Home > Economics - General, Environment > The Guide to the Draft of the Plan to do Something about the Murray

The Guide to the Draft of the Plan to do Something about the Murray

October 9th, 2010

The problems of the Murray Darling Basin have been developing for more than a century. I’ve been working on this issue for 30 years, during which, despite a series of policy initiatives too long to list, the situation in the Basin has got worse in most (not all) respects. So, it’s not surprising that the attempt to provide a comprehensive plan for the future involves a drawn-out process. The big question (which the Risk and Sustainable Management Group at UQ will be addressing in a workshop later this month) is: Have we finally got it right?

My general view is optimistic. If the politics can be negotiated, and if the government is willing to spend around $5 billion on buying back overallocated water rights, we can probably reach a solution that is economically, environmentally and socially sustainable.

The Draft Plan proposes a reduction in water use for irrigation of between 3000 and 4000 Gigalitres (GL). That range reflects two fairly tight constraints. Anything less than 3000 GL won’t achieve environmental sustainability. Anything more would imply unacceptably large impacts on irrigated agriculture.

Here’s the rough arithmetic on the irrigation side, which is broadly consistent with the modelling done by my Group, some of which was used along with research by ABARE in preparing the draft plan. A 30 per cent cut in water use will result in a 15 per cent reduction in the gross value of agricultural output, and a smaller reduction in net returns to farmers.

The big change required to achieve this kind of reduction in water use is a shift from irrigated rice production to dryland agriculture. Since yields on irrigated lands are much higher that will imply a reduction in our total grains output. Still the impact is much smaller than, for example, the effect of the current overvaluation (relative to long-run value) of the Australian dollar.

Importantly, although the changes in the Draft Plan have been referred to as “cuts in allocations” this is incorrect. Although the National Water Initiative proposed cuts where water resources had been over-allocated in the past, the Draft Plan calls for the entire reduction in water use to be treated as a change in government policy, meaning that the Commonwealth will bear the cost. It’s already been made clear that this reduction will be achieved entirely by voluntary buybacks and conservation measures.

While there are some opportunities for conservation, the most cost-effective mechanism in most case is buying back entitlements. Now that the drought has broken, I’d guess the likely price for entitlements will be around $1500/ML suggesting a cost of buyback (or similarly cost-effective conservation) of between $4.5 billion and $6 billion. It’s not clear whether buybacks that have already taken place will be counted towards this. There’s enough money allocated to the National Water Plan/Water for the Future to cover this cost, though most of it is currently earmarked for on-farm works.

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  1. BilB
    October 9th, 2010 at 15:22 | #1

    While you are worying about the water, keep an eye on the oil (not unrelated)

    http://www.theoildrum.com/node/7024

    Scan down to “Mat’s” comment. NSW gets a mention.

  2. Lizzie
    October 9th, 2010 at 15:23 | #2

    I believe that $1bn of buybacks already spent will be counted (question in press conf)

  3. el gordo
    October 9th, 2010 at 17:59 | #3

    If the next 30 years prove to be extremely wet, will they maintain the ‘buyback’ during massive flooding?

  4. Hermit
    October 9th, 2010 at 19:38 | #4

    I don’t yet have the number of gigalitres involved, but there seems to be a preoccupation with saving the lakes just upstream of the Murray mouth. To me that seems like the tail wagging the dog in geographic terms. I suggest instead the barrages could be opened to flood the lower lakes. Embankments and dredging could extend a narrow river channel out to the sea. If the river flooded fresh water could be released to the sea but not to the now saline lakes. In dry years fresh water would not go past a weir to be constructed just upstream of the lakes. Compensate those affected.

    None of this is really novel. For decades the barrages have artificially reduced salt incursion into the lakes and this is partly letting nature take its course. I believe at least a gigalitre a year is lost to evaporation in Lakes Alexandrina and Albert. Outback rivers like Cooper Creek just peter out without making it to an ocean so lack of an outlet is not unique.

  5. Peter T
    October 9th, 2010 at 21:20 | #5

    I sympathise with the aims, and agree that returning the river to some semblance of its natural flow is essential. But the means seem to ignore many – maybe most – dimensions of the problem. Every reduction in farm income causes country towns to lose critical mass (one year the post office, then the bank, then the dentist….), and encourages bigger farms, with higher overheads, tied more to financial cycles than to natural ones. Whose impacts will then be mitigated by more money, leading to more losses, leading to….

    The environmental need is for more people with intimate knowledge of local landscapes and patterns, working on smaller scales, less tied to finance. This plan does not even start to think in the right way.

  6. johncanb
    October 9th, 2010 at 22:26 | #6

    Hermit. Its not just the lowerlakes that would be assisted by the extra 3 to 4,000 GL in water rights for the environment. The Chowilla flood plains and the Burmah Millewah forests, to name just two iconic sites, have really been struggling in the last 20 years. The Chowilla flood plains need semi regular very high flows to be even halfway healthy. I actually agree with you that we should sometimes let salt water into the lower lakes, but again for their long term health they need quite high flows of fresh water more than one year in 2.

  7. Ian Gordicans
    October 9th, 2010 at 23:59 | #7

    The link to the oil drum in the first comment contains an interesting prediction that when oil starts becoming scarce (not all that far away) that countries that are net food exporters will be best placed to trade for oil. The Murray Darling plan illustrates how important it is that this country has a sustainable population (ie in terms of size) and you’d think that it would be a topic discussed in conjunction with the release of the water plan. But unfortunately it is a topic that politicians and business are very keen to see buried for reasons of short term self interest.

  8. paul walter
    October 10th, 2010 at 03:30 | #8

    I just feel angry about what’s gone before, over the last thirty years, first as an agricultural rort then as a financial rort.
    Muttonheads, we ozzers are!

  9. pablo
    October 10th, 2010 at 10:31 | #9

    I get a sense of deja-vu from the latest MDB report and its persuasive arguments. Back in the 1970-80′s there were social predictions of doom for certain communities over the consequences of salinity damage, particularly in the Goulburn, Lodden valleys. You could say it was the consequences of too much water.
    While working on a local paper in the Murrumbidgee Irrigation Area in the 1990′s the animosity between those irrigators who drew their water from irrigation canals and those who directly pumped from natural water courses was on display during good seasons – the ability to fiddle the latter being at stake. Hopefully the long drought and AGW concern has ended the opportunists run.
    But I’m sceptical of any rigorous government action to take the hard decisions. I recall a voluntary NSW Government questionnaire going out to some 3500 MIA irrigators. It drew a 3 percent response rate, which was considered adequate at the time. Imagine canvassing your regular clients today on the MDB draft report and basing profound long term actions on the basis of such feedback.
    Irrigators may suffer far less than the local labour force who won’t have the benefit of selling a water allocation into a predicted rising market.

  10. Don Wigan
    October 11th, 2010 at 07:33 | #10

    It is more than just environmental concerns. Anyone with SA origins or connections knows of the dependence on reliable drinking water.

    Action is a political minefield, with many communities’ economic future at risk, a factor which we have seen blown up out of the mere release of the report. We just have to hope for a more sober reflection of the issues over time.

    Just as the abuse of the rivers’ system can be attributed to a variety of political decisions in various states over time, improvement might have to come from a variety of methods. Buy-back of water allocations has commenced. It is expensive.

    Would a Kennett-style price mechanism work for water allocation? It seems to me that although the short-term effects might be brutal, this might drive out the less economic uses of water such as rice and cotton. That is, we compete internationally in some of these products only because the real cost of water is kept artificially low

    Even that level of change can have a big impact on a community. Could countering economic activity help offset the damage? I think of the MIA and many other forms of open irrigation. Could some of these be converted to Israeli-style drip irrigation? That would seem to me capable of reducing the evaporation loss and minimising the salinity run-off. Investment in such conversion could be targeted at those predicted to be most damaged by the changes.

    It would be great to have a national and a bipartisan approach to managing this issue. In the likely absence of that, Labor can at least take comfort from the fact that it hardly has a seat at risk if it is brave enough to act.

  11. Roger Jones
    October 12th, 2010 at 07:43 | #11

    John, what evidence is there that the drought is over? While the northern part of the MDB has benefited from recent La Nina events, this year the south has had good rainfall but missed out on those previous events. The combination of a La Nina and negative Indian Ocean Dipole that we have this year last occurred in 1975, before that in 1942. These are rare events. Meanwhile positive IOD events have increased in frequency from 1 in 10 to 1 in 3. The three consecutive positive IODs in 2006-8 brought the Murray system to its knees. The subtropical ridge, strongly implicated in autumn early winter reductions in the south, still has high central pressures, those pressures increasing in step with global temperatures over the 20thC. It may be true that the Darling system continues under La Nina infleunces for a while but the situation for the Murray system in the south is one of a temporary, but very welcome, reprieve. Only if those more widespread influences affecting southern Australia changed sign would one say we are back to experienced historical conditions.
    While the debate over the draft plan is about how much water is moving from ag to the environment, everyone is in denial about how much water will be available for bulk allocations. The modelling studies on future supply have substantial design flaws that smooth mean changes and ignore combinations of mean change and variability. The latter, the models do quite poorly whereas the real world produces substantial rainfall variability. Given the South East Australian Climate Initiative is beginning to understand a number of the underlying drivers of that variability, I know which I would bet on.

  12. rojo
    October 12th, 2010 at 10:12 | #12

    Hermit, you might not have noticed but the lower lakes are now 67cm above sea level and all gates are open. The MDBA seems a little coy about publishing figures about the amount flowing out to sea at the moment, or at least I can’t find them.

    Don, if cotton is such a poor return why is the water it uses the most valuable in the system? General security water trading in excess of $2000/ML and temporary trade at $250 or more.

    John Quiggan, while buybacks would be the cheapest way of returning water to the system they aren’t what I’d consider an investment. Water saved by efficiency orientated spending may only give modest returns now, but they keep on giving. Who knows what the returns will be in 50 years from now from the water that would still be available for production. Outright purchases are dead money – unless govt retains the water rights as saleable assets.

    Why doesn’t govt buy temporary water for the rivers needs, instead of actually selling temporary water from entitlements already purchased. Seems a bit strange to me.

  13. Fran Barlow
    October 12th, 2010 at 10:49 | #13

    Personally, I’d be keener for the state to buy back marginal farmland in coherent packages and to attempt to return these to something like their pre-European settlement condition.

    The buyback could incorporate retraining in the relevant land management skills for ex-landholders, suitable wages as land stewards including an entitlement to live in their pre-purchase homes and so forth.

    They could be paid bonuses for achievement of specific goals in the relevant biodiversity plan and given a budget to manage in consultation with a regional land management team.

    This way all the stakeholders have the same objective — the return to health of the whole riparian system around the river. Nobody loses their home or a livelihood or is in debt to a bank. Regional communities would be preserved and doubtless you’d have to build local TAFE facilities to run the programs effectively, which could also deliver other vocational training.

    Instead of a bunfight over water rights, we get a serious slice of the rural folk wanting to protect the integrity of the system.

    Better environmentally and politically.

  14. Robert Merkel
    October 13th, 2010 at 11:09 | #14

    The buyback could incorporate retraining in the relevant land management skills for ex-landholders, suitable wages as land stewards including an entitlement to live in their pre-purchase homes and so forth.

    I think this is a tad naive, Fran.

    I suspect the majority of farmers are no more interested in working as land stewards as, say, high school teachers would be in working in the mining industry.

  15. calyptorhynchus
    October 15th, 2010 at 10:28 | #15

    I think your analogy is inaccurate Robert, how about:

    High school teachers being required to teach only three mornings a week, whilst being paid the same salary.

    Good comment Fran.

  16. John Howe
    October 19th, 2010 at 10:00 | #16

    One of the major flaws in the current debate about the basin is the notion that there is a ‘fix’ out there, we just have to find it, implement it, and then everything will be alright. An example of the ‘quick fix’ approach is John’s suggestion that the big change needed is the elimination of irrigated rice production. It leads us to the wrong policy approach and opens the possibility of heartless solutions aimed at targeting specific communities to solve basin wide and national problems.

    The resolution of the basin’s future will require the best technical analysis we can muster(claims of ‘best science’ should be tossed out as either unnecessary self promotion or misleading) supported by sound assessment of community values to obtain the best trade-offs between environmental, social, and economic interests in the basin. This should result in elimination of ‘shock’ treatments and solutions that enable all stakeholders to ‘enjoy the journey’ to a better basin.

    Like John I was optimistic that such improvement could be realised because farmers and related communities have supported the need for a better basin environment. The basin guide has put such support at risk. That alone represents a monumental failure of policy and process. Something needs to be done to restore the prospect of consensus, and quickly, because rural communities are already meeting the costs that the MDBA say they can’t quantify (or don’t exist).

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