Economics - Victoria
Victoria
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 Victoria
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 |
| Avoca River | 359,699 | 105,770 | 99,493 |
| Barwon River | 100,109 | 5,937 | 11,077 |
| Broken River | 536,316 | 167,132 | 197,455 |
| Bunyip River | 267,180 | 53,340 | 78,533 |
| Campaspe River | 153,674 | 14,280 | 23,729 |
| East Gippsland | 6,561 | 908 | 1,694 |
| Glenelg River | 179,699 | 28,273 | 36,028 |
| Goulburn River | 653,007 | 143,750 | 193,330 |
| Hopkins River | 324,186 | 42,458 | 62,105 |
| Kiewa River | 40,289 | 3,419 | 6,209 |
| Lake Corangamite | 137,155 | 14,664 | 23,500 |
| Latrobe River | 157,550 | 21,131 | 32,166 |
| Loddon River | 584,394 | 94,876 | 124,953 |
| Mallee | 818,232 | 276,198 | 283,720 |
| Maribyrnong River | 13,257 | -5,585 | -4,356 |
| Millicent Coast | 601,783 | 96,859 | 88,419 |
| Mitchell River | 30,621 | 5,854 | 7,213 |
| Moorabool River | 44,391 | 1,316 | 5,009 |
| Murray-Riverina | 504,964 | 117,837 | 119,667 |
| Otway Coast | 176,993 | 17,418 | 31,095 |
| Ovens River | 107,169 | 10,098 | 16,175 |
| Portland Coast | 136,200 | 24,686 | 31,834 |
| Snowy River | 81,788 | -17,204 | -1,870 |
| South Gippsland | 303,868 | 45,977 | 73,262 |
| Tambo River | 21,025 | 2,423 | 1,991 |
| Thomson River | 128,758 | 20,758 | 31,139 |
| Upper Murray River | 52,568 | 13,089 | 23,420 |
| Werribee River | 57,941 | 5,173 | 12,269 |
| Wimmera - Avon Rivers | 512,667 | 158,046 | 111,286 |
| Yarra River | 85,819 | 8,900 | 16,334 |
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.
Soil resources: economic opportunities in Victoria
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 Victoria
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.
| 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:
- Australian Water Resources Assessment 2000
- Australian Dryland Salinity Assessment 2000
- Australian Native Vegetation Assessment 2001
- Rangelands - tracking changes: Australian Collaborative Rangeland Information System
- Australian Agriculture Assessment 2001
- Australian Catchment, River and Estuary Assessment 2002
- Australian Terrestrial Biodiversity Assessment 2002
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:
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:
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:
- "Ex-situ Costs of Australian Land and Water Resources Degradation to non-Agricultural Industries, Infrastructure and Households - REPORT A: EX-SITU COSTS OF SALINITY " by J.F.Thomas, The Resource Economic Unit, PPK Environment & Infrastructure (PPK) (PDF - 400 KB)
- "Ex-situ Costs of Australian Land and Water Resources Degradation to non-Agricultural Industries, Infrastructure and Households- REPORT B: EX-SITU COSTS OF EROSION AND SEDIMENTATION " by J.F.Thomas, The Resource Economic Unit, PPK Environment & Infrastructure (PPK) (PDF - 300 KB)
- "Ex-situ Costs of Australian Land and Water Resources Degradation to non-Agricultural Industries, Infrastructure and Households - REPORT C: TOTAL EX-SITU DAMAGE COST ESTIMATES FOR SALINITY, WATER TURBIDITY, AND EROSION" by by J.F.Thomas, The Resource Economic Unit (PDF - 400 KB)
- "The Ex-Situ Impacts to Industrial and Commercial Water Users Due to Degradation in the Quality of Water Resources" by PPK Environment Infrastructure Pty Ltd (PDF 0.2 MB)
- "Estimating community values for land and water degradation impacts" Martin van Bueren and Jeff Bennett (PDF - 1.5 MB)
Case study: View or download a technical report and appendices on dryland salinity:
- Capacity to change - Case studies of dryland salinity and watertable control by Mike Read. (PDF - 1.2 MB)
- Capacity to change - Case studies of dryland salinity and watertable control - APPENDICES by Mike Read. (PDF - 1.9 MB)
View "People" project and technical reports:
- "Framework and Review of Capacity and Motivation for Change to Sustainable Management Practices" by D. Mark Fenton, Colin MacGregor and John Cary (PDF - 410 KB)
- *"Human and social aspects capacity to change to sustainable management practices" by John Cary, Neil Barr, Heather Aslin, Trevor Webb and Shannon Kelson (PDF - 707 KB)
This report does not contain maps and needs to be read in conjunction with:
- "Social Atlas for sustainable management - a social and economic database" by John Cary, Shannon Kelson and Heather Aslin. (PDF - 165 KB)
- the image files for the "Social Atlas for sustainable management - a social and economic database" report by John Cary, Shannon Kelson and Heather Aslin (Zip - 7.8 MB)
- "Structural change in Australian agriculture: implications for natural resource management" by Neil Barr (PDF - 1.8 MB)
- "Structural change in Australian agriculture: implications for natural resource management - APPENDICES" by Neil Barr (PDF - 4.3 MB)
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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