Agricultural research: implications for productivity in New Zealand and Australia.

1. Introduction

There is renewed interest on both sides of the Tasman about the contribution of research and other elements of science policy to productivity growth in agriculture, as a source of economic growth and higher living standards for farmers, processors and consumers of farm products. Both New Zealand and Australia have smallopen agricultural sectors where the role of the public sector in investing in agricultural research has generally been larger than in many other OECD countries.

Despite this commonality, Hall and Scobie (2006) observed a marked divergence in public research intensity between Australia and New Zealand. This divergence has added to concern that the level of public investment in agricultural research in New Zealand may be inadequate. In both countries there remains ambivalence about the role of the public sector and uncertainty about the returns earned by research.

In this paper we compare and contrast trends in the growth in productivity in agriculture in New Zealand and Australia, looking in particular for evidence of a slowdown in productivity growth in either sector. We then review investment in research, particularly by the public sector and recent econometric analyses of the relationship between research and productivity growth. We conclude by making some judgments about key drivers of productivity in agriculture, and returns from research investments and consider their implications for science policy.

2. Productivity Growth in Agriculture in Australia and New Zealand

In this paper the term productivity refers to multifactor productivity (MFP) which is a physical measure conventionally defined as the growth in an index of several outputs less the growth in an index of several inputs (1). Methodologies for measuring productivity are described in many places (Coelli et al. 2005) and are not reviewed in detail here. Mullen and Crean (2007) exhaustively review empirical analyses of productivity growth in agriculture. Here we report recent trends in productivity in agriculture in Australia and New Zealand particularly in relation to other sectors in their economies and in relation to trends in the terms of trade as some guide to the competitiveness of the agricultural sectors. An important indicator of the agricultural sector's competitiveness is its rate of productivity growth relative to that in other sectors of the economy (Shane et al. 1998).

2.1 Productivity Growth in New Zealand Agriculture