal Assent on 23 March 2023, the agreement entered into force on 31 May 2023. Under the A-UK FTA, more than 99% of Australia’s exports to the United Kingdom are now duty free, providing new and enhanced market access for Australian farmers and exporters of beef, sheep meat, wine, sugar, dairy, grains, horticulture, and seafood. The agreement also eliminates tariffs on 98% of Australia’s imports from the United Kingdom, will facilitate the mobility of skilled workers between Australia and the United Kingdom, and will enhance technical collaboration on biosecurity, animal welfare and antimicrobial resistance.

Negotiations on an Australia-European Union FTA, launched in 2018, are ongoing.

Negotiations for the Australia-India Comprehensive Economic Co-operation Agreement launched in May 2011, were suspended in 2015, and re-launched in September 2021. An interim agreement called the Australia-India Economic Co-operation and Trade Agreement (AI-ECTA) was signed on 2 April 2022 and entered into force on 29 December 2022. Negotiations have now resumed for a Comprehensive Economic Co-operation Agreement (CECA), which will build upon ECTA outcomes. Key exports of Australian agricultural products to India include lentils, wool, cotton, and almonds. Under the AI-ECTA, tariffs on a range of Australian crops will be bound at zero, providing Australian exporters with more certainty on Indian tariffs when planning their crops.

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, 2023[5]).

The October 2022-23 federal budget provides AUD 12.3 million (USD 8.5 million) over three years to support regional agricultural trade events including Beef Australia 2024, Casino Beef Week, the second Dairy Symposium, LambEx, Hort Connections 2023 and 2024, and other horticulture conferences and agritech industry events. Regional trade events and forums provide opportunities for producers to learn about new on-farm practices that foster innovation, gain direct access to export expertise, connect with businesses and form new partnerships with key international trading partners. In addition, AUD 4 million (USD 2.8 million) has been allocated over four years for the establishment of an Inspector-General of Animal Welfare to strengthen animal welfare assurance, and increase accountability and transparency for animal welfare in livestock exports.

A 10-year National Agricultural Traceability Strategy 2023-33 and its five-year implementation plan aim to put in place interoperable traceability systems along supply chains to support Australian exports and strengthen responses to biosecurity and food safety, while supporting emerging ESG reporting requirements. The government is also offering several new Agricultural Traceability Grants. The AUD 6 million (USD 4.2 million) National Agricultural Traceability Regulatory Technology (RegTech) Research and Insights Grant round opened for applications from 9 November to 14 December 2022, and provides funding for projects lasting up to two years for the investigation of how RegTech (i.e. the use of technology to better achieve regulatory objectives) can assist in streamlining agricultural compliance obligations, and for feasibility assessments of traceability RegTech systems. The AUD 4 million (USD 2.8 million) National Traceability Sustainability Reporting Uplift Grants round opened for applications from 19 January to 23 February 2023 and will aim to deliver projects that support the agricultural sector through consistent collection, measurement and reporting of data to demonstrate sustainable practices to meet increasing expectations from international markets and consumers.

Biosecurity remains a critical focus for the Australian Government and is key for preventing, responding to, and recovering from pest and disease outbreaks. The Biosecurity Amendment (Strengthening Biosecurity) Act 2022 was passed through parliament in November 2022 and introduced key measures to strengthen Australia’s ability to manage and respond to emerging biosecurity risks. In addition, the 2022-23 budget provides AUD 134.1 million (USD 93 million) over four years for the Bolstering Australia’s Biosecurity System package, including:

• AUD 14 million (USD 9.7 million) in emergency funding for biosecurity preparedness in Australia, as well as funding to support Indonesia, Timor Leste and Papua New Guinea to prevent and respond to the spread of foot and mouth disease (FMD) and lumpy skin disease (LSD).

• AUD 61.6 million (USD 42.7 million) to strengthen Australia’s biosecurity capability, including in Northern Australia, and to support domestic preparedness and biosecurity outcomes in neighbouring countries.

• AUD 46.7 million (USD 32.4 million) to support continuous improvements in livestock traceability by maintaining systems and ensuring quick recovery from any disease incursions.

• AUD 11.7 million (USD 8.1 million) to expand detector dog and handler capabilities at the border.

Additional funding was announced for the Supporting Communities Manage Pest Animals and Weeds Program, which provides AUD 49.1 million (USD 34 million) over four years to deliver better solutions to combat established pest animals and weeds that pose a significant threat to agricultural production, the environment and biodiversity. The National Forest Pest Surveillance Program was launched in December 2022 and will improve the early detection of exotic forest pests and the likelihood of their subsequent eradication. A national action plan for production animal health, Animalplan 2022 to 2027, was developed and approved following extensive stakeholder engagement with government, industry organisations and animal health experts. It aims to strengthen emergency animal disease preparedness, bolster on-farm biosecurity systems, support diagnostic and surveillance capabilities, minimise the risk of antimicrobial resistance, foster sustainable industry practices and further enhance traceability systems.

Trade policy responses to the COVID-19 pandemic

The International Freight Assistance Mechanism was an AUD 1.04 billion (USD 721 million) temporary emergency measure that was introduced in response to the collapse of international airfreight capacity in and out of Australia as a result of the COVID-19 pandemic. IFAM supported and maintained domestic and global supply chains by helping to restore key airfreight routes, ensuring the flow of time-sensitive, perishable products and vital medical supplies. The mechanism concluded in June 2022 when international airfreight movements resumed.

Contextual information

Australia is the world’s 19th 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 3.4% of GDP and 2.4% of total employment in 2021. Australia is an important producer of agricultural commodities. In 2021, the country ranked as the world’s second-largest producer of sheep meat and wool, the seventh-largest producer of beef, and is also among the world’s top-ten producers of wheat, barley, oats, rapeseed and sugar cane.

Table 5.3. Australia: Contextual indicators

	Australia		International comparison
	2000*	2021*	2000*	2021*
Economic context			Share in total of all countries
GDP (billion USD in PPPs)	539	1 595	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	355 775	15.1%	12.1%
			All countries1
Population density (inhabitants/km2)	2	3	52	64
GDP per capita (USD in PPPs)	28 313	61 977	9 350	23 401
Trade as % of GDP	16.5	17.4	12.3	15.6
Agriculture in the economy			All countries1
Agriculture in GDP (%)	3.8	3.4	2.9	3.9
Agriculture share in employment (%)	4.8	2.4	-	-
Agro-food exports (% of total exports)	23.1	12.3	6.2	7.9
Agro-food imports (% of total imports)	4.3	6.2	5.5	7.2
Characteristics of the agricultural sector			All countries1
Crop in total agricultural production (%)	55	59	-	-
Livestock in total agricultural production (%)	45	41	-	-
Share of arable land in AA (%)	5	9	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 quickly and has been strong at 4.0% in 2022, while the unemployment rate has fallen from 6.5% in 2020 to 3.7% in 2022 (Figure 5.4). Inflation also increased to 6.6% in 2022, its highest level in more than three decades, driven by rising costs for energy, housing and food.

Figure 5.4. Australia: Main economic indicators, 2000 to 2022

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

Australia is a net exporter of agricultural products. Around 72% of the value of agricultural production is exported, and the country is a major exporter of wheat, barley, oats, cattle, beef, sheep meat, wool, rapeseed, and chickpeas. Primary goods for final consumption and further processing make up 53% 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).

Figure 5.5. Australia: Agro-food trade

 

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

Source: UN Comtrade Database.

Over the 2011-20 period, agricultural output declined by 0.5% per year, compared to a 1.9% per year increase globally (Figure 5.6). This was partly due to a decline in total factor productivity (TFP), which fell by -0.6% per year (compared with the global average of 1.1% growth). Primary factor growth also declined at -0.3% per year, driven by a decline in the agricultural land area. These declines were partly offset by an intensification of intermediate input use, which grew at 0.4% per year.

Agriculture accounted for 16.8% of Australia’s GHG emissions (78.3 out of 464.8 MtCO₂eq) in 2020-21 and can play an important role in helping the country to achieve its economy-wide target of net-zero emissions by 2050 (Table 5.4). Agriculture’s contribution to GHG emissions has declined over the past two decades but remains above the OECD level. The share of agriculture in total energy use has increased slightly since 2000 and was above the OECD average in 2021, despite the small share of the sector in the economy.

Compared to the OECD area, agriculture accounts for a relatively high share of total water abstractions. While aggregate national indicators suggest that water stress is less of a problem than in many OECD countries, water availability and competition for natural resources with other sectors remains a significant constraint that is likely to be exacerbated by climate change. Estimates also indicate a relatively low nitrogen surplus balance and point to a low phosphorous balance.

Figure 5.6. Australia: Composition of agricultural output growth, 2011-20

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
	1993-2002	2011-2020	1993-2002	2011-2020
			World
TFP annual growth rate (%)	1.4%	-0.6%	1.7%	1.1%
			OECD average
Environmental indicators	2000*	2021*	2000*	2021*
Nitrogen balance, kg/ha	20.7	17.3	32.2	30.4
Phosphorus balance, kg/ha	1.3	0.6	3.3	3.0
Agriculture share of total energy use (%)	2.3	2.5	1.7	2.0
Agriculture share of GHG emissions (%)	16.8	12.9	8.6	10.5
Share of irrigated land in AA (%)	0.5	0.4	-	-
Share of agriculture in water abstractions (%)¹	67.7	67.0	46.6	49.7
Water stress indicator	5.5	3.4	8.3	7.4

Note: *or closest available year.

1. Data are not comparable between time periods, 2020 data from (Australian Bureau of Meteorology, 2021[6]).

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

References

[6] 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.

[5] DFAT (2023), Australia’s free trade agreements (FTAs), Australian Government Department of Foreign Affairs and Trade, https://www.dfat.gov.au/trade/agreements/trade-agreements (accessed on 20 March 2023).

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

[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 programme 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), Hong Kong (A-HKFTA 2020), Peru (PAFTA 2020), Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA 2020), the Pacific Agreement on Closer Economic Relations (PACER Plus 2020), the Regional Comprehensive Economic Partnership Agreement (RCEP 2022), the Australia-India Economic Co-operation and Trade Agreement (ECTA 2022) and the United Kingdom (A-UKFTA 2023).