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Government support to WA agricultural producers
National and international comparisons
How is the value of policy assistance measured?
The internationally recognised method of measuring the value of government assistance is the Producer Support Estimate (PSE). It measures the value of transfers from taxpayers to producers that result from agricultural policies. PSEs are aggregate measures of the monetary value of agricultural policy assistance.
The value of policy assistance for Australian and Western Australian producers
Policy assistance received by Australian producers in 2008, as measured by PSE, was 5.85% of the total value of national agricultural production. By contrast, Western Australian producers received only 2.32% of the total value of state agricultural production (see Table 1). Other states in aggregate receive as support 6.77% of their total value of agricultural production. The difference in the support estimates between Western Australia and the rest of Australia is due to WA farmers not receiving Exceptional Circumstance payments in 2008 and the small volume of rice and milk produced in Western Australia.
Energy credits in the PSEs
A contentious element in the reporting of PSE is the OECD inclusion of the Energy Credits Grants Scheme (ECGS) that reduces agricultural input costs. For this reason two estimates—one including and one excluding fuel grants are presented in Table 1.
The OECD methodology for determining the PSE declares policies must support agricultural production exclusively. However, the Energy Credits Grants Scheme (ECGS) is available to all industries involved in off-road fuel use. The inclusion of this scheme that is not designed specifically for agriculture inflates the PSE.
Table 1 Measures of PSE for Australia and Western Australia
|Incl. ECGS||Excl. ECGS||Incl. ECGS||Excl. ECGS|
|Total value of transfers (PSE)||$2650||$1891||$219||$145|
|Value of transfers per unit of production||$0.06||$0.04||$0.02||$0.02|
|PSE as % of value of production||5.85%||4.01%||2.32%||1.55%|
Source: OECD 2009, DAFWA
Government support to Western Australian producers is largely through the ECGS and constitutes approximately 34% of producer support (see Table 2). Western Australian producers receive 8.2% of the total assistance on offer for Australian producers.
Comparison with other states
Western Australian producers generate about a quarter of Australia’s gross value of agricultural production and receive less assistance compared to other states. Moreover, in 2008 the other states received $288 million (17 times the assistance of Western Australia) in small program assistance. Also, other states received $690 million in drought support compared to $19 million received by Western Australia.
Table 2 Breakdown of government support for industry
|2008 Est. ($m)||% of PSE||2008 Est. ($m)||% of WA PSE|
|EC interest subsidy||524||20||14||7|
|EC relief payments||193||7||5||2|
|Fuel Tax Credit||869||33||74||4|
|Dairy industry restructure||203||8||6||3|
|State government services|
|Disease and pest control||129||5||28||13|
|Farm Management Deposit Scheme||100||4||14||6|
|Livestock valuation—natural increase||65||2||11||5|
|Income tax averaging||55||2||9||4|
|Environmental programs (state government)||65||2||13||6|
|Other small programs||305||12||17||8|
Source: OECD 2009, DAFWA
Internationally, Australia has the second lowest level of support of the OECD countries (see Figure 1). Only New Zealand has a lower PSE as a percentage of production than Western Australia.
Figure 1 Estimates of the value of government support for agriculture as a percentage of value of agricultural production. Source: OECD 2009, DAFWA
Categories of agricultural policy measures
The OECD uses five measures of agricultural policies:
- Market price support: measures which simultaneously affect producer and consumer prices
- Direct payments: measures which transfer money directly to producers without raising prices to consumers
- Reductions in input costs: measures that lower input costs and do not discriminate between subsidies to capital and other inputs
- General services: measures which, in the long term, reduce costs but which are not directly received by producers
- Other: other indirect support such as sub-national subsidies and taxation concessions.
Agricultural policy measures in Western Australia
- Market price supports: None
- Direct payments: Major direct payments are Exceptional Circumstance (EC) payments and associated drought relief programs. WA farmers no longer receive EC payments
- Reduction in input costs: The Energy Credits Grants Scheme is the main support mechanism for input costs (an offset for the fuel tax for off-road vehicles). The Interest Rate Subsidy is part of the EC package, which ends in 2009, and smaller programs offsetting input costs are included in Figure 2 under ‘Other small programs’
- General services: Predominantly related to the Farm Management Deposit Scheme and state-funded services such as biosecurity management and research
- Other services: No sub-national subsidies operate in Australia that deliver benefit to Western Australian growers.
 Cahill, C & Legg, W, ‘Estimation of agricultural assistance using producer and consumer subsidy equivalents: theory and practice’, OECD Economic Studies, no.13, winter 1989–90.