After our recent political spill and fill, there is always a need to show that you are a positive change and you can do something. So combined with:
CSIRO has released a series of report today (here) (summary by ABC here) by cherry picking 3 regions, they have identified 6 new dams locations in northern Australia. If they were all developed up to 4,400 GL of water would be available to irrigate 380,000 Ha and generate an additional $5.3 billion per year and require 15,000 new workers. (I'm deliberately ignoring the 710,000 Ha of new lined ponds in coastal areas for now.
As I'm a poor student of economic history, I once again turn around and drag out two of the classic Australian agricultural economic texts by Bruce Davidson:
Perhaps its time to remind people of the other white elephant in the north, the Ord Scheme. Bruce Davidson's Northern Myth is about the Ord. It tells the failure of the process and recent expansion (my review for The Conversation of stage two is here) was and is still not a shining economic success story. The 2017 Australia Institute report found that it had a return of $0.17 for every dollar invested. Or in other words for every dollar invested you loose 83 cents.
So lets say these new 6 dams generated the same return on the Ord. Well its probably going to cost about $31 billion a year to generate the reported $5.3 billion in benefits a year.
Lets not forget we need another 15,000 people to make this work and all plans to reduce the current rural labour shortage (here) have been so successful for backpackers (here) and migrant workers (here) and (here)
I think these white elephants are going to stay on the horizon once the costs are considered.
Background: The Murray-Darling Basin Plan is based on the concept of 'common property' were a set of environmental rights are established and managed in the national good (economic, society & the environment). The environments rights were purchased from farmers either: directly via market mechanisms (i.e. buy-back where rights were traded); or obtained as part of the water saved when on and off-farm irrigation infrastructure was upgraded with the assistance of public funds (i.e. water use efficiency). The costs of this purchase of environmental rights from farmers is estimated at between $10-13 billion in public expenditure.
The story today in the Guardian (here ) where politicians are calling for the farmers to be able to purchase environmental water goes against everything that the Basin Plan stands for and highlights one of my personal fears. In short the environmental water is not an overdraft facility that can be used when farmers failed to account for the risk and uncertainty associated with this land 'of droughts and flooding rains' (Mackellar, 1911). Nor should the environments water be used to provide base or conjunctive flows.
For too long, the environments share has been utilised for private gain at social & environmental cost. This is how we operated before the Basin Plan. The environments water is the environments water. The environment can experience irreversible losses when it fails to receive its share. If farmers want water, they can buy the water from other farmers.
I will provide a word of warning that people still fail to consider here. With all things considered (see the excellent charts by the ABC) this drought is in it infancy when compared to the Millennium Drought. If this drought turns into a long and persistent drought, there may be real welfare gains from buying more water for the environment from the allocation market.
If the environmental manager is willing to pay the most, why would we prevent willing sellers from maximising their income.
On Monday 30 July 2018, Dr Adam Loch and I gave evidence at the Murray-Darling Basin Royal Commission. The transcript from the proceedings can be found here. Both Adam & I were approached about our work in the area (we didn't put in a submission) and subsequently asked to give evidence.
Overall it provided the opportunity to talk about our work and depute points about the Murray-Darling Basin Plan with both the Senior Council (Mr R. Beasley) and The Royal Commissioner (Mr B. Walker). It ended up being an enjoyable experience as both The Royal Commissioner and the Senior Council have sharp minds and very dry wit.