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Native Vegetation: An Update


practices imposing constraints on some farmers. ABARE conducted what is called a total factor productivity analysis, which is a ratio of all output quantities on a farm to all input quantities. Output quantities include the crop produced, livestock as well as other sources of on-farm derived income. Input quantities include fixed costs such as land and machinery, and variable cost items such as labor and material. Farms in the North West Slopes and Plains were found to be twice as productive as farms in western NSW.

ABARE found that vegetation density has a significant negative impact on total factor productivity on broadacre farms in the survey region. However, it was also noted that while farms with low vegetation densities are, on average, associated with higher total factor productivity, it was also not possible to conclude that continual removal of vegetation will necessarily lead to higher productivity, particularly in rangeland areas. At low vegetation densities, research has suggested that increasing vegetation levels, up to some point, is consistent with increased productivity on some farms, particularly grazing properties.

Regulations that prevent the clearing of native vegetation on private agricultural land can impose opportunity costs – ie, the cost of forgoing a profitable activity. The opportunity costs of forgone crop development in the survey area were calculated by ABARE, based on a hypothetical blanket ban that effectively prevented any broadscale clearing. Over the entire survey region, 19 percent of survey farmers wished to clear land for crop development. The opportunity cost of native vegetation conservation varies over the total survey region; ninety per cent of the estimates fell between $187 and $1445 a hectare of potential crop development area. The median opportunity cost per hectare in the Central Division ($596) is 57 per cent higher compared with the Western Division ($379), consistent with more favorable cropping opportunities in the former. The median cost of forgone crop development across the survey region is around $156,000 per farm. The estimated opportunity cost per landholder in the Central Division (where cropping is better suited) ranged from less than $1,000 for the lowest 5 per cent to greater than $1.9 million for the worst affected 5 per cent. Where the expected private benefits from clearing exceed the expected private costs of clearing, including expected penalties for illegal clearing, there is a strong financial incentive for some farmers to ignore regulatory constraints. The total opportunity cost of forgone crop development on rangelands is as high as $1.1 billion across the survey region. Most of the cost is borne in the Central Division areas.

ABARE concluded that a broad based regulatory approach to managing native vegetation may fail to differentiate between sites where conserving native vegetation generates net benefit versus net costs. Policy instruments that allow farmers to conserve native vegetation at sites within their property with relatively lower opportunity costs are likely to lower the cost of native vegetation conservation to individual farmers. If equivalent environmental outcomes can be generated at different sites, market based initiatives that allow native vegetation to be conserved at sites where the opportunity cost is relatively low may lower the overall cost of delivering environmental outcomes.


The Agriculture and Food Policy Reference Group

The Agriculture and Food Policy Reference Group was commissioned in March 2005 by the Commonwealth Government to help guide the development of future directions in Australian Government policies and programs affecting the agriculture and food sector.

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