Economists say water buybacks can save the Murray-Darling River

A large irrigation channel on the Murray River in Southern NSW. Photograph: Dean Sewell.

Professor Quentin Grafton from the Crawford School of Economics and Government at the ANU says that despite the Australian Government making commitments to spending $5.8 billion on infrastructure designed to increase water efficiency, this will have little impact on increasing flows through the ailing system.

"That’s probably going to get the government about 500 gigalitres. So to put that in perspective, that’s a fraction of the sorts of numbers we need in terms of volumes for the rivers", said Prof. Grafton.

"By contrast, if we were to purchase water entitlements from willing sellers, we can get the volumes that we need".

Water buyback a sound approach

The Productivity Commission has supported this view, calling for some of the money allocated to infrastructure to be redirected to other initiatives, including water buybacks from willing sellers and support for affected communities.

"A general conclusion is that purchasing water from willing sellers is a sound approach to meeting the Australian Government’s commitment to obtain additional water for the environment. Indeed, it should be the preferred method for recovering water, taking precedence over subsidising investment in water saving infrastructure", concluded the Commission.

While big irrigation companies continue their scare campaign saying that water buybacks will have a negative economic impact on the agricultural industry, a model proposed by Prof. Grafton concluded that irrigators would be adequately compensated.

"If the $8.9 billion currently budgeted for water reform were spent in a cost effective manner on the purchase of water entitlements rights from willing sellers, and with no arbitrary restrictions on water trade, the Australian government would be able to increase environmental flows by at least 4,000 gigalitres per year, fully compensate irrigators for reduced extractions, and have funds left over."

This is a much better alternative than committing massive financial resources to infrastructure that will not save the Murray-Darling River.

More willing sellers than tenders

Far from being unpopular with many farmers, recent tenders for water buybacks have been oversubscribed, with the majority of sellers only parting with a portion of their entitlements and using the capital raised to improve efficiency or diversify their businesses.

The Australian Government needs to spend the $10 billion of taxpayers’ money allocated to save the river system wisely and ensure the rivers flow, or give the Australian people their money back.

With the health of the rivers and the communities that rely on them at stake, we need economically responsible action that ensures that the rivers keep flowing whilst building stronger, more economically diverse and sustainable rural communities.

Prof. Grafton concluded that, "Unless we spend most of the money on the buying of the water entitlements, we won’t have sufficient flows for the rivers, and that’s a critical point. Because otherwise, we’ll end up spending billions and billions of dollars, we won’t get sufficient volumes for the rivers so we’ll have the problem we’ve gone through in the last few years come back again."

"The communities will continue to be in a trouble because they won’t get the support that they need, and we’ll end up in a few years time with lots of concrete channels but no water".

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