Native vegetation management on broadacre farms in New South Wales: impacts on productivity and returns

In the largest study undertaken to date, a survey was conducted of 386 broadacre farmers in a 400 000 square kilometre region of New South Wales to quantify the impact of native vegetation on farm productivity and returns. Analysis of data collected as part of the survey found that farms with lower vegetation density generally have higher total factor productivity. However, the removal of vegetation below the level that generates private benefits to farmers is likely to have a negative impact on productivity. In the study region, around 20 per cent of farmers reported that they would like to clear rangelands for crop development. The opportunity cost of preventing this development in order to conserve native vegetation for environmental services was estimated to be as much as $1.1 billion in net present value terms. On a per hectare basis, the estimates reveal that the potential opportunity cost of conserving native vegetation varies widely across the region suggesting there may be scope to achieve the desired level of environmental outcomes at lower cost to the farm sector if more flexible policy instruments were adopted. To the extent that equivalent environmental outcomes can be achieved, it appears that conserving native vegetation on land with lower agricultural productivity could reduce the total economic cost of achieving the desired environmental benefits. The reliance on only a regulatory regime to manage native vegetation is therefore likely to lead to an outcome that fails to deliver environmental services at least cost. Determining the balance of land allocated between agricultural production and environmental services using a regulatory approach based on substantially incomplete information sets is likely to be costly to society, particularly across areas where the opportunity cost of native vegetation conservation is relatively high. Furthermore, the use of regulatory settings that determine how much, what types and where native vegetation is mandated to be conserved is unlikely to deliver the outcomes that the community desires, given continual changes in ecological, market and social environments.