Australian agribusinesses are showing positive signs of growth and have recorded their best ever overall results since the research commenced in 2006, according to the latest Westpac & Charles Sturt University (CSU) Agribusiness Index.
According to the report author and director of CSU’s Western Research Institute Mr Tom Murphy, Queensland, Tasmania, Victoria, and Western Australia reported positive performance indices, with all states except Tasmania reporting improvement from the last quarter in December 2007.
“Agribusinesses upstream and downstream from producers recorded positive performances in the quarter, while producers remained in negative but recorded their best result in the quarter. No region across Australia recorded a poor performance. This is due to positive business performance, increased capital expenditure and stable employment in the industry,” Mr Murphy said.
“Nationally, consumer demand has continued to have a positive impact on business performance. However, climate continues to have a negative impact on significant parts of some states, notably NSW and South Australia.”
Mr Murphy said caution was still needed. “Operating costs continued to increase in the March 2008 quarter with the rate of increase significantly higher than reported at the same time last year. Rising costs, the strong Australian dollar and uncertainty about the weather may have contributed to a slight fall in agribusiness confidence since the December 2007 quarter. However, agribusiness confidence is much higher than that recorded a year ago in the March 2007 quarter.”
The Westpac & Charles Sturt University (CSU) Agribusiness Index is developed for each State and statistical division in Australia, including NSW, Victoria, Queensland, South Australia, Western Australia and Tasmania, as well as Bathurst, Orange, Dubbo, Wagga Wagga and Albury-Wodonga.
- Despite improved economic performance in the December 2007 quarter, the NSW agribusiness sector is taking a ‘wait-and-see’ approach to predicting business confidence.
- While business performance and employment increased slightly in the period, rising costs and reduced capital expenditure indicate that agribusinesses are ‘sitting on the fence’ and waiting for rain before making any positive statements about the 2008 season.
- Continuing dry conditions in the south-west and northern areas are having a significant impact on overall state-wide economic performance.
- The performance of five of the state’s eleven statistical divisions was positive, with the NSW Mid North Coast performing best of all. Five divisions reported a negative performance, with four still suffering from drought or very dry conditions.
- The economic performance of Victorian agribusiness has improved further in recent months with the majority of regions in the state recording positive results.
- Continued positive business performance and almost stable capital expenditure resulted in Victoria’s agricultural production sector posting its second consecutive satisfactory performance and holding steady at the national average.
- In particular, weather patterns and business costs will be critical in determining whether the improvement registered by Victoria continues into the next quarter.
- The economic performance of Queensland agribusiness continues to surpass the national average. The positive result could be attributed to a number of factors, including capital expenditure, employment and business confidence.
- Where weather conditions had improved, performance, confidence and future expectations were higher than those still affected by dry conditions.
- Higher commodity prices are a positive influence on performance and future expectations and although this is tempered by increasing operating costs, overall agribusiness confidence levels are expected to remain higher in Queensland in the June 2008 quarter.
- A significant improvement has been recorded over the last quarter in South Australia’s agribusiness economic performance, however most indicators are still negative. The SA improvement over the last year matches the national trend.
- Coming rainfall and cost increases will be extremely important in determining how agribusiness performs and whether the state’s improvement continues.
- Western Australian agribusiness continues its positive performance, achieving the best economic result of any Australian state.
- WA agribusiness performance has been improving since September 2007, with business performance and capital expenditure contributing to a positive outlook.
- Four of the state’s six statistical regions – South Eastern, Midlands, South West and Upper Great Southern – reported a positive economic performance, with the Lower Great Southern division reporting ‘good’.
- Tasmania’s agribusiness sector performance remains significantly higher than the national average despite local employment and business concerns. It has fallen from a record national high performance in the December 2007 quarter.
- Climate and employment were the reasons for the slight drop in economic performance in Tasmania, with businesses generally reporting a decline in performance, mainly due to climate.
Specific regions
- Central West NSW (including Bathurst and Orange): The overall business index improved from negative to satisfactory, with satisfactory business performance, slightly negative capital expenditure and positive employment growth. Business confidence remains high although it fell slightly possibly due to operating costs increasing at a greater rate than that reported to date, the high Australian dollar and some uncertainty about the weather.
- North Western NSW (Dubbo): Overall performance improved significantly from the December 2007 quarter but remains negative. Of particular note is business performance improving from poor to negative and employment growth becoming slightly positive. Business confidence fell slightly, possibly due to operating costs increasing at a greater rate than reported to date, the high Australian dollar and some uncertainty about the weather.
- Murrumbidgee, NSW (Wagga Wagga): Business performance improved dramatically from the December 2007 quarter moving from poor to marginally negative. The improvement is based on positive employment and capital expenditure and much improved business performance. The improved EPI is associated with a jump in business confidence despite operating costs increasing at a greater rate than reported to date, the high Australian dollar and some uncertainty about the weather.
- Murray, NSW (Albury) and Ovens Murray, Victoria (Wodonga): In the December 2007 quarter, north of the Murray River performed much better than south of the border. In the March 2008 quarter, both sides are about the same with satisfactory overall performance. Both Murray and Ovens Murray divisions had positive employment growth and slightly negative business performance. While business confidence in both regions was affected by operating costs increasing at a greater rate than reported to date, the high Australian dollar and some uncertainty about the weather, Murray’s business confidence fell slightly while that in the Ovens Murray division rose.
The Westpac & CSU Agribusiness Index is a quarterly survey of Australia’s Agribusiness sector conducted by CSU’s Western Research Institute. A survey is conducted via a telephone questionnaire, with respondents a mix of primary producers, and businesses upstream and downstream of the agricultural sector.
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