Economics - New South Wales

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New South Wales

Economics - returns to the land and water resource base and costs of degradation

New data sets have been developed through the National Land and Water Resources Audit that relate to economic aspects of natural resource management in Australia. There is a focus on resources used to support agriculture and resources impacted by agriculture. The Australia-wide report provides:

An overview of the economic returns from the Nation's land and water resources used in agriculture;
An agricultural or within pa.gifk perspective on economic aspects of salinity, sodicity and acidity;
A "beyond the farm gate" perspective on impacts of agriculture on local infrastructure and downstream water users;
Information on willingness to pay to slow rural population decline and improve environmental attributes that are not part of the market for agricultural products;
An overview of how the databases developed for this project are organised and observations about ways they can be developed further to assist decision makers.

Consistent with protocols used by the Australian Bureau of Statistics and the Australian Bureau of Agriculture and Resource Economics, the database provides a new capacity to integrate natural resource information in Australia. The data sets are primarily built for the 1996/97 financial year, the year of an agricultural census. Except where stated otherwise, all dollar values given are in 1996/97 dollars.

Most of the data is represented on a 1km by 1km grid covering agricultural land. Whilst modelled at this level of spatial detail interpretation should generally occur at coarser levels. Data on downstream infrastructure costs of deteriorating water quality has been assembled by river basin.

River basin scale aggregate information may be viewed to by selecting a river basin from the menu at the top of this page or by using the links in the table or map below.

Agricultural profitability in New South Wales

Economic returns to natural resource base from agriculture are measured using profit at full equity. This is the economic return to land, capital and management after the value of labour provided by managers has been deducted. It does not include any debt payments to financial institutions. Estimates of profit at full equity differ from gross margins, a commonly used measure of agricultural financial performance, by including fixed costs of production (e.g. depreciation of capital assets, labour).

Profit at full equity measures presented in this report are derived from survey data, satellite data, government reports, gross margin handbooks and other sources. Profit has been mapped on a 1km by 1km grid covering the nation, although underlying source data is accurate at coarser levels of spatial detail. The twelve variables relating to prices, yields and costs used to derive profit at full equity are also mapped to a 1 km grid. A shortened version of the profit equation reads:

Profit At Full Equity=Price x Quantity - Variable Costs - Fixed Costs

To gain an appreciation for how economic returns to agriculture varied across Australia, profit at full equity was computed based both on 1996/97 prices and at average prices over the period 1992/93 to 1996/97.

Using 1996/97 prices and yields, the estimated total profit at full equity was roughly $6,555 million for the Nation. An area of 311.5 million hectares, 66% of agricultural land, made a loss and 159.9 million hectares, 34% of agricultural land, made a profit. The bulk of the loss-making areas were the low-rainfall sheep/beef grazing lands. The following map shows profit at full equity for 1996/97.

River basin name	1996/97 Gross revenue	1996/97 Profit at full equity	5yr (1992/93 - 1996/97) Profit at full equity
Bega River	84,915	33,577	34,576
Bellinger River	73,303	11,530	13,962
Benanee	97,671	46,521	50,441
Border Rivers	927,150	371,742	266,110
Brunswick River	54,459	11,610	13,235
Bulloo River	31,529	-11,951	-9,951
Castlereagh River	266,349	51,253	74,810
Clarence River	225,694	28,607	78,909
Clyde River - Jervis Bay	23,334	8,885	8,280
Condamine-Culgoa Rivers	1,362,759	489,338	424,572
Coopers Creek	194,294	-45,359	-3,122
Darling River	144,819	10,578	32,166
East Gippsland	6,561	908	1,694
Gwydir River	796,916	295,890	225,494
Hastings River	64,309	18,917	20,333
Hawkesbury River	177,887	17,732	22,708
Hunter River	363,890	47,935	83,416
Karuah River	34,887	4,176	7,086
Lachlan River	999,220	128,311	136,351
Lake Bancannia	9,776	-3,026	-1,655
Lake Frome	57,925	-33,432	-20,082
Lake George	6,275	-2,252	-1,117
Lower Murray River	768,287	295,304	302,864
Macleay River	122,559	19,605	46,014
Macquarie - Tuggerah Lakes	5,380	1,873	784
Macquarie-Bogan Rivers	1,025,416	190,628	159,375
Manning River	116,759	25,094	34,141
Moonie River	88,353	42,793	17,666
Moruya River	7,694	2,418	2,287
Murray-Riverina	504,964	117,837	119,667
Murrumbidgee River	1,653,894	368,023	418,392
Namoi River	1,049,351	323,444	380,857
Paroo River	72,802	8,806	9,836
Richmond River	267,642	57,656	82,219
Shoalhaven River	74,542	9,946	15,006
Snowy River	81,788	-17,204	-1,870
Sydney Coast - Georges River	5,513	953	838
Towamba River	10,191	3,253	4,051
Tuross River	15,698	4,897	5,330
Tweed River	66,769	7,496	11,427
Upper Murray River	52,568	13,089	23,420
Warrego River	87,961	11,250	22,654
Wollongong Coast	21,757	7,369	5,573

Click on the river basin name or map below to view a report on the returns to the agricultural resource base and costs of degradation.
Map of NSW's river basins

Soil resources: economic opportunities in New South Wales

An assessment was made of the economic opportunities associated with managing saline, sodic and acidic soils. This assessment did not contrast current soil conditions with pristine soil conditions. Rather, it focused on the economic opportunities arising from future changes to soil condition.

In the assessment measures of gross benefit and impact cost are provided. The gross benefit is the additional profit at full equity attainable in a given year if the soil constraint were removed without cost. It can be considered an approximate investment ceiling for soil treatment. Impact cost measures the decline in profits due to worsening salinity extent and severity over the next 20 years (2000 to 2020). In addition to these measures, a benefit cost analysis of lime and gypsum application to ameliorate acidic and sodic soils was undertaken.

The table below places this State/Territory in context:

	Salinity $m	Sodicity $m	Acidity $m	Limiting factor $m
New South Wales	6.3	280.3	378.7	624.1
Victoria	18.5	342.5	471.1	757.4
Queensland	10.2	180.3	232.5	392.9
South Australia	39.1	126.4	2.9	162.0
Western Australia	111.0	89.7	226.1	341.6
Tasmania	1.9	12.3	214.8	220.3
Northern Territory	0.0	3.0	58.2	61.1
Australian Capital Territory	0.0	0.0	0.2	0.2
Australia	187.0	1,034.6	1,584.5	2,559.5

Costs beyond the farm gate in New South Wales

In addition to the agricultural productivity impacts, increasing concerns are being voiced about the effects of land and soil degradation on water quality, landscape amenity values, biodiversity, the environment and other attributes. The direct market impacts of agriculture that occur beyond the farm gate fall into two categories:

Local impacts on infrastructure; and
Downstream impacts on urban and industrial water users.

Local Infrastructure Costs of Salinity and Watertable Rise

In order to estimate local infrastructure impacts, unit cost functions for salinity and water table rise were developed for three levels of impact: slight, moderate and severe for the following infrastructure categories:

General urban and minor infrastructure in non-metropolitan towns and rural areas including minor roads, bridges, underground drainage, aerodromes, public buildings, parks and gardens, and sporting fields;
Private non-agricultural assets in non-metropolitan towns: domestic buildings, commercial/retail buildings, industrial buildings, septic systems and service stations;
Major roads, including national highways, rural arterials and urban arterials and bridges associated with these;
Railways; and
Power and communication infrastructure: power transmission, pipelines etc.

The current impact of water table rise and dryland salinity in non-metropolitan Australia is estimated to range between $30 million/yr and $125 million/yr with a best-bet estimate of $89 million/yr as shown in the following table.

Table: Estimated current impacts on local infrastructure of watertable rise and salinity in non-metropolitan areas (millions/yr)
	Low estimate	Best-bet estimate	High estimate
New South Wales	4.4	14.0	19.7
Victoria	3.9	12.2	17.3
Queensland	0.7	2.2	3.1
South Australia	4.5	6.7	8.3
Western Australia	16.3	51.8	73.8
Tasmania	0.6	1.9	2.7
Australian Capital Territory	0.0	0.0	0.0
Total	30.3	88.8	124.9

Further information

View the Australians and Natural Resource Management 2002 (theme) report.

View other Audit assessments by clicking the links below:

View "Natural Resource Economics" project and technical reports:

A project report has been prepared by CSIRO Land and Water Policy and Economic Research Unit in the development of this work:

"Values of returns to land and water and costs of degradation" Edited by S.A. Hajkowicz and M.D. Young (PDF - 2.8 MB)

The technical appendices of "Values of returns to land and water and costs of degradation" report contain detailed descriptions of the methods used in this work:

"Values of returns to land and water and costs of degradation" Edited by S.A. Hajkowicz and M.D. Young (PDF - 2.8 MB)

The technical appendices of "Values of returns to land and water and costs of degradation" report also includes a number of component project reports. These report may be viewed separately:

Case study: View or download a technical report and appendices on dryland salinity:

View "People" project and technical reports:

This report does not contain maps and needs to be read in conjunction with:

Link to the Map Maker to view economic data.

Link to the Australian Natural Resources Data Library - to download economic and social data

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