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Abstract
Australian farmers invest over two thirds of their capital expenditure on farm machinery
and equipment. Clearly investment decisions of this magnitude have a big impact on
the viability of the farm. Complicating the situation is the erosion of the capital base
which has occurred on Australian farms over the last fifteen years, due to high interest
rates, low world commodity prices, droughts and the tightening of requirements by
financial institutions. This paper presents some background on machinery investment
in Australia and reviews what has historically been seen as the key decision variables.
Results are then presented from a spreadsheet analysis undertaken as part of a larger
project to investigate optimal machinery replacement for Australian conditions.