Taxpayer, Send Money
When the ‘salinity tree’
is given a shake, many proposals to tackle problems of dryland salinity fall
out, ranging from recommendations based on well-researched scientific and
economic analyses to the more common, apparently simple solution from
salinity fixers that could be summarised as: ‘Dear Taxpayer, Send Money’.
recommendation to spend more and more public money on dryland salinity
programs is often unencumbered by much consideration of the human, technical,
economic and institutional aspects of Australian agriculture that are
critical to solving environmental problems. Even more unfortunately, the
Australian Conservation Foundation (ACF) and the National Farmers Federation
(NFF) have also been attracted by the spend first and think later approach. A
defining event was the joint ACF/NFF proposal to spend AUD $65 billion over
10 years on mitigation of dryland salinity and other land management issues (Virtual
Consulting Group and Griffin nrm 2000). Pannell
(2001, p.46) has suggested that if this proposal had been accepted
the result would have been “one of the most poorly conceived, unproductive
and wasteful programs of public expenditure in Australia’s history.”
The main conceptual and
empirical issues surrounding dryland salinity are to do with issues like:
many farmers are capable of generating sufficient revenue to invest in
environmental remediation that would yield on-farm benefits?
should programs be designed to account for the variability of commodity
prices, farm income and investment and the time path for control and
amelioration of dryland salinity?
does the endemic small farm problem in Australian agriculture affect farmer
behaviour in relation to dryland salinity?
the market for agricultural land eventually sort the problem out?
are the implications for government policy?
In this article,
information about the magnitude of the dryland salinity problem is introduced
as a starting point. Some observations are then made about on-farm and
institutional aspects of dryland salinity.
Size of the problem
Estimates of the potential
losses from dryland salinity for the major groundwater systems across
Australia are detailed in Australian Dryland Salinity Assessment 2000, a
recent report of the National Land and Water Resources Audit.
has close to 25 million hectares of local groundwater systems.
Approximately 3 per cent (0.75 m ha) of the area is considered to be at
risk of developing some dryland salinity.
has around 40 million hectares of intermediate groundwater flow systems.
Approximately 5 per cent (2 m ha) of these systems are considered to have a
high risk of developing dryland salinity.
has around 45 million hectares of regional groundwater flow systems.
Approximately 6 per cent (2.70 m ha) of this land is considered to be at
high risk of salinity in the next 100 years.
The ‘costs’ of dryland
salinity are difficult to estimate. Because of the difficulties involved
Bathgate and Pannell (2000, p.2)
suggested that there is ‘almost no practical value’ in estimating the
cost of salinity. This has not stopped some rash estimates being made. Nor
has it stopped policies based on these estimates.
A recent paper by
Commonwealth Scientific and Industrial Research Organisation (CSIRO)
scientists Walker, Gilfedder and Williams (undated) refers to a 1998 estimate
by the Prime Minister’s Science, Engineering and Innovation Council that
dryland salinity costs $700 million in ‘lost agricultural land’ and $130
million annually in ‘lost production’.
use of estimates of the lost value of agricultural land and loss of annual
earnings is double counting. Losses from salinity can be measured either as
losses in the value of agricultural land, as indicated by the capitalised
value of the losses in net annual returns to that land, or as the annual
losses of net annual returns themselves. Furthermore, the CSIRO estimate does
not distinguish between revenue and cost – losses of gross returns are
advanced as if they were the same as losses of returns.
Losses from salinity should
also be put in the wider context of Australian agricultural development. Knopke,
O’Donnell and Shepherd (2000) estimated productivity growth on
broadacre farms in Australia at 2.6 per cent per annum from 1977-78 to
1998-99. This is significantly greater than estimated annual losses from
dryland salinity. In an aggregate sense, offsetting the losses occurring from
dryland salinity by management improvements and technical innovation on
non-affected areas is well within the bounds of previous productivity
improvement in Australian agriculture.
Thus, on the basis of the
estimates reported by the Prime Minister’s Science, Engineering and
Innovation Council, the estimated current losses of $130 million per year
from dryland salinity do not loom large as an economic problem. Note that the
annual gross value of Australian farm production is around $30 billion.
On the farm
Farmers do not deliberately
damage the land they farm. Investment to change farming systems to reduce
dryland salinity has implications for farm profitability and risk in both
short and long terms, just as farm profitability and risk have implications
for the capacity to invest on farms. In this regard, size does matter in
It is a commonplace of
Australian agriculture that the distribution of farm size is uneven. This is
usually expressed imprecisely as an ‘80/20 rule’ – 20 per cent of
farmers produce 80 per cent of the output and vice versa. Official data from
the Australian Bureau of Statistics and the Australian Bureau of Agricultural
and Resource Economics (ABARE) allow more accurate representation of the
situation. For example, the McLachlan Taskforce on the wool industry reported
in 1999 that only 2000 woolgrowers (four per cent of an Australian total of
46,000) produced 25 per cent of national output, with the largest ten per
cent producing 40 per cent (McLachlan,
There is no simple way of
interpreting data on the distribution of farm size and income. The data are
confounded with social and economic variables associated with:
versus part-time farming.
and education of farmers.
and transfer of ownership of family farms.
of land settlement.
The most important reason
for concentrations of small farms with limited investment capacity in some
areas of Australia is the history of settlement. A most dubious concept –
the ‘home maintenance area’ – was the guiding principle of government
settlement programs. The idea that farms should provide for the needs of an
average family condemned many farm families to penury from the start. The
development of Australian agriculture includes numerous government settlement
schemes that had unintentional but serious environmental outcomes. Examples
include dust storms in the Victorian Mallee in the 1930s, irrigation salinity
and loss of high-quality timber and amenity with clearing of forests for
dairying in Gippsland and on the North Coast of New South Wales. With such a
poor track record, why should anyone be confident that government plans for
the repair of previous environmental damage will be successful?
Australian farm businesses
are small businesses distinguished from other small businesses by higher
equity ratios, necessitated by the high variability of their income.
Insolvency is a constant prospect in most parts of the grain-livestock areas
of Australia. Occasionally, farmers have little choice and adopt short-term
strategies when confronted with low incomes brought about by low commodity
prices and/or drought. Large numbers of farms in Australia perform
indifferently for much of the time. These farms have little or no capacity to
invest in dryland salinity control.
In the short-run, the
opportunity for farmers to change enterprises quickly is constrained by their
past investment in capital equipment and fixed improvements on farms; that
is, sunk costs. Neglecting the significance of sunk costs overstates
prospects for new investment.
for salinity mitigation usually imply a regular pattern of expenditure.
Attempts to encourage a regular pattern of investment will fall on deaf ears
if farmers do not have the financial capacity to respond. Yet forums
assessing policies to combat dryland salinity frequently proceed as if the
profit and risk dimensions of farming are unimportant, or even non-existent.
Succession issues are also
important to this question, especially on small farms. Older farmers who do
not anticipate passing on their farms to family members have different
attitudes to the future than other farmers. The cash surplus from farming
operations does not have to be spread as thinly. Given the episodic nature of
peaks in farm income and land values, the timing of exit from farming is an
important objective for farmers. How life cycle affects investment behaviour
– and environmental investment in particular – is far from clear?
Small full-time farms do
not have the capacity to generate sufficient revenue to operate commercially,
let alone generate the funds necessary for remediation of environmental
damage. For part-time farms, the story is mixed. In the ranks of small
part-time farms are represented some of the richest and poorest people in
Australia. Rich part-time farmers are concentrated in desirable locations
close to capital cities and in aesthetically pleasing countryside. As a
general rule, these individuals are conservation-minded and have the
resources to act accordingly. Various indicators of environmental concern,
including participation in Landcare programs and related activities, suggest
a ‘Hume Highway effect’. Environmental enthusiasm (and government grants)
is concentrated in the neighbourhood of the road from Sydney to Melbourne
(and in similar favoured areas). If so, this is hardly the basis of a
long-term program of dryland salinity control in the places most affected by
dryland salinity that are concentrated in the truly commercial farming areas
of Australia away from capital cities.
It is not sufficient for a
proposal to be technically feasible or even profitable ‘on average’.
Salinity mitigation has to fit in with management of the farm business. An
important determinant of the attitudes and behaviour of individual farmers
will be survival of the farm business in an uncertain production and
marketing environment. What appears to be sensible to an outsider may be
unacceptable and inappropriate for the farmer. National salinity mitigation
strategies will be most effective if they recognise and fit with the many
goals of farmers, of which profitability and business survival is
pre-eminent. Without profits, survival, resource improvement and other goals
cannot be achieved.
The principal technical
solution to the on-farm problems associated with dryland salinity is to lower
water tables by increasing transpiration by plants. This requires
modification of farming systems in salinity-prone areas. Where problems are
localised, the financial resources necessary to mitigate dryland salinity
have to be generated from the receipts of farming operations on the farms
directly affected. There is no case for government assistance when dryland
salinity is a problem contained within the boundary of a farm.
When dryland salinity is a
problem with public ramifications, selecting the best institutional
arrangements is critical to success of policies to ameliorate the problem.
Catchment management has
been popular in recent times, even though not many agricultural problems are
suited to management on a catchment basis. Australia is a relatively flat
country. Traditionally, climate, history of settlement and soil type have
been regarded as being more important than topography in determining the
pattern of agricultural production and requirements for services by farmers.
Catchment management has
advantages and disadvantages. There are certain classes of engineering
problems that need to be managed on a catchment basis – flood mitigation,
for example. While catchment authorities have been established widely, they
do not have an independent funding base. They are funded by and responsible
to state governments. In some cases, there will be external effects of
dryland salinity on other landholders. Previously, the significance of
external effects was overstated. External effects were incorrectly regarded
as the norm rather than the exception until the last few years. However,
where there are external effects on water quality in streams in a definable
drainage area, catchment levies are appropriate. Still, attempts to establish
catchment levies in Victoria to fund a range of environmental programs were
singularly unsuccessful (Watson 2001).
Engineering solutions are
applicable to many problems caused by dryland salinity in country towns.
While not all damage is worth repairing, local government rates are an ideal
funding instrument to finance these engineering works. There will be cases
where the local funding base is inadequate and state or Commonwealth support
is justified for valuable assets. Much the same goes for roads, railways and
other infrastructure affected by dryland salinity. Provided the necessary
repairs can pass a cost-benefit test, the best strategy will be recoupment of
costs by user charges.
In theory, there are legal remedies
when the actions of one individual have adverse effects on others. This is
not a practical solution in this instance. For one thing, long lags in the
effects of land clearing on agricultural productivity mean that changes of
ownership make it impossible to sheet home the source of damage. Some
enterprising lawyers have claimed that there is an argument in law for
farmers and others affected by dryland salinity to seek compensation from
governments. This is because of past government policies that encouraged
excessive land clearing. Investment allowances, accelerated depreciation,
concessional credit and other previous inducements operating through the
taxation and financial system spring to mind. Official settlement policies
also wreaked economic, social and environmental havoc on the Australian
countryside. The essential difficulty is that all these policies were widely
supported at the time by all governments and the community. In any case,
their ill-effects (and, of course, benefits) are not confined to dryland
It would be a grim outlook
– except for the legal profession – if every past mistake of government
brought about by ignorance, opportunism and/or misplaced enthusiasm could be
settled in the courts.
Political imperatives and
pork-barrelling predilections frequently conspire to confound sound policy.
With this possibility in mind it is important that the science and economics
of farm salinity measures are not only sound, but also widely known. Good
science and good economics pursued with vigour in public debates may help
slow the adoption, if not the promulgation, of less sensible policy measures.
In so doing, they may contribute to the public policy objective of spending
money well – or, at least, striving for the situation once described by an
observant ex-agricultural bureaucrat, Chas Savage, as ‘wasting money wisely’.
A. and Pannell, D.J. 2000, ‘Economics of deep-rooted perennials in Southern
Australia’, SEA Working Paper 2000/05, Agricultural and Resource Economics,
University of Western Australia, Web Page:
P., O’Donnell, V. and Shepherd, A. 2000,
‘Productivity Growth and the Grains Industry’, ABARE Research Report
I. 1999, Report of the Wool Industry Future Directions Taskforce, AGPS,
D.J. 2001, ‘Public funding for environmental issues: Where to now’, in
Public Funding of Environmental Issues, 4th AARES Annual
Symposium, October, Melbourne.
Consulting Group and Griffin nrm 2000, National Investment in Rural
Landscapes: An Investment Scenario for NFF and ACF with the assistance of
A.S. 2001, ‘Money and Environment’, Agenda,
vol. 8, pp. 89-96.