Agricultural Reforms Policy Australia †MyAssignmenthelp.com

Question: Discuss about the Agricultural Reforms Policy Australia. Answer: Introduction In the composition of national GDP agriculture, contribute a significant portion in Australia. Australia makes huge export earnings from exporting its primary products. Australian farmers are able to produce 93% of domestic product used by Australian natives on daily basis. Other than, that agricultural sector possesses linkage with other sectors in the economy. Agricultural sectors also contribute to employment generation in Australia and unemployment rate significantly lower. Nearly 1.6 million people are engaged in agriculture and other related farming industries. Despite so much importance, agricultural sector receives least assistant from the government. The paper makes aneconomic analysis on news report capturing different types of agricultural reform policy of Australian government. Essence of the story There is a well known different between the agricultural policies devised by the Australian government and that of the rest of the world. A subsidized or regulated agricultural market is the most common form of reform. In contrast free market approach has been given more priority in Australia. In other contemporary countries like Ireland or United Kingdom follows Common Agricultural Policy (CAP) (queenslandcountrylife.com.au, 2017). The farmers there receive agricultural subsidies and participate in programs for agricultural development. In contrast, Australian farmers are independent of EUs subsidy allowance. Australian government is reluctant to give price support to farmers. Australia stands as second in the list of OECD countries in terms of giving lowest support in its agriculture. In other OECD countries, CAP subsidy accounts a significant part of farmers income. This makes Australian agriculture more sensitive to market forces. CAP has a different type of operation in Australia. Apart from basic subsidy, other benefits under CAP policies include healthy regional communities, efficient management of agriculture product and inputs (Swinbank Daugbjerg, 2017).The target of the Australian government is to make agro business to run profitably and viably. Australian government aims at designing a market based sustainable agro policy keep it primary sector competitive in the world market. Economic theories and concept Agricultural reforms in Australia though largely rely on free market policies there are some areas where government intervene. Australian government had initially imposed a high tariff rate to protect the agricultural sector. A tariff is a tax on imports (Park, 2017).To protect famers from low price imported agricultural product tariff was imposed. However, due to the distortion resulted from tariff policy government decides to relax all the restriction and back again to the free market policy. Demand, Supply and Free Market Demand for a product is defined as people ability to buy the product at the existing market price (Kirwan Roberts, 2016). On the other hand, supply of a product measures producers ability to supply at different pricing point. Market equilibrium is ensured at a point where decision of buyers matches with the decision of seller (Frank, 2014). Corresponding to the equilibrium point, market price and market quantity is determined. Free market price and quantity are P* and Q* as obtained from the intersection of demand and supply curve. At any price higher the P* there will be excess supply and at any price below P8 there will be excess demand. In such situations forces of demand and supply adjusts and restore equilibrium. Price mechanism known as invisible hand ensure efficiency in the market. In the free market, there are no amount of market power either in the hand of buyers or in the hands of sellers (Nicholson Snyder, 2014). Hence, the surpluses are equally divided among buyers and sellers. Resources are efficiently allocated and hence optimally utilized. This justifies the Australian government decision of free market policy. Agriculture support policy With support price policy, there are always distortions in the market (Bernanke, Antonovics Frank, 2015). The following figure describes the market with a agricultural support policy. In the above figure free market price and quantity are P* and Q* respectively. In the free market situation, consumer and producer surpluses are shown by the area abe and cf. Now, suppose government intervene and sets price to P min to increase producers surplus. Higher price induces consumer in the grain market to reduce their demand from Q* to QM while supply increase from Q* to QT. Because of supply outpacing its demand there will be excess supply in the market that the government has to purchase at the regulated price. This may increases the stock of grains to government but in most of the situation the grains are wasted (Ciaian, Kancs Swinnen, 2014). The loss occurred due to government spending to purchase additional grains shown by the area HEFGJI. Recommendation The price support policy to agriculture is not very effective in Australia. However, government cannot stand still leaving this sector completely on free market situation. In agricultural sector, productivity matters a lot. The productive growth is measured through the change in output contributed from factors in addition to direct factor inputs. These include innovation and adaption of new technology in the production process. Australian government should increase investment in innovation. This will increase productivity in agricultural sector. The government may continue with its non-subsidy policy but investment should be made to improve the infrastructure of agriculture. Conclusion In the paper, a critical evaluation is made on the article published in Australia on reform agricultural policies in Australia. The article finds the difference of reform approach in Australia and that in other European countries. Agriculture is an important sector for Australian economy. The policy agricultural reform in Australia is different from that of other European countries. While most of the countries generally adapt price support policy or other agricultural subsidy policy farmer in Australia usually, deal with free market condition. The agricultural sector is strong enough in Australia but still there is some field where the government should intervene. Areas like innovation or other infrastructural facilities require government investment. With government support, the sector can make a remarkable progress. References Ag system differences an interesting study. (2017).Queensland Country Life. Retrieved 10 August 2017, from https://www.queenslandcountrylife.com.au/story/4841904/ag-system-differences-an-interesting-study/. Bernanke, B., Antonovics, K., Frank, R. (2015). Principles of macroeconomics. McGraw-Hill Higher Education. Ciaian, P., Kancs, D. A., Swinnen, J. (2014). The impact of the 2013 reform of the common agricultural policy on land capitalization in the european union.AppliedEconomic Perspectives and Policy,36(4), 643-673. Frank, R. (2014). Microeconomics and behavior. McGraw-Hill Higher Education. Kirwan, B. E., Roberts, M. J. (2016). Who Really Benefits from Agricultural Subsidies? Evidence from Field-Level Data.American Journal of Agricultural Economics,98(4), 1095-1113. Nicholson, W., Snyder, C. M. (2014).Intermediate microeconomics and its application. Cengage Learning. Park, H. W. (2017). Economics 100 04 Introductory Microeconomic. Swinbank, A., Daugbjerg, C. (2017). The Changed Architecture of the EUs Agricultural Policy Over Four Decades: Trade Policy Implications for Australia.