Meeting the policy challenges of rural and peri-urban land use in Australia: Government, governance and public policy
2. Land use pressures and drivers
Over the two centuries since European settlement in Australia, land use has changed as communities have adjusted to economic, environmental and social drivers. Changing environmental and economic factors, infrastructure development, shifts in consumer preferences and population growth have shaped the structure of primary sector businesses, the nature and extent of particular land uses and the growth – and decline – of towns and hamlets across Victoria. Over recent decades, increased population growth has seen urban boundaries shift to cover what was once peri-urban and agricultural land. These factors, discussed below, have also shaped community values d to different land uses and, where land use has become more diverse, the tradeoffs between those values have become more complex. This is discussed further in section 3.
2.1 Environmental factors
Environmental factors such as rainfall and temperature, for example, affect suitability of a piece of land for cropping as well as for human settlement. Since 1997 rainfall has been significantly below the long-term average across most of Victoria and there has been a large reduction in stream flows. This has resulted in a decline in environmental conditions in rivers and waterways, constraints on rural and urban water supplies and reduced the population of a range of plant and animal species, among other things.
Victoria’s climate is projected to be hotter and drier in future, particularly in the north. There is likely to be more days over 35 degrees Celsius, lower annual rainfall but more intense rainfall events, fewer frosts, more days with very high and extreme fire danger, and more extreme weather events. The drought/bushfire/flood cycle that influences Victoria’s natural environment is likely to be intensified (Department of Premier and Cabinet 2009, Department of Sustainability and Environment 2009).
The impact of climate change is projected to vary across the State. Rising temperatures may increase agricultural productivity in temperate regions such as the south west; however productivity may decline in drier areas (Department of Primary Industries 2008). Other possible impacts include an increase in forest plantings, a move away from grazing toward cropping in high rainfall areas, a reduction in the reliability of irrigated horticulture and an increase in land used for wind farms for energy production. Policy responses to climate change may also influence land use through increases in the cost of inputs such as water, electricity and liquid fuels, the impacts of food processors passing increased costs back up the supply chain to farm businesses, and the impact of a price being applied to direct carbon emissions (Department of Premier and Cabinet 2009).
2.2 Economic factors
The profitability and returns from farming businesses in Australia are shaped by broad economic drivers including exchange rate movements, commodity price fluctuations and shifts in the terms of trade. As a net exporter and a price taker in world markets, the agricultural sector in Victoria needs to remain competitive in the face of these economic drivers.10 A key factor underpinning the agricultural sector’s competitiveness has been productivity growth11 generated by adopting new technologies and new farm management techniques to reduce costs, the introduction of higher yielding animal and plant varieties, and by increases in farm size bringing economies of scale.12
Exposure to economic drivers, and having relatively low levels of producer support (OECD 2010), the Australian agricultural sector is constantly under adjustment pressure. Changes in the relative size of industries, the characteristics of the workforce and the size and mix of activities within regions can result in social changes in local communities towns and regional centres (Productivity Commission 2001). Structural adjustment can drive rural land use change as production moves away from historical patterns, as activities become increasingly specialised (or diversified), and as farm numbers and sizes shift over time.13 The causes of structural adjustment can be varied and complex.14
Agricultural land values in Victoria are driven, in part, by production factors such as rainfall and soil type. Another factor that influences agricultural land values is proximity to urban areas where planning conditions allow subdivision of an appropriate size for hobby farming or real estate developments. High land values can restrict options for structural adjustment as it increases the cost of entering the industry or of seeking productivity improvements through economies of scale. Where planning conditions allow smaller subdivisions this can be an important source of income for those seeking to permanently exit the industry.
10Environmental factors, infrastructure, consumer preferences and government policy discussed in this section often manifest in economic factors through prices. For example, below average rainfall increases water scarcity, increasing the price of water and substitutes for rainfed inputs to production.
11In the period 1969–2006 agricultural total factor productivity growth in Victoria averaged 2.1 per cent per year (Department of Primary Industries 2008). This compares with the United States and Canada at 1.29 per cent, southern Europe at 1.15 per cent, Australia and New Zealand 0.74 per cent, South Africa 1.95 per cent and the former Soviet Union at 0.65 per cent over the period 1961–2007 (Fuglie 2010).
12The average farm size has grown from 210 hectares to more than 430 hectares over the period 1963–64 to 2004–05 (Department of Primary Industries 2008).
13The number of farms in Victoria has decreased from almost 70,000 in 1963–64 to around 32,000 in 2004–05 (Department of Primary Industries 2008).
14Structural adjustment can be induced by government policy such as reducing industry assistance or autonomous or a mix of both. The pace of structural adjustment can be incremental or a step-change. For a comprehensive discussion see Productivity Commission (2001).
2.3 Infrastructure development
Changes in road, rail, air and port infrastructure can influence land use in complex ways. They can increase the value of land in general, for example by increasing accessibility, or for land used by a particular industry. For example, a rail freight line that reduces transport costs for grain producers may lead to a change in the profitability of that land use and attract more entrants to the industry.
Government support for water infrastructure and irrigation schemes have also influenced land use patterns in rural Victoria. The development of irrigation in the Murray Darling Basin was supported by public investment in infrastructure that began in the early 1900s to increase agricultural exports and to move people back to rural Australia. Irrigation development was initially structured to maximise the number of settlers in closely controlled irrigation districts, giving rise to small blocks with fit-for-purpose water delivery infrastructure (Watson 2008). This public investment in irrigation infrastructure continues to shape land use with large tracts of land dedicated to irrigated production. Successive government policies aimed at a range of objectives, prolonged drought and an increased commitment by governments to address environmental degradation have driven change in industry structure over recent decades.15
Infrastructure development is also an important determinant of land use in peri-urban areas. New road and public transport networks connecting urban and peri-urban areas, for example, enable the development of housing and industrial estates in areas that were dedicated to agricultural production. Councils in peri-urban and amenity areas that have experienced population growth face pressure to provide new or extend existing infrastructure services to residents. Expenditure on roads, for example, as a proportion of total expenditure in rural councils can be twice that in metropolitan councils (Australian Bureau of Statistics 2001). Victoria has the longest network of roads (201,000 kilometres) compared to the more populous states of New South Wales (184,000 kilometres) and Queensland (180,500 kilometres) (VicRoads 2010, Expressway 2010, Queensland Transport and Main Roads 2009).
15These policies include deregulation of the dairy industry (Edwards 2003) and the purchase of water by the Commonwealth Government from agriculture to meet environmental needs (Department of Sustainability, Environment, Water and Communities 2010).
2.4 Shifts in consumer preferences
As household incomes have risen, consumers have expressed greater awareness of and interest in links between food and personal health, and in environmental and animal welfare practices associated with food production (Cole and Harris 2003, Australian Bureau of Statistics 2009). Consumer interest in environmental practices and animal welfare associated with production has implications for the way land and other factors of production are used. Free-range chickens and eggs, for example, require more extensive use of land than cage chickens.
Some shifts in preferences, such as animal welfare practices, can be expressed in market transactions. For example, increased value (and production costs) for free range animals are reflected in market prices. Others, such as a preference for increased biodiversity, are not readily expressed through markets. In these cases other instruments are required to reveal information and guide policy, and will be discussed further in sections 3, 4 and 5.
2.5 Population
In 2008-09, Victoria recorded the fastest population growth rate of 2.2 per cent after the mining states of Western Australia (3.1 per cent), Queensland (2.7 per cent) and the Northern Territory (2.5 per cent) (Australian Bureau of Statistics 2010b). The largest and fastest outer suburban growth rate in a local government area in Australia was recorded in Wyndam – a peri-urban area in Victoria. This area grew by 8.1 per cent over a 12 month period in 2008-09 (Australian Bureau of Statistics 2010b). Victoria is projected to have strong population growth in rural areas of high amenity value, in rural centres and in peri-urban regions over the next 15 years (Business Victoria 2009).
The pressures and drivers of land use change are particularly acute in Victoria. Projected increases in population growth in a small and densely populated state, shifting consumer preferences for land with amenity and environmental value, coupled with large investment in transport infrastructure that improves connectivity between urban, peri-urban and rural areas has increased contestability for access to land. These uses are rarely compatible and tradeoffs need to be made. The following discussion highlights the different land use objectives and tools to maximise the value offered to the community from land use activities.
