Trimester 2 HI5003 Report: Agricultural Production Impact on Economy

This report analyzes the impact of agricultural production on the Australian economy, particularly focusing on the effects of climate change and market instability during 2018-2019. The study examines the decline in agricultural GDP, the shift in aggregate demand due to falling net exports, and the impact of unstable climatic conditions on production. It highlights the importance of water scarcity, price fluctuations, and the need for government intervention through subsidies and technological innovation to mitigate the negative impacts. The report concludes that the Australian economy faced a slowdown in agricultural production and suggests policy recommendations to improve the sector's performance and economic growth. The analysis includes figures illustrating the shift in aggregate demand and the fluctuating trend in agricultural GDP. The report emphasizes the importance of addressing climate-related challenges and market volatility to ensure the sustainability of the agricultural sector and the overall Australian economy.

Running head: IMPACT OF AGRICULTURAL PRODUCTION ON AUSTRALIAN
ECONOMY
IMPACT OF AGRICULTURAL PRODUCTION ON AUSTRALIAN ECONOMY
Name of the Student
Name of the University
Author Note
Course ID:

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IMPACT OF AGRICULTURAL PRODUCTION ON AUSTRALIAN ECONOMY
Executive Summary
Australia is a country which is considered one of the largest exporter of agricultural products.
Recently, Australia has suffered from drought. Thus, this report tried to analyze the effect
caused on the Australian economy and agricultural industry due to the harsh change in
climatic condition. By total demand and total supply, the impact had been analyzed. The
outcome of the report states that the total market fell due to the fall in net export. The net
export fell because of less production in the Agricultural industry. Hence, the Australian
economy faced a slowdown in Agricultural GDP growth. The government should implement
subsidy and bring innovation to the technology in order to increase agricultural production.

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IMPACT OF AGRICULTURAL PRODUCTION ON AUSTRALIAN ECONOMY
Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................3
Issues related to the impact of agricultural production in the Australian economy and
Agricultural industry..............................................................................................................3
Conclusion..................................................................................................................................7
Reference....................................................................................................................................8

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Introduction
Australia is known to be one of the countries whose major export depends on the
agricultural products. They are a significant producer of agricultural products. The
agricultural sector plays a crucial role in Australia by contributing to the economic, social as
well as environmental factors (Nff.org.au 2019). The production of agriculture in Australia
has experienced significant growth over the last 20 years. The present report will focus on the
issues related to which agricultural production affects the economy of Australia and
agricultural industry of Australian. During 2018, Australia faced low rainfall. Hence, this
report will also focus on analyzing the impact of agricultural production on the Australian
economy and agricultural industry.
Discussion
Issues related to the impact of agricultural production in the Australian economy and
Agricultural industry
Agricultural production in Australia is affected by many problems occurring across
the country. The major issues faced during 2018-2019 are climatic instability and regular
price fluctuation occurring in the market. During 2018, the Australian agricultural sector
faced difficulty in their production and thus resulted in market instability. The changes were
found because the country, Australia, suffered from climatic changes and the market price
fluctuation. Australia experienced a dry climate throughout 2018-2019.
Less rainfall in the year 2018-19 majorly affected the productivity of agriculture.
Therefore, there was water scarcity problem. As known for agriculture, the most important
need is water. Therefore, production of agricultural products reduced. Hence, there was a
decline in the profit related to the agricultural sector. Consequently, the agricultural products
are imported from different countries by Australia. Even in winter, Australia faced hottest

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IMPACT OF AGRICULTURAL PRODUCTION ON AUSTRALIAN ECONOMY
winter in the year 2018 (Abs.gov.au. 2019). Due to adverse climatic situation Australia is
facing higher price to buy the agricultural products. The quality of the food is getting affected
and the seasonable agricultural production is not taking place. Therefore, the producer’s food
supply is being hampered.
In Australia, the prices related to the agricultural products are getting affected due to
unstable or the unpredictable weather conditions. Hence, the market is facing price volatility
throughout 2018-19. In case of fruits, the higher degree of temperature is ripening the fruits at
earlier stage itself, which is resulting in the poor quality of the fruits being cultivated. The
competitiveness of agricultural industry in Australia is therefore, being hindered when
compared with other agricultural industry all over the globe (Pc.gov.au. 2019). Hence, the
price for exporting the agricultural products increased and therefore, export reduced in the
concerned year when compared with the year 2017-2018.
Other than consumption, investment and the government expenditure, the aggregate
demand consists of export and import. In this scenario, the import of the agricultural product
rises and the export of the agricultural product reduces. As a result, the net export becomes
negative. Therefore, the aggregate demand shifts left (Rao 2016).

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IMPACT OF AGRICULTURAL PRODUCTION ON AUSTRALIAN ECONOMY
SRAS
LRAS
AD
AD1
E
E1
P
P1
Price
QuantityQ1 Q
P2
Figure 1: Shift in Aggregate demand
(Source: Created by author)
Figure 1 shows the shift in the aggregate demand (AD) because of the change in net
export. LRAS AND SRAS are the total supply curve in the long run and total supply curve in
the short run. Assuming the Australian economy to be in full employment, the aggregate
demand (AD) and aggregate supply (LRAS) meet at the equilibrium point E where the price
is at P and quantity is at Q. Since, in 2018-2019 Australia faced unstable climatic condition
and price fluctuation in the agricultural market, therefore, the net export became negative.
Therefore, the fall in net export resulted in the fall in the total demand curve in the short run.
Thus, the demand curve shifted towards the left to AD1. Hence, the equilibrium point
changed from E to E1. The price of the agricultural goods decreased to P1, and the quantity fell
to Q1. However, in the future, the market will try to adjust in the long-run by setting the price
as P2 so that the agricultural production increases to Q. As a result, Australian economy faced
an impact in their GDP growth.

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IMPACT OF AGRICULTURAL PRODUCTION ON AUSTRALIAN ECONOMY
Figure 2: Agricultural GDP of Australia
(Source: Tradingeconomics.com 2019)
The above chart shows a fluctuating trend in agricultural GDP of Australia as a share
of total GDP of Australia. The horizontal axis measures the time span of 5 years, which is
from 2014-2019 and the Agricultural GDP (AUD) of Australia is measured along the vertical
axis. The concerned period that is from 2018-2019 experience a decrease in Agricultural
GDP of Australia from 12500 AUD approx in 2017 to 10618 AUD in 2019. This decrease in
the trend was because of the worse climatic change in Australia from 2018 to 2019.
As per the outcome of the report, the government should intervene in the agriculture
market to improve agricultural production. The Government of Australia should implement
subsidy in order to benefit the financial condition of farmers. The subsidy implementation
will help the consumer to buy the agricultural product at a low price. Hence, consumption, as
well as production, increases. This will result to improve the country's economic growth.
Since, to control the output during the time of unstable climatic condition, the government
Agricultural GDP(AUD)
Year

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IMPACT OF AGRICULTURAL PRODUCTION ON AUSTRALIAN ECONOMY
should bring innovation to the technologies. The innovation will help to produce agricultural
product even during adverse climatic conditions (Agriculture.gov.au 2019).
Conclusion
After performing the report, it is concluded that Australia in 2018-2019 faced a
slowdown in the Agricultural production, which also led to a fall in economic growth. The
aggregate demand shifted towards left because of the fall in net export. The net export is seen
to be falling because of the fall in the total export of agricultural production and the rise in the
import of agricultural products in Australia. The reason for the fall in net export was unstable
climatic condition and price instability in the agricultural market. According to the outcome
stated above, few recommendations should be considered. The government should take the
initiative in implementing subsidy policies as well as improve or innovate the technologies
needed while producing agricultural goods.

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Reference
Abs.gov.au., 2019. 1301.0 - Year Book Australia, 2000. [online] Abs.gov.au. Available at:
https://www.abs.gov.au/ausstats/abs@.nsf/94713ad445ff1425ca25682000192af2/3852d05cd
2263db5ca2569de0026c588!OpenDocument [Accessed 9 Sep. 2019].
Agriculture.gov.au., 2019. [online] Agriculture.gov.au. Available at:
http://www.agriculture.gov.au/abares/Documents/snapshotaustraliasagriculturalworkforce201
81213_v1.0.0.pdf [Accessed 9 Sep. 2019].
Nff.org.au., 2019. Farm Facts | National Farmers' Federation. [online] Nff.org.au. Available
at: https://www.nff.org.au/farm-facts.html [Accessed 9 Sep. 2019].
Pc.gov.au., 2019. [online] Pc.gov.au. Available at:
https://www.pc.gov.au/research/completed/agriculture/agriculture.pdf [Accessed 9 Sep.
2019].
Rao, B.B. ed., 2016. Aggregate demand and supply: a critique of orthodox macroeconomic
modelling. Springer.
Tradingeconomics.com., 2019. Australia GDP From Agriculture | 2019 | Data | Chart |
Calendar | Forecast. [online] Tradingeconomics.com. Available at:
https://tradingeconomics.com/australia/gdp-from-agriculture [Accessed 9 Sep. 2019].