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Drought dries up Australian growth
By Grant Holloway
CANBERRA, Australia (CNN) -- The prolonged drought in much of Australia will rip $2.1 billion (Aust. $3.8 billion) out of the nation's economy, according to the latest government figures. The Australian Bureau of Agricultural Resource Economics (ABARE) quarterly report, released Monday, predicts the gross value of farm production will fall by 16 percent in 2002-03 to $18 billion because of the drought. Of this, the value of farm exports will plunge by 7.4 percent to $15.5 billion. Much of Australia has been in drought for six months with some highly productive agricultural areas of Queensland, New South Wales and Western Australia having been dry for over 10 months. "The drought is expected to significantly affect the agricultural sector in 2002-03," ABARE Executive Director Dr Brian Fisher said. The drought would also have a major effect on economic growth throughout the Australian economy because of the direct and indirect links between the farm sector and other industries, Fisher said. While some rains finally fell in parched areas of New South Wales last week, follow-up rains are still required to save crops from total ruin. But it is too late for farmers in other areas of Australia however, with massive convoys of trucks over the weekend carrying underweight cattle from northern Queensland rural areas to southern auction centers. The cattle farmers say they cannot get enough feed to keep the animals alive. Price declines
Making the situation worse is ongoing arguments between state and federal governments over how to deliver relief to those farmers in most need. As well as being hit by lower production, some Australian farmers will also be hit by reduced prices for products such as beef, sugar and dairy products. The latest ABARE report also says export earnings will to decline for commodities such as wheat, barley, cotton and canola. Commodity analyst Terry Sheales told Australian Broadcasting Corporation radio farming incomes would go backwards to where they were in the early 1990s. "The second half of the 90s was pretty good for the farm sector in terms of its overall performance. Of course this drought is hitting pretty hard and we're coming off an exceptionally good year last year when incomes were very high," he said. Overall, the dry conditions will wipe a half a percentage point off Australia's forecast growth rate of 4.3 percent. Not all badBut it is not all bad news for the Australian economy. World prices are likely to be higher for some crops, including wheat, barley, rice, soybeans and cotton. Expected higher prices for minerals and energy exports will also offset the losses from agricultural exports, keeping total export earnings steady at around $48.6 billion. Minerals and energy commodities are forecast to earn $31.2 billion with stronger prices for crude oil, metallurgical coal, refined copper, gold and nickel. Despite the huge wealth that is earned in the rural areas of Australia, the nation is one of the most urbanized countries in the world, with 84 percent of the 19 million people living in the most densely populated 1 percent of the continent -- along the east coast in the cities of Sydney, Melbourne and Brisbane. By contrast, half the continent is home to just 0.3 percent of the population.
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