Smarts to power future growth
TASMANIA is punching well above its weight in agricultural production but education will be a key factor for the future.
Economist Saul Eslake was a guest speaker at the Grains Research and Development Corporation Farm Business Update event last week.
Mr Eslake said agriculture will be an important part of Tasmania’s economic future, but commodities are not the answer.
“It’s inevitable that the Tasmanian economy of the future if it’s going to be economically and in other ways sustainable has to be very to be different from the past,” he said.
Mr Eslake said globalisation had led to low-cost production and that was making undifferentiated commodities, including agricultural products, and competing on price alone no longer viable.
“We can’t do that in Tasmania given our scale,” he said.
“Our economic future has to depend on being able to produce and market highly differentiated goods and services which embody a significant intellectual content, for which customers can be persuaded to pay premium prices.”
Agriculture is a key pillar of the Tasmanian economy and offers big opportunities.
“I really strongly believe that agriculture is an important part of that,” he said.
“Agriculture is a bigger part of Tasmania’s economy than it is of any other state or territory. It’s almost three times as important to us as it is to the rest of the country.
“The second thing is that agriculture is something we’re actually good at,” Mr Eslake said.
“An above-average proportion of Tasmania’s workforce works in industries where productivity is lower than the corresponding industry on the mainland. But agriculture is one of the handful of industries where productivity in Tasmania is actually higher than the national average.”
Mr Eslake said the changes and diversification in the state’s agriculture sector in recent years were positive, with a move over the past 15 years towards differentiated products and premium prices.
Despite the positives, Mr Eslake said education was an area holding Tasmania back.
Unlike mainland states many Tasmanian students do not complete year 11 and 12, which has an impact on their overall earning capacity.
Jason Lynch from Macquarie Franklin discussed the gap between top-performing farms and the average.
Mr Lynch said the top 20 for farming businesses produced a return of equity of about 8.18 per cent, compared to just 1.94 per cent for average farms.
Generally better-performing farms are larger but Mr Lynch said this was because those managing them were better able to use those assets.
The best farmers have a disciplined approach to cropping inputs and efficient rotations.
He said top producers focused on things they can control such as margin optimisation, a low-cost business model and managing people and risk.