Irrigators the losers in ‘win-win’ outcome

December 26, 2017

It is with sadness and disappointment that I write in response to MDBA chief executive officer Phil Glyde’s letter to the people of Goulburn Murray.

We all support the need for the Murray-Darling Basin Plan and recognise that some give-and-take is required to meet everyone’s needs.

We just ask that the MDBA properly recognises that the GMID and Murray Irrigation areas have borne the majority of the impact of the basin plan so far.

This is not evident in the MDBA’s work to date.

Mr Glyde refers in his letter to the MDBA’s recently-released document that provides an ‘‘evaluation of the outcomes of the first five years of basin plan implementation’’. Unfortunately the evaluation document does not provide an evaluation of the outcomes for the GMID but rather just criticises the work by RMCG and Frontier Economics, suggesting that both of them have overstated the socio-economic impacts. These two completely separate studies by reputable consulting firms support the same conclusions and have considerable support from the community.

The MDBA evaluation claims all of the benefits of increased productivity but downplays any of the impacts. Finally, the document provides very little detail but deals in generalities and, as a result, underestimates the socio-economic impacts on the GMID. There are six areas where the MDBA’s research continues to misrepresent the impacts on the GMID:

1.Buyback has no long-term socio-economic impact

The document repeats the assumption that all the money from buyback has been reinvested in the community, creating new wealth, with the conclusion that buyback has had no net impact on the communities. As a result, the MDBA has spent considerable time trying to determine where the entitlements were purchased from to show how much new wealth would have been created in that same location.

Practical experience of the farming communities will tell you that most of the money from buybacks has funded farmers’ retirements and has been used to pay for drying-off land.

One has only to look at the Pyramid Hill region, the Swiss cheese effect in the GMID, or the Wakool region to see that the money has not been reinvested to create new wealth locally.

2.MDBA underestimates the volume of the water recovery

The MDBA underestimates the water recovered for buyback as it only includes the Commonwealth purchases and ignores state purchases.

Secondly, it claims the volume recovered is only 810Gl, not the 1100Gl recovered in the southern connected basin as it believes investment in farm efficiency creates new water (whereas in reality this reduces the total size of the future consumptive pool).

Thirdly, it talks in averages across the basin rather than analysing impacts by region.

This ignores that the GMID has contributed far and away the majority of the high-reliability water, that is the water which is most valued.

3.Water use drives regional economies

The fundamental issue is that the amount of water used and the industry which uses it drives regional economies and is the single most important determinant of the socio-economic wellbeing of communities in the Murray-Darling Basin. The level of water use in GMID and Murray Irrigation has declined to almost half what it was pre-basin plan. In comparison, the South Australian Riverland, Sunraysia (both Victoria and NSW) and Murrumbidgee have maintained their water use for high-reliability water and horticulture. Where the Murrumbidgee region has given up lower reliability water, it has been able to offset this by expansion of the cotton industry at the expense of the rice industry.

The MDBA should look at water use rather than entitlements under different scenarios and different regions. Its current approach suits its argument that the basin plan has been good for everyone, which of course is not true. Mr Glyde suggests he wants a win-win for everyone, but there are clearly winners and losers and the GMID has been a loser.

The GMID recognises it has received $1billion for the Connections Project and also a subsidy for farm efficiency water recovered. However, ultimately the southern connected basin has lost access to 1100Gl of water for future production, much of which has been lost by the GMID and Murray Irrigation.

4.The trade impact is underestimated

The MDBA suggests the trade impacts are overestimated in the GMID study. However, the MDBA fails to acknowledge the ‘‘knock-on’’ effect of the water recovery program. As a result, it fails to acknowledge that water sold to the Commonwealth (as either buyback or associated with farm efficiency works) from South Australia and Sunraysia has ultimately been replaced by purchases by those regions from the GMID. Examining the actual level of water use in irrigated production by region is the only way to track and understand the impact of the basin water recovery program.

5.The impact on the market price of water is significant

The MDBA continues to suggest that taking 1100Gl out of the consumptive pool (ie, more than 20 per cent) only increases the price by $25/Ml, whereas both the Frontier Economics and RMCG studies suggest the proper figure is more than $100/Ml. Further, the MDBA continues to quote a 2012 study (in the middle of low water prices during a wet period) to suggest that the price of temporary water was having no impact on irrigation businesses. Professional experience of working with dairy farmers in the GMID confirms the price of water is now a significant impost on their businesses, and at a far higher level then pre-plan.

6.Water use under the cap has reduced

The level of water use in Victoria in practice is lower than assumed in the basin plan. This is confirmed in the recent MDBA report on compliance with the cap, which shows that water use in Victoria has been well under the level assumed in the basin plan. The change in carryover policies has been the prime cause of this reduction.

While no-one wants to remove carryover, it must be recognised that the conservative behaviour of irrigators in response to the policy means that about 500Gl a year less water has been used in Victoria since the period before the basin plan. This reduction in water use has generated benefits for the environment through increased spills which have not been recognised. The MDBA evaluation document ignores the implications of this effect for the socio-economic impacts.

MDBA wants a win-win for further water recovery

Mr Glyde suggests the MDBA is poised to deliver a win-win outcome by the recovery of additional water through investment in irrigation efficiencies. Let us remember that the law states that any such initiatives must have no adverse socio-economic impact.

There is no doubt that water efficiency projects in South Australia and Sunraysia will provide substantial subsidies to those regions.

However, the knock-on trade impact will be that the GMID will lose further water as the irrigators in South Australia and Sunraysia ‘‘back-fill’’ their water portfolios by buying water from the GMID. There will, therefore, be no win for the GMID from the implementation of a further 450Gl in water efficiency projects.

In conclusion, the MDBA should examine actual water use and the changes in water use over time as a result of the basin plan.

If so, it would find that what has occurred is different to what was envisaged. Therefore, before proceeding further, it is time to re-evaluate what has happened in terms of water use.

Hopefully the MDBA will undertake a proper evaluation of the socio-economic impacts before proceeding to recover any more water.

— Rob Rendell

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