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Lower subsidies = strong agriculture

agricultural support

An Australian Bureau of Agricultural and Resource Economics and Sciences analysis of government support for Australia’s farmers has found they are among the least subsidised in the world.

Australia has one of the lowest levels of agricultural support across the 37 Organisation for Economic Co-operation and Development (OECD) member countries – and when compared to major emerging economies.

Report author and ABARES’ Head of Forecasting and Trade Dr Jared Greenville said keeping subsidies low was important for both Australian producers and international markets.

“Australia’s reform experience shows that deregulating the agriculture sector and removing distorting forms of support spurs overall sector growth, increasing participation in global markets and the contribution that agriculture makes to the rural and national economy,” Dr Greenville said.

“Recent OECD research also points to the fact that countries that have lower subsidies have agricultural sectors that perform better, seeing farm incomes grow faster over time than heavily subsidised ones.

“The costs of increasing distortions to trade and subsidies are also felt more in countries that implement these policies than elsewhere.”

Dr Greenville said there were no targeted subsidies provided to Australian producers of our most traded products—beef and veal and grains (which includes barley).

“In contrast, global levels of support for beef and veal were around 13 per cent of farm revenues, on average,” Dr Greenville said.

“Grains markets other than rice are relatively free from market distortions—on average three per cent and six per cent for wheat and barley, respectively.”

The ABARES Analysis of government support for Australian agricultural producers also examined the potential impacts of creeping protectionism in a post-COVID-19 trading environment.

“The use of export restrictions and increases in support during COVID-19, along with the initial signs of a trend to rising overall levels of support brings into focus the need for an effective international system to ensure agricultural markets continue to address food security concerns and drive economic development,” Dr Greenville noted.

He added that “governments will need to make investments in agriculture to help meet global development goals, but it is important that these investments do not harm producers elsewhere.

“Future trade rules will need to be set to help achieve this outcome.”

This article was first published in Leading Agriculture magazine.

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