Drought conditions continue to exert pressure on Australian agribusinesses, yet the sector is showing promising signs of resilience with 60 per cent of farmers confident about the year ahead, according to the second quarterly Westpac & Charles Sturt University (CSU) Agribusiness Index.
The Westpac & CSU Agribusiness Index, which provides agribusinesses with national, state-wide and regional overviews of business performance, shows agribusiness capital expenditure and employment levels remain steady despite the difficult trading conditions and less than satisfactory improvements to weather.
Reviewing trends indicated by the March quarter Index, the Chief Executive Officer of CSU’s Western Research Institute Tom Murphy believes that strong demand for agricultural products has led to high export prices and this has offset some effects of the drought on farm businesses.
“The drought continues across the majority of Australia, although a few States and regions are showing signs of the beginning of a recovery,” Mr Murphy said.
“Nevertheless, farmers and associated businesses show high level of resilience and appear confident about business conditions in the coming year. Expectations for improvement in March quarter that were expressed in December 2006 survey have been achieved to some extent, but lower than average rainfall has dampened expectations for June quarter.
“Rainfall in past few weeks and continued rain in May could, however, quickly change business expectations,” he said.
The Westpac & CSU Agribusiness Index provides an Economic Performance Indicator (EPI) for each State based on the average results collected from all regions. Key State and Territory results from the March quarter include:
- Western Australia recorded a negative EPI of -0.03 for the March 2007 quarter. However, this represented the most substantial improvement of all States from the December quarter and is the second highest State EPI (excluding NT) for March. WA expects the greatest improvement of all States into the June quarter with an expected EPI of 0.11.
- Queensland recorded strong performance in the northern regions with positive EPIs in the Far North (0.10), North West (0.21), Central West (0.04), Fitzroy (0.16) and Mackay (0.10) regions. Southern Queensland was more affected by poor climate conditions and featured negative performance. On average, capital expenditure increased State-wide with good expectations for investment in business improvements across the northern regions in the March quarter and predicted into the June quarter.
- Tasmania was the only state to record a positive EPI (excluding NT) this quarter with a 0.08 result and outlooks to the June quarter remaining stable.
- New South Wales’ coastal areas recorded positive performance suggesting that recent rains have enabled agribusinesses to get back on track. There are also good predictions for the Hunter region with an anticipated 0.19 EPI for the June quarter. Moving into the June quarter, capital expenditure for coastal regions remains positive with good indications for renewed investment prospects.
- The March quarter results highlighted the effect recent bushfires have had on local economies in Victoria, hindering drought revival initiatives. Goulburn, Gippsland and East Gippsland all reported negative and lower EPIs of -0.30, -0.25 and -0.19 respectively, with Gippsland showing the largest drop in performance between December and March. Capital expenditure was maintained through the March quarter with positive exceptions in Loddon, Ovens and Murray and Western districts where significant improvements were recorded.
- South Australia was again the state hardest hit by drought conditions nation-wide. However, there were marked increases from the December quarter in business confidence for the year ahead in the Yorke and Lower North and Murray Lands regions, suggesting that agribusinesses are remaining strong in the face of poor performance. Local producers behaved guardedly and minimised capital expenditure. Overall, the SA EPI is expected to improve from -0.19 to -0.04 into the June quarter.
The Westpac and CSU Agribusiness Index is a quarterly survey of Australia’s Agribusiness sector conducted by Charles Sturt University’s Western Research Institute. A survey is conducted via a phone questionnaire with respondents drawn from the 48 statistical divisions of regional Australia with a mix of primary producers and businesses upstream and downstream of the agricultural sector. The March 2007 survey resulted in 1 180 responses.
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