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.


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