Why did agriculture's share of Australian gross domestic product not decline for a century?

Abstract

The agricultural sector's share of gross domestic product (GDP) in growing economies typically declines but, for a century from the early 1850s, Australia's did not. Drawing on recent structural transformation literature, this paper seeks explanations for this unusual phenomenon, which is all the more striking because agriculture's share of employment continued to decline throughout and growth in manufacturing was being stimulated by tariff protection from imports. Several factors contributed, including a huge land frontier that took more than a century for settlers to explore, rapid declines in initially crippling domestic and ocean trade costs for farm products, the absence of a need to do any processing of the two main exports during that period (gold and wool) and innovations by farmers and via a strong public agricultural R&D system that contributed to farm labour productivity nearly doubling over those 10 decades. The ban on iron ore exports from 1938 and low export prices for fuels, minerals and metals during the two world wars and in the intervening decades also contributed.