The Murray Darling Basin Plan amid Drought and Civil Discontent

Glyn Wittwer

No 333230, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: The Australian government introduced the Water Act in 2007 in attempt to deal with sustainability within the Murray Darling Basin. This included a combination of buybacks of water entitlements from irrigators for the environment and irrigation infrastructure upgrades. Lobbyists railed against this, although buybacks were treated by many farmers as a financial option. TERM-H2O modelling indicated that farmers would benefit from terms-of-trade gains through the rising price of water that would more than offset income losses from reduced farm output. Now that the buyback process, regarded by economists as the most efficient way of obtaining water for the environment, has been suspended, policy has turned to relatively expensive infrastructure upgrades. This is against the background of record drought in 2019. The marginal impacts of infrastructure upgrades are minor compared with year-on-year changes in output due to seasonal variation. The welfare losses of upgrades are substantial. Since suspension of the buyback process arose from the perceived negative impact on the Basin economy, an alternative scenario is also examined. This time, the same public funds are directed towards provision of services in the Basin over twice the duration of the investment upgrades. Each dollar spend creates four times as many jobs as upgrades, and national welfare losses are a small fraction of those of upgrades.

Keywords: Resource/Energy; Economics; and; Policy (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:333230

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