Output 8 - Economic Research

Table of Contents

Economic Research
Performance indicators for Output 8
Performance Against Overall Effectiveness Indicators
Performance Against Departmental Indicators

Economic Research

The objective of the Economic Research Output is to provide high quality economic policy analysis and forecasts to enhance the competitiveness of Australia’s agriculture and resource industries and the quality of the Australian environment.

Through this Output, the Australian Bureau of Agricultural and Resource Economics (ABARE) will make a significant contribution to the department, government and resource commodity industry stakeholders by conducting high-level policy and economic research. ABARE research on specific issues in natural resource management (NRM), product integrity, food, industry development and markets are covered under Outputs 1, 2, 3, 4 and 5.

ABARE research provides the overarching framework for delivering specific research products in NRM, multilateral trade negotiations under the World Trade Organisation (WTO), market access, food, industry development and product integrity. This work is fundamental to ABARE’s ability to enhance the department’s position as the leading provider of decision-critical information to rural policymakers and the rural industries sector.

Delivery of Output 8 by ABARE is achieved by providing economic analyses and forecasts to enhance the competitiveness of Australian industry, as described below.

Through its farm survey program, ABARE provides the Australian rural sector with a unique economic research database that enables farmers, government and industry to analyse a wide variety of issues facing rural and regional Australia.

ABARE has developed the database over many years with continued support from farmers and industry. The database underpins much of the Bureau’s research effort. The underlying annual surveys provide data on the physical, financial and socio-economic performance of farms in Australia’s broadacre and dairy industries. Such an extensive database enables research to support the policy debate on issues related to specific rural industries, as well as on issues facing regional Australia.

These data, combined with ABARE’s commodity forecasts, form the backbone of research on areas covered by other relevant Outputs, including NRM, product integrity, industry development and markets. ABARE also conducts annual fishing industry surveys which provides information to assess the efficiency and effectiveness of fisheries management.

The Bureau also undertakes a comprehensive research program into the minerals and energy sector, based on a wide range of databases and industry models, policy frameworks and markets.

ABARE continues to develop and maintain its global trade and environment model to provide Australian policymakers and international negotiators with analysis of key international issues, such as climate change response policy and trade liberalisation. The model has underpinned ABARE’s analysis of international climate change response policy in the pre-and post-Conference of the Parties 7 (COP 7) negotiating environment and multilateral trade issues. ABARE also continues to enhance the model’s credibility by participating in the Stanford University Energy Modelling Forum peer review and model comparison exercises.

Performance indicators for Output 8

Overall effectiveness indicators
Economic research:

• economic research findings reflected in national and international agendas and in uptake by Ministers and industry.

Departmental indicators
Timely economic research as measured by:

• completion of core policy research in time to feed into decision making processes
• completion of contracted research within negotiated timeframes.

Professional standards as measured by:

• annual client satisfaction survey
• rigorous quality control maintained on research processes.

Relevant and professionally independent research as measured by:

• annual client satisfaction survey
• ongoing ability to attract research funding
• number of normalised reports produced by ABARE
• forecasts released to pre-arranged schedule
• national and regional conferences held
• demand for ABARE participation in industry events.

Performance Against Overall Effectiveness Indicators

Economic research
ABARE continues to significantly contribute to the competitiveness and enhancement of Australia's natural resources, agriculture, food, minerals, energy, fishing and forest industries with its research and commodity forecasting. The Bureau published 43 reports and 19 conference papers and provided significant levels of economic briefing. ABARE’s work was well represented at international and national forums on issues of high importance to the agricultural sector, such as water trading, land degradation and agricultural trade reform.

ABARE has had considerable success in raising awareness among policy makers and irrigation stakeholders of the importance of effective water markets in minimising the opportunity cost of environmental flows, and accounting for the environmental impacts of trade. ABARE’s work on policy issues relating to environmental flows in the Murray River was enhanced with the release of a research paper highlighting the need to carefully target public investments in water-use efficiency. The existence of salinity benefits and potential impacts on downstream availability underpin arguments to target investments in improved water use efficiency carefully. These issues are now central to the thinking of the Council of Australian Governments (COAG) taskforce and the Murray-Darling Basin Commissioner’s working groups.

ABARE has been heavily involved in assessing the possible impact of changes to land clearing controls in Queensland. The Bureau forged a close working relationship with BRS and the project team worked closely with the Australian Government reference group, which provided excellent feedback on the final report. The Queensland Government also recognised the high quality work of the ABARE/BRS team by asking it to review a 1999 Queensland Department of Primary Industry report on tree clearing on freehold land.

ABARE contributes significantly to the understanding of the role of economic efficiency in implementing fisheries management policies that maximise the benefits to the community from the use of fisheries resources. An ABARE presentation to the Australian Fisheries Management Authority board on economic efficiency in fisheries management, and the results of ABARE research, were particularly important in communicating the significance of this to stakeholders and decision-makers.

ABARE’s agricultural trade reform program continued to deliver first class research on WTO and other trade-related issues in 2002-03. Activities included major research reports on critical agricultural tariff issues; the impact of trade reforms on grains markets; the importance of linkages between tariffs, export subsidies and production subsidies; and special treatment for developing countries at the WTO. The research helps to keep Australian policymakers, trade negotiators and Cairns Group members abreast of trade policy development and critical WTO negotiations. Briefing was also provided on formula approaches to cutting tariffs; water in tariffs; converting specific and complex tariffs to ad-valorem terms; capping and reducing blue box support; reducing amber box support; approaches to expanding tariff quotas; European Union (EU) integration (expansion); and issues relating to providing special safeguards to developing countries. ABARE also provided major input to the department’s approaches to non-agricultural market access negotiations, the challenge Australia has mounted at the WTO on the EU sugar regime, and the expansion of the EU.

A major focus of the Bureau’s work in the past year has been on the extent and implications of the drought. ABARE widely disseminated assessments of the drought and its effects on farmers and regional economies through articles in Australian Commodities, the Australian Crop Report, and in briefings to the drought taskforce and industry groups. ABARE analysis also formed a key part of the assessment process for exceptional circumstances providing information and advice for 41 applications, with a total of 80 detailed briefings being undertaken.

ABARE's survey information has played an important role in monitoring and shaping government and industry response to the drought.

The Bureau continued to enhance the department’s position as the leading provider of decision-critical information to rural policymakers and rural sector industries. ABARE released financial performance estimates for Australian farms in 2001-02 and 2002-03 in the Farm financial performance paper, presented as part of the Taking Rural Australia Forward sessions at Outlook 2003.

Public use of detailed, survey-based rural industry information expanded markedly during 2002-03: the Agsurf website, which provides free public access to a wide range of current and historical state, industry and regional level statistics in the broadacre and dairy industries, delivered over 14 000 data downloads - a 60 per cent increase from 2001-02. ABARE's staff responded to over 8800 requests for farm survey data by e-mail and telephone - an increase of over 80 per cent from 2001-02. The Dairyweb dairy industry benchmarking data site provided 407 reports - an increase of 95 per cent from 2001-02.

Ministers delivered keynote addresses each day of the successful national Outlook conference held on 4-5 March 2003, ensuring government policies and actions received wide coverage.

The program of six regional Outlook conferences received good local media coverage, widely disseminating ABARE forecasts and economic analysis to farmers and local industries.

Performance Against Departmental Indicators

Timely economic research
ABARE made a valuable contribution to the debate about environmental flow options in the Murray River, which focused on the opportunity cost of the proposals and associated policy issues. The Bureau provided research directly to the Socio-Economic Reference Panel (of the Murray-Darling Basin Commission) estimating the basin-scale opportunity costs. ABARE also provided substantial input to the COAG water reform taskforce.

ABARE and BRS undertook an assessment of the possible impact of changes to land-clearing controls in Queensland and worked closely with the Australian Government reference group to achieve the desired outcomes.

ABARE used a special drought briefing to the Treasury and Reserve Bank's Joint Economic Forecasting Group to develop official estimates of national economic performance. The Bureau also made a major contribution through its farm surveys program and commodity analysis to decision-making on the drought and provided a sound basis for determining exceptional circumstances assistance status.

ABARE’s extensive modelling analysis of alternative domestic emission abatement policies contributed to development of the climate change forward strategy. The Bureau presented the results at a climate change inter-departmental committee workshop in June 2003.

ABARE worked across the department during the year to ensure that briefing and advice on trade-related issues was timely and targeted. ABARE researchers provided trade negotiators in the department and the Australian Government Department of Foreign Affairs and Trade with written and verbal briefing on complex economic issues being discussed by the Cairns Group and the WTO. The Bureau’s research was a key input to the development of Cairns Group positions on agricultural trade reform during the ongoing Doha Round trade negotiations.

ABARE research on genetically modified (GM) crops contributed to the ongoing debate in Australia on the costs and benefits of gene technology. The work included the release of a paper at Outlook 2003 on the use of agriculture biotechnology in developing countries. The Bureau prepared a draft report for the department on market access issues for potential Australian GM crops in June 2003. The report is due for public release in July 2003.

Australia’s premier market assessment forum for the commodities sector, the Outlook 2003 conference, was attended by around 650 delegates and received national media coverage with at least 633 mentions. Drought was the most popular item with 160 mentions, followed by commodities with 88 mentions. Media monitoring reported 236 press items, 360 radio items and 28 television interviews. The conference offered 23 sessions over two days, including commodity forecasts for agriculture, trade reform, grains, sugar, future of food, forest products, and economic and resource issues affecting regional Australia.

ABARE increased its wide public distribution of forecasting and research publications by substantially increasing its complimentary online material. The Bureau further distributed material through the media, large client/stakeholder mailing lists, conferences and publications to Australian and overseas clients. Media coverage monitored for ABARE’s Current Issues, research, statistical and forecasting reports for 2002-03 included:

• 764 articles in the print media
• 431 radio items
• 147 television stories (including 460 radio and television interviews)
• 88 items listed through websites
• ABARE received coverage of some publications through links to web sites such as BBC News, FT.com and London Financial Times. ABARE’s own website attracted over 240 000 visitor sessions averaging around 11 minutes.

Professional standards
ABARE completed a client satisfaction survey in March 2003. The telephone survey covered all clients who had contracted research services from the Bureau since 1 July 2002, and found that high quality of work and ‘only known source’ are the two most popular reasons for clients (including the department) contracting ABARE to do work. Clients indicated that economic research of emerging industry issues and commodity forecasting were two key areas they would like the Bureau to focus on in the future.

All ABARE research undergoes a formal clearance process to ensure appropriate levels of rigor, reliability and accuracy, and the validity of conclusions drawn and reported. Researchers maintain and continue to develop the professional quality of their research by studying and testing new approaches; by engaging in internal and external peer review processes; and by being active participants in professional organisations.

Relevant and professionally independent economic research
The client satisfaction survey completed in March 2003, indicates that ABARE is seen as an unbiased source of information.

The Bureau attracted economic research funding during the year from a combination of appropriation and external sources. External clients, including the Australian Government Department of Industry, Tourism and Resources; research and development corporations; other government agencies; the private sector; and international clients provided 48 per cent of ABARE’s research funding. ABARE faces a highly competitive market and competes with the public and private sector for around 36 per cent of its projects.

ABARE released 107 normalised reports on a wide range of issues, from agricultural trade reform to natural gas in eastern China. Its officers presented 22 individual papers to the national Outlook conference and around 18 papers to other national and international conferences. The Bureau provided considerable briefing for the department’s consideration of exceptional circumstances applications.

ABARE published and disseminated the following reports in 2002-03:

• Australian Wine Grape Production and Winery Intake: Projections to 2004-05
• Opening Agricultural Markets through Tariff Cuts in the WTO
• Tax Incentive Options for Junior Exploration Companies
• Mineral Exploration in Australia: Trends, Economic Impacts & Policy Issues
• Australia's Petroleum Resource Rent Tax: An Economic Assessment of Fiscal Settings
• Australian Aquaculture: Industry Profiles for Selected Species
• Three pillars of Agricultural Support and Their Impact on WTO reforms
• China's Changing Coal Industry: Implications and Outlook
• Economic Implications of the Kyoto Protocol for New Zealand. Sensitivity Analysis
• Potential Impact of Saline Irrigation Water on the Grape Industry in the Murray-Darling Basin
• Fisheries Management: A framework For Assessing Economic Performance
• Trends in Australian Energy Intensity: 1973-74 to 2000-01
• Australian Energy: National and State Projections to 2019-20
• Australian Aquaculture: Industry Profiles for Selected Species
• Excluding Technologies from the Mandatory Renewable Energy Target.

Research Reports

• Australian Beef Industry 2002
• Profile of Australian Wool Producers 1997-98 to 2000-01
• Grains Policies in a Global Market
• World Wine Market: Barriers to Increasing Trade
• Deregulating Energy Markets in APEC: Economic and Sectoral Impacts
• Natural Gas in Eastern China: The Role of LNG
• Mining Technology Services in Australia.

Current Issues

• The Economic Crisis in Argentina: Implications for Grains and Oilseeds Markets
• Improving Water Use Efficiency: Targeting Public Investment
• Rising Domestic Plantation Wood Supplies: Implications for Australian Production and Use of Forest Products

Statistical reports

• Australian Commodities (quarterly)
• Australian Commodity Statistics 2002
• Australian Crop Report (quarterly)
• Australian Mineral Statistics (quarterly)
• Australian Fisheries Statistics 2002
• Australian Forest and Wood Products Statistics (bi-annual)
• Australian Farm Surveys Report
• Australian Fisheries Surveys Report 2002.

Conference Papers

• Agriculture Outlook for 2002-03 and Farm Performance Estimates for South Australia
• Australian Wine industry: Market Access and Industry Expansion
• The GTEM Greenhouse Gas Emissions Database: Version 5
• Commodities outlook for 2002-03 and Farm Performance Estimates for the Goldfields-Esperance Region
• Conjunctive Use of Groundwater and Surface Water in the Burdekin Delta Area
• Competitive Tendering for Public Investment in Improving Water Use Efficiency
• Commodities Outlook for 2002-03 and Farm Performance Estimates for the Northern Territory
• China's Coal Exports: Implications for Asia Pacific Trade
• 'Get Big or Get Out': Is This Mantra Appropriate for the New Century?
• Agriculture Outlook for 2002-03 and Farm Performance Estimates for Horsham
• Externalities and Water Trading in the Murray-Darling Basin, Australia
• Data Issues in General Equilibrium Modelling
• Agriculture Outlook for 2003-04 and Farm Performance Estimates for the Lismore Region
• Feasible GTEM Baselines of the World Economy for the next 100 years
• Agriculture Outlook for 2003-04 and Farm Performance Estimates for Toowoomba
• Monitoring Land Degradation in South East Queensland & North East NSW
• Comparing the Effects of Different Approaches to Liberalising World Grains Markets
• Agricultural Trade Reform. Benefits for Australian Broadacre Agriculture
• OUTLOOK 2003 Conference Papers.

Other Reports

• Water Trade and the Externalities of Water use in Australia-Interim Report
• Import Competitiveness of Australian Aquaculture
• Efficiency of Individual Transferable Quotas in Fisheries Management
• Energy Statistics-Australian Energy Update 2002
• Agricultural trade reform to the WTO: Special treatment for developing countries
• Major Australian Minerals and Energy Development Projects - December 2002 listing
• Minerals and Energy: Major development projects
• Queensland Land Clearing Proposal: Socioeconomic Impact.

All ABARE forecasts were released on time. The Australian Crop Report and the Australian Commodities reports were released quarterly. Two special editions of the Australian Crop Report were released in August and October because of the rapid deterioration in crop conditions during the winter and spring of 2002.

ABARE held six regional Outlook conferences at Horsham, Victoria; Nuriootpa, South Australia; Kalgoorlie, Western Australia; Alice Springs, Northern Territory; Toowoomba, Queensland; and Lismore, New South Wales.

ABARE participated in industry meetings, workshops and seminars and was invited to present papers at Australian and international conferences. Highlights included:

• participation in the Stanford Energy Modelling Forum
• arranging and hosting an international workshop that brought together key climate change policymakers/negotiators and modellers from around the world
• a major drought presentation at the National Press Club
• industry involvement in forestry sessions at Outlook 2003 by Timbercorp
• participation in the National Aquaculture Industry Roundtable
• providing briefing material for the Cairns Group meetings
• providing a key note presentation to the annual conference of the Australian Society of Soil Science
• participation in various fisheries assessment group meetings and workshops
• participation in the Pratt Water Initiative - meetings of the Murrumbidgee Project team.