Economics - Australia

Australia

Economics - in natural resource management: an overview

Australia is a developed economy in which agriculture, as the main user in both extent and impact on our natural resources, is an important but now (at 2.7% of GDP) a relatively small part of the overall economy. Agriculture continues to be an important contributor to national, State and regional economies; other sectors remain highly dependent on the farm sector. For example, approximately 60 per cent of manufacturing turnover in the Murray-Darling Basin is derived from food processing industries. Australia's agricultural industries are also strongly export-oriented and account for 30% of merchandise export and 20% of total export trade.

Increasingly, our land and water resources ares being valued for more than their productive capacity. People now value natural resources not only for cropping, grazing, forestry and fish production, but also for their aesthetic and intrinsic values, biodiversity, and ecosystem services such as sinks for greenhouse gases and water filtration. The natural resource base supports tourism, recreation, and community lifestyles.

Associated with the benefits derived from natural resource use, there have also been environmental costs.

Historically, natural resource use has often not been sustainable.
Agricultural systems have largely been adapted from European ways of farming that are not suited to Australia's climate variability.
Extensive tree clearing was necessary to prepare land for cropping and led to changes in water balance and dryland salinity.
Overgrazing of native pastures led to soil erosion, increased sediment and nutrient loads in rivers and deteriorated water quality.
Many other forms of degradation have occurred as a result of commercial use of natural resources.

Other Audit assessments deal in detail with the biophysical state of natural resources (including dryland salinity, vegetation, soil erosion, river condition , soil acidity, water quality) degradation processes and management opportunities to maintain the natural resource base for maximum public benefit and productivity.

Over time our knowledge of degradation processes and land use practices has increased and significant improvements have been made in the way we use our land and water resources. This improvement in practice has been underpinned by better institutional arrangements and legal frameworks governing natural resource use as well as extension and support to foster improved land use practices. But the question remains - have we done enough to ensure a sustainable future for the management and use of our natural resources and the people who depend on them? This raises specific questions:

- are we managing our natural resources responsibly and sustainably?
- if we are not managing our natural resources sustainably, why not? and
- what are the steps towards sustainable use of natural resources and how do we prevent further degradation?

This work contributes context and some answers to these questions. It is a national assessment of the economic and social dimensions of our land and water resources and the way they are managed. The report focuses on people - those who manage and depend on our land and water resources and their capacity, motivation and opportunities to implement changes that bring about improved social, economic and environmental outcomes consistent with sustainability objectives. Social and economic profiles of Australia's farming community provide valuable contextual information relevant to natural resource management and planning at all levels. Structural adjustment trends are presented and analysed, and future adjustment pressures and trends projected.

The report focuses on the value of land resources used in agriculture, future profits foregone due to some forms of land degradation and off-farm costs of land degradation. This includes estimates of costs of damage to infrastructure and costs relating to reduced water quality. Estimates of unpriced assets such as loss of endangered species, landscape aesthetics, waterway recreation and the viability of rural communities completes this analysis.

Natural resource issues are used to examine costs and benefits of agricultural use.

dryland salinity, caused by rising saline water tables, has costs on-farm and substantial impacts on water resources, biodiversity and infrastructure off-farm;
soil acidity is caused by increased acid inputs to the soil from the farm operations such as nitrogenous fertiliser use. Impacts are on-farm through reduced plant productivity and changed soil condition; and
soil sodicity is a natural constraint to productivity with potential off-farm impacts including increased sediment loads to rivers by soil erosion.

The main challenge presented by soil acidity and sodicity is to balance the costs of soil ameliorants against benefits of production. These three issues are used to demonstrate the role of resource accounting for Australian agriculture as an input to planning and management activities. Resource accounting approaches will be invaluable when applied as part of regional natural resource management planning under initiatives such as the Natural Heritage Trust and National Action Plan for Salinity and Water Quality.

The results of the economic analysis provide the first layer of information needed for priority setting, both from the perspective of addressing different forms of degradation and resource use constraints, and targeting different geographic locations. However, it does not provide a means for establishing priorities per se or determining the appropriate level of investment in natural resource management. To demonstrate how the method can be taken further and applied to current planning data on the impacts and cost effectiveness of alternative management options were investigated by several case studies of salinity.

Estimates of costs are based on a range of assumptions and represent 'best bets'. Varying degrees of confidence in the estimates mainly depend on the completeness and precision of the biophysical and economic input data (upper and lower range estimates are reported on the Australian Natural Resources Atlas). Estimates of forgone returns have been based on a concept of 'yield gap', that provides an upper bound to the level of benefit that could be generated if factors limiting yield were removed. It provides insight to the ceiling on investment for cost effective natural resource remediation and does not necessarily reflect an optimal economic solution. The complexities of modelling the optimal decision requires farm level analysis and therefore was not part of this Australia-wide context setting analysis. Therefore, estimates should be read as indicative and relative rather than absolute measures.

Australians and Natural Resource Management 2002 provides insight into the social and economic dimensions of natural resource management. These insights, the collated information and the methods developed for application at regional scale are key to meeting the challenges of natural resource management and the triple bottom line. Information has been organised under two broad topic areas:

Natural Resource Economics

People - The social dimension of sustainable natural resource management discuss and describe factors influencing sustainable natural resource management and adoption of sustainable practices including population, education, age of farmers, farm income and profit, and property size.

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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