Farm financial performance

» Severe drought across southern and central Australia is projected to reduce farm incomes in 2006-07 to their lowest level in over thirty years. » Farm cash incomes for grain forms in New South Wales, South Australia and Victoria are estimated to have fallen the most, and the dairy industry has also been particularly affected. » Most Australian forms entered 2006-07 with relatively high farm equity. However, a large increase in the proportion of forms recording negative farm cash incomes in 2006-07 is likely to result in significant increases in farm debt. » Continued strong prices for major commodities, particularly grains and beef, together with high levels of form investment in recent years, remain positive factors supporting farm income recovery and farm values after 2006-07. » While financial performance is obviously important to farmers' ability to manage the impact of the current drought, human social and biophysical factors are also important contributors to the resilience of farm businesses.