Economic Impact of Drought in Australia: An Analysis

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Economics for Business
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Table of Contents
Executive Summary.............................................................................................................................3
Introduction.........................................................................................................................................3
Background of Industry......................................................................................................................4
Market Structure of Agriculture Industry........................................................................................5
Drought in Australia...........................................................................................................................5
Impact of Drought on the economy of Australia...............................................................................6
Conclusion............................................................................................................................................9
References..........................................................................................................................................10
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Executive Summary
This report aims at presenting the impact of agriculture in the economy of Australia.Every
country’s economy is diversified into several sectors. The contribution of these sectors is very
important in forming the GDP of the country. The report presents how much contribution
agricultural production makes in the economy of Australia. It also mentions about the
significant drought that affected the southern Australia and its impact on its economy.
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Introduction
The economy around the world consists of various segments.These play a crucial role in the
development of the various countries. One such very vital segment is Agriculture. Today,
75% of food that is consumed by the world comes through agricultural products. They are
produced through the traditional as well as modern way of agriculture. It is the backbone of
country’s economy. It is not only the source of fresh food but also provides employment
opportunities to various people. Increase in the agricultural productivity gives rise to
industrial products and thus promotes industrial growth. This report will discuss all the
crucial aspects related to agriculture and its impact on the Australian economy.
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Background of Industry
A lot of extensive research on the Australian landscape has helped the agriculture practices of
Australia evolve into what it is today. The study of the history of the Australian agriculture is
the growth of the innovation as well as various trail and error method by the farmers. The
most important thing to consider in the whole study is that the farmers have always tried
something new in the practices so as to increase their production with the use of latest
technology (Flynn, et.al., 2016). This is not only helpful for the consumption of the country,
but also plays a major role in export. The earlier policies of agriculture framed by the govt.
were not accepted by the farmers as they felt limited help and utilization of resources.
The development of the machines used by the farmers is mainly due to their perseverance and
their innovation. The current agricultural practices followed by the farmers in Australia has
emerged largely due to trial, error and necessity. The biggest change that has been witnessed
is that now the farmers are more aware by the environmental impacts that is associated with
the rural landscapes as well as urban needs.
Practices of agriculture have seen lot of changes. In today’s time, most of the activities
aremachinery driven. In earlier times, cultivation was done by hand. This was practiced till
1820, after which the use of plough, spade, hoes and other crude tools were used from 1797.
As there was less support from the government, primitive implements were invented by the
farmers to enhance the process of seedbed preparation (Singh-Peterson and Lawrence, 2015).
Until the 1930’s, horse was the main source used as farm power.
To clear the land for cultivation, the first step was to clear the timber. It was done through
English Ploughs such as light Rotherham plough. They were later replaced by heavy wooden
plough. These were used for many years and then were replace by harrows. Disc principle
was used for cultivation after these methods. The farmers faced various issues regarding the
use of these tools and gradually shifted to machines for better results, increased productivity
and less manpower.
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Market Structure of Agriculture Industry
Australia is one of the biggest agriculture producer and exporter. It employs 325,300 people
in departments such as forestry, fishing and agriculture. All these components clubbed with
agricultural produce earn approximately $ 155 billion which contributes to a staggering 12%
share in the GDP. 64% of the total farms in Australia is taken care by the govt. and the rest
are managed by individual farmers.
Australia leads the world in organic farming, with 35 million hectares of land which makes to
8.8% of the total land. It has been notified by the CSIRO that climate change can be
extremely drastic for agricultural point as it can cause decreased precipitation and this will
lead to scarcity of water and quality of production (Magnan, 2015).
The main crops grown in Australia are Wheat and coarse grains (barley, oats, maize and
triticale), rice, oilseeds (canola, sunflowers, soybean), grain legumes (lupins and chick peas),
sugarcane, strand, fruits, tobacco and vegetables.
A major part of the agricultural products are exported in Australia. The farmers export around
77% of their produce. A large part of the GDP is contributed through the exports in Australia.
The agriculture industry is not only prevalent for producing foods but also providing organic
food to the rest of the world. These products are very healthy and they make way for further
innovation in the field of agriculture.
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Drought in Australia
Australia faced a drastic drought in 2018 and 2019. According to the govt. data, there was a
decrease in the winter crop production by 23%. On the eastern court of the country, drought
had affected 49% of the primary agricultural land and it has also affected the cattle by 17%.
In today’s time, due to climate change, the primary impact is seen on the agricultural
produce. Due to the changes in the climate, there has been change in the pattern of rain and
this has affected some regions with a severe dry spell (Naumann, et.al., 2018).
Due to the catastrophic drought, various farmers had to sell off their cattle to half as they are
not able to feed them, which has resulted in low production of items like milk and wool both
in quality and quantity. The country has experienced the warmest years since 2005 and the
heat wave in January broke all records. There was extreme weather change in Australia as the
southern island of Tasmania were on bushfires and there was flooding in parts of north
eastern Queensland. Higher temperatures lead to rise in water evaporation, this makes the
water absorbed in the plants less efficient (Low, et.al., 2015). It has been said by the farmers
that the drought is bringing tough situations ahead for them with every year.
Drought has a very drastic impact on various aspects. It primarily affects the farmers and the
cattle stockers as well.From issues relating to finances and the loss of livestock, the drought
has also taken toll on the mental health of the farmers.It has a significant impact on the
agricultural produce and that impacts the economy as well. The decrease in productionleads
to less supply. This increases the price of the price of the products ranging from dairy, fruits
and vegetables. This also has adverse effect on the agricultural export.A total of 1.25%
population of Australia works in the fields.
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Impact of Drought on the economy of Australia
Agriculture is the primary source that provides food to every person in the world. The
agricultural produce plays a key role in the economy of every country. The demography of
the world is in such, manner that there is production of cereals, wheat, fruits and vegetables
in every corner of the world. Similarly, the areas that do not have access to certain food
products get them imported from different countries.
Drought are recurring feature in the economy of Australia. But the drought of 2018 was the
worst till today. It had severely affected the production, cattle and economy.Australia is one
of the largest exporters of agricultural products including organic products, but the drought
has reduced the production as well as detoriated the quality of the goods produced (Freire-
González, et.al., 2017). There is a chain of effects that take place once, this situation arises.
The impact on different segments are mentioned below:
Impact on Farmers:
 They lose a lot of capital, if the crops are destroyed due to drought.
 If the water supply is low due to less rainfall, additional capital is paid for irrigation
facility.
 They will have to sell their stock as they are unable to feed and take care of the large
livestock and due to less resources, the livestock is unable to produce quality
products.
Impact on Companies:
 The companies that manufactures tractors will lose business.
 Hydroelectric power companies will spend more capital for finding other sources of
water and will have to find customers who will pay them more (King, et.al., 2017).
Impact on the prices of goods:
 The drought brings a change in the prices of the agricultural produce. It is important
to know that in every economy there is a demand and supply factor. The process of
the goods are determined by either the demand or the supply. In drought like
situations, the prices of the product shoots up.
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 As the supply is less, it become difficult for the govt. to manage the demand with the
local produce. To satisfy the demands, they have to import various products. This is
also responsible for higher expenditures of the govt.
Impact on Govt.
 As the govt. takes care of the major agricultural land, they witness increase in the
spending on the agricultural front.
 They have to make arrangement for alternate resource for water supply as well as
fodder for the cattle.
 The allotted budget of the govt. also seeks extra expenditure for importing food items.
 Due to the scarcity of water, there is decrease in the water level in seas which results
in death of several fishes (Jenkins and Warrens, 2015).
Australia has witnessed the worst drought so far. There have been unexplainable weather
conditions in certain parts of the country that is responsible for various activities. This has
created a major problem for the farmers and their families. Agriculture provides employment
to various people and also to its related courses. There are several companies who deal with
machineries and other things that are associated with the agricultural activities.
It is quite evident that the drought has been severely damaging the economy of the country as
well. There has been scarcity of common household items and the citizens have to pay twice
the price of the products that they are in original terms. It has decreased the purchasing power
of the people. It has also led to health effects. Due to the detoriated quality of production,
children are easily grasping diseases. For a balance economy, such situations need to be
handled with proper planning and resources. It is noted that drought is a very common
phenomenon in Australia, yet proper actions are still not taken by the govt.
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Conclusion
This report sheds light on the importance of agriculture in the economy of
Australia.Managing the economy is a very complex task and it involves various segments.
The most important part of the economy is the agricultural production of the country. This
production is responsible for feeding the majority of population of Australia and it also
exports its items to other countries.
Australia has faced drought from many years, but it saw it’s worst in 2018. There was a huge
loss in the production of agricultural products, dairy items, fisheries and so on. This report
provides data on the ill effects of the drought on the economy.
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References
 Flynn, M.C., Pillay, H. and Watters, J., 2016. Industry–school partnerships: Boundary
crossing to enable school to work transitions. Journal of Education and Work, 29(3),
pp.309-331.
 Freire-González, J., Decker, C. and Hall, J.W., 2017. The economic impacts of
droughts: A framework for analysis. Ecological economics, 132, pp.196-204.
 Jenkins, K. and Warren, R., 2015. Quantifying the impact of climate change on
drought regimes using the Standardised Precipitation Index. Theoretical and Applied
Climatology, 120(1-2), pp.41-54.
 King, A.D., Karoly, D.J. and Henley, B.J., 2017. Australian climate extremes at 1.5 C
and 2 C of global warming. Nature Climate Change, 7(6), p.412.
 Low, K.G., Grant, S.B., Hamilton, A.J., Gan, K., Saphores, J.D., Arora, M. and
Feldman, D.L., 2015. Fighting drought with innovation: Melbourne's response to the
Millennium Drought in Southeast Australia. Wiley Interdisciplinary Reviews:
Water, 2(4), pp.315-328.
 Magnan, A., 2015. The financialization of agri-food in Canada and Australia:
Corporate farmland and farm ownership in the grains and oilseed sector. Journal of
Rural Studies, 41, pp.1-12.
 Naumann, G., Alfieri, L., Wyser, K., Mentaschi, L., Betts, R.A., Carrao, H., Spinoni,
J., Vogt, J. and Feyen, L., 2018. Global changes in drought conditions under different
levels of warming. Geophysical Research Letters, 45(7), pp.3285-3296.
 Singh-Peterson, L. and Lawrence, G., 2015. Insights into community vulnerability
and resilience following natural disasters: perspectives with food retailers in Northern
NSW, Australia. Local Environment, 20(7), pp.782-795.
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