People - Adjustment - FM500 Financial Sustainability Benchmarks
FM500 Financial Sustainability Benchmarks
Figure 1 Percentage of farm families achieving a farm family income of $50,000 or greater (in 1996 dollars) averaged for the years 1986, 1991 and 1996 by Statistical Local Area. See appendix figures 40-41 for further geographic detail.
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Figure 2 Percentage of farm families achieving a farm family income of less than $20,000 (in 1996 dollars) averaged for the years 1986, 1991 and 1996 by Statistical Local Area. See appendix figures 42-43 for further geographic detail.
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Background
FM500 is a group extension project undertaken with mixed farming clients in the southern Murray Darling Basin. A major component of this project was the analysis of seven years of farm accounting records. Farmer members of these groups identified disposable family income as a major benchmark of financial sustainability. Farm families with disposable incomes below $20,000 per annum were considered clearly unsustainable. Families with disposable incomes greater than $50,000 were considered clearly sustainable (Rendell, O'Callaghan, & Clark 1996). Whilst these simple measures may lack the sophistication of more commonly used business performance benchmarks, disposable family income was the benchmark measure which the farm managers in these groups believed many farm families used to consider their continued position in agriculture. In 1996 the $20,000 benchmark was not achieved by one third of Australian non-farm families and one third of Australian farm families. The $50,000 benchmark was achieved by one third of Australian non-farm families and 30% of farm families. Essentially, the FM500 farmers were saying that they were confident of farm financial sustainability if family income was in the top third of Australian family incomes, and that financial sustainability was not likely if farm family income was within the lowest third of Australian family incomes.
Data source
Data was sourced from customised tables of farm family income provided by the Australian Bureau of Statistics (see section of farm family income).
Indicator construction
Income categories used by the Australian Bureau of Statistics were adjusted for inflation for the period 1986 to 1996. Assumptions of uniform income distribution were then made to estimate the number of families reaching the sustainability benchmarks for each of the three census years. These three estimates were then averaged to obtain a smoothed indicator of performance against FAST financial sustainability benchmarks for the years 1986,91 and 96. Two maps are presented.
Indicator limitations
- The ambiguity inherent in the self-definition of farmer has been discussed elsewhere. These indicators do not include farm families where the major occupation of all family members is off the farm.
- Assumptions of uniform distribution within income categories will introduce error to the estimates.
- The sustainability benchmarks take no account of family life cycle, as do more complex benchmarks such as the Henderson poverty line. Using the Henderson benchmark would have required greater resources than were available to this project.
Observations
- Regions with a high percentage of families with high farm family incomes are not necessarily areas with a high proportion of larger farms. There are several regions of rural Australia where the proportion of farm families with high incomes is greater than that found in the general Australian population. These areas include some parts of the northern rangelands, central Queensland, some irrigation districts in the Murray Darling Basin and the West Australian wheat belt. In each of these cases, above average incomes can be explained by the generally larger farms in these regions. The other concentration of higher than average incomes are around the major centres of Sydney, Melbourne and Canberra, and along parts of the coastal strip of New South Wales (see Figure 1). These are generally regions where agriculture plays a small part in the regional economy, and where agricultural employment is a small proportion of total employment. The coastal strip of Victoria also has higher than average family earnings over the three census periods. This is probably due to a combination of relatively buoyant conditions in the dairy industry and ample off farm employment opportunities.
- Regions with a high percentage of families with low farm family incomes are areas with limited proportion of larger farms and limited opportunities for off farm employment. These areas include the Murchison-Gascoyne, the Cobar region of NSW, parts of central Queensland and the Eyre Peninsula (see Figure 2).
- The high rainfall grazing regions along the great dividing range, which are characterised by small farms, do not have the extremes of high and low incomes found in other agricultural regions. Despite the large number of smaller farm businesses in hill country of both eastern and western Australia, these areas do not seem to be the areas with the greatest proportion of low income farm families. Farm families in the hill country generally seem to have neither the low nor high incomes seen elsewhere. This suggests that the structure of small farm sizes has contributed to a farming culture in which income stability is achieved by a dependence upon off farm income and a risk minimising style of farming.
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