Amidst a shocking drought, we should be celebrating the remarkable productivity of Australian agriculture, and the key role water trading has played in it.
At a time when even the government admits that Australia’s productivity has slumped on its watch, we could be learning from one of our great productivity success stories — or realising that maybe productivity is not all it’s cracked up to be if you look at it from a different perspective.
Isn’t agriculture currently stricken by the east coast drought? Indeed it is, and that caused a big fall in productivity in 2018-19, according to the Australian Bureau of Statistics, just as it caused a fall the previous year, reversing the huge productivity rise in 2016-17.
But putting aside weather and climatic volatility, Australian agriculture has led the way in efficiency over the last two decades. Agriculture, fisheries and forestry production has increased 34% in real terms in the 20 years to 2017-18, according to government research body ABARES, despite drought lowering production in 2017-18. Exports have increased 37% by value over that period. And productivity growth in the sector significantly improved between 2006-07 and 2014-15.
But here’s the thing: that big increase in production and exports has been achieved with dramatically fewer workers: employees in agriculture have fallen from 380,000 to less than 280,000 since 1999. Large farms, which employ comparatively fewer workers, have significantly increased in number and output in recent decades and have driven productivity gains.
A sector that has dramatically increased production and exports while slashing its workforce by more than a quarter should, in our productivity-obsessed economy, be celebrated. It would be if it was another industry. The workers who had lost their jobs would be assumed to have moved to other industries where their skills, and labour would be deployed more efficiently.
But the narrative around agriculture is different. Lost agricultural jobs aren’t celebrated as evidence of productivity improvements, but rather are seen as a tragedy for regional communities, where small towns are “hollowed out” by population loss and the inevitable consequences — loss of services, closure of facilities, economic decline, drift to larger regional centres. The story of agriculture must always be one of loss and despair even as it moves from success to success.
The other narrative is about water allocation. Most of the focus around water in the eastern states has been driven by outrage from the NSW Nationals and rural communities that a small, and insufficient, proportion of water from a grossly over-allocated river system has been restored for environmental flows and South Australia.
But water trading is also attacked. Companies are attacked for “hoarding” and speculating in water, “water barons” are attacked in the media, opposition MPs attack the government for allowing it, Nationals MPs complain about people “sitting in high rises in Melbourne trading water”, and ACCC investigations have been initiated.
Since the Rudd government removed many of the parochial state-based impediments to water trading, the water market has dramatically expanded, although part of the increase has been for environmental purchases, as well as commercial transactions. But the evidence is that the only driver of water prices is availability. And the Productivity Commission in 2017 found and heard evidence of how water trading had significantly increased the efficiency of water use, enabled more diverse crops to be developed and, crucially, helped farmers with inflexible water needs access water during drought.
But as with productivity gains, there are losers: farmers who are outbid for water by competitors who can obtain better value from it, or use it more efficiently, complain about water trading, or blame the Murray-Darling Basin Plan, or attack the Nationals for failing to stand up for them. Meanwhile, the industry in which they work is prospering; no one hears protests from the farmers who are able to access precious water in a way they couldn’t in the 1990s or 2000s.
There’s a double standard at work here both from politicians and from most of the media: productivity and efficiency gains — the lack of which are lamented elsewhere — are decried in agriculture. Workers in manufacturing, or construction, or retail, are expected to go elsewhere if there’s a cyclical or structural change in their industries. Lost jobs are seen as the price of economic change and greater efficiency.
But in Australian agriculture, productivity is our guilty secret. Which prompts the question: do we really want what we have there applied to every other industry?
Is there a double standard in the narrative around agriculture? Send your thoughts to [email protected]. Please include your full name for publication.