FARM
INVESTMENT
There
appears to be a close relationship between net investment in plant
and machinery and real farm incomes and the cost of capital (Tucker,
1992). Net investment increases either as real farm income increases
or the cost of capital falls and vice versa.
The
rise in the net investment ratio between 1990-91 and 1991-92 was due
largely to the substantial fall in interest rates over that period.
The trend shows an increase which is expected to continue with rising
positive farm business profits in the cropping industries. However,
for other broadacre industries the farm business profit is expected
to be negative so it is unlikely that net investment will fully
offset depreciation at least in
the
short run.