Angst in Murray Darling Basin over skyrocketing water prices is now at fever pitch.
Many groups are advocating for change to the Murray Darling Basin Plan. The Victorian Nationals want to terminate the additional 450 gigalitre recovery target. Some farmer groups in the southern Riverina and northern Victoria want the plan paused or their state governments to withdraw. Members of NSW Farmers Association passed a motion at their July annual conference to lobby the federal government to hold a Royal Commission into the plan.
But while such decisions are being made in response to issues with the plan, especially an assumption that it is responsible for many areas of the basin now having zero water allocation, a solution is not as simple as pausing the basin plan.
The dairy industry has largely supported the basin plan, mainly because it is underpinned by science and economics. A plan that ensures a balance between irrigation and water required to maintain river, wetland and floodplain health is not just necessary, it is good policy.
The Australian Dairy Industry Council has argued through countless submissions to government that for the basin plan to have the most impact, the acquisition of water for environmental use must always be rooted in scientific and economic evidence.
Many parts of the basin have received the lowest rainfall on record.
Not only that, but the government must also ensure an open and efficient water trading market, co-ordination between water recovery programs such as irrigator buybacks and infrastructure reform, respect for individual property rights, and consultation with affected communities.
Investors, especially, have copped blame for driving up the price of water in an already stressed market.
In recent months, horticulture groups have urged Minister Littleproud to put a temporary ban on investors buying water and holding on to it for the next year. The government responded by announcing the Australian Competition and Consumer Commission would investigate markets for tradeable water rights in the Basin.
The ADIC has not joined this push to ban the basin plan or investors. Water policy experts, including Aither, have found the market to be working effectively and that high prices are the result of high demand and low supply caused by persistently dry conditions and below average rainfall.
Ultimately, it is the devastating impact of drought - not the basin plan or investors - that is responsible for rising water prices.
In the past 30 months, many parts of the basin have received the lowest rainfall on record, particularly around the border rivers - a trend that is set to continue in 2019-20 given the Bureau of Meteorology's forecast of below average inflows.
It is important to remember that water prices during the Millennium Drought in the early 2000s, prior to the basin plan, were significantly higher than they are now.
For most of that dark period, allocation prices in the southern basin were more than $500 per megalitre, while in June 2007 it peaked at a whopping $1400/ML in the Murrumbidgee.
To put this in perspective, the Australian Bureau of Agricultural and Resource Economics (ABARES) is predicting an average annual water price of $473/ML in 2019-20 for the Murray trading zones.
While this is not good news, the best chance to increase water availability and lower water prices in the basin is for the federal government to get behind large-scale water supply projects to safeguard industries and basin communities from drought and decline.
The ADIC has requested the government to commission the CSIRO to develop a transformational water supply blueprint for Australian agriculture.
The government, meanwhile, has announced the development of a National Water Grid to bring together water experts, scientists and economists to look at how large-scale water diversion projects could deliver reliable and cost-effective water to farmers and regional communities.
Ultimately, it is not the answer to simply abandon the basin plan. The dairy industry, together with the National Farmers' Federation, other farmer groups, and federal government, are working to relieve pressure on irrigators while ensuring a healthy river system.
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