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By Root 1991 0

land makes little or no positive contribution to Australia’s economy. It turns out that about 80% of Australia’s agricultural profits are derived from less than 0.8% of its agricultural land, virtually all of it in the southwestern corner, on the south coast around Adelaide, in the southeastern corner, and in eastern Queensland. Those are the few areas favored by volcanic or recently uplifted soils, reliable winter rains, or both. Most of Australia’s remaining agriculture is in effect a mining operation that does not add to Australia’s wealth but merely converts environmental capital of soil and native vegetation irreversibly into cash, with the help of indirect government subsidies in the forms of below-cost water, tax concessions, and free telephone linkups and other infrastructure. Is it a good use of Australian taxpayers’ money to subsidize so much unprofitable or destructive land use?

Even from the narrowest point of view, some Australian agriculture is uneconomic to the individual consumer, who can buy its products (such as orange juice concentrate and pork) more cheaply as imports from overseas than as domestic produce. Much agriculture is also uneconomic to the individual farmer, as measured by what is termed “profit at full equity.” That is, if one counts among a farm’s expenses not only its cash expenditures but also the value of the farmer’s labor, two-thirds of Australia’s agricultural land (mainly land used for raising sheep and beef cattle) operates at a net loss to the farmer.

For instance, consider Australian pastoralists raising sheep for their wool. On the average, pastoralists’ farm income is lower than the national minimum wage, and they are accumulating debts. The farm’s capital plant of its buildings and fences is running down because the farm doesn’t yield enough money to maintain the plant in good condition. Nor does wool yield enough profit to pay the interest costs on the farm’s mortgage. The means by which the average wool-grower survives economically are through non-farm income, earned by holding a second job as a nurse or in a store, operating a bed-and-breakfast, or other ways. In effect, those second jobs, plus the farmers’ willingness to work on their farms for little or no pay, are subsidizing their own money-losing farm operations. Many in the current generation of farmers pursue the profession because they grew up to admire the rural life, even though they could earn more money doing something else. In Australia as in Montana, the children of the current generation of farmers are unlikely to make that same choice when they will be facing the decision whether they want to take over the family farm from their parents. Only 29% of current Australian farmers expect that their children will run the farm.

That’s the economic value of much Australian farming to the individual consumer and the individual farmer. What about its value to Australia as a whole? For any given piece of the farming enterprise, one has to take into account a broadened view of its costs to the entire economy, as well as its benefits. One big piece of those broadened costs is government support to farmers through means such as tax subsidies and expenditures for drought assistance, research, advising, and agricultural extension services. Those government expenditures eat up about one-third of Australian agriculture’s nominal net profits. Another big piece of those broadened costs is the losses that agriculture imposes on other segments of the Australian economy. In effect, agricultural uses of land compete with other potential uses of the same land, and using one piece of land for agriculture may damage the value of another piece of land for tourism, forestry, fisheries, recreation, or even for agriculture itself. For instance, soil runoff caused by land clearance for agriculture is damaging and locally killing the Great Barrier Reef, one of Australia’s major tourist attractions, but tourism is already more important to Australia than agriculture as a source of foreign-exchange earnings. Or suppose one wheat farmer on