Social and economic impacts of the Basin Plan in Victoria February 2017

3.6Summing up

Irrigation water use in northern Victoria varied markedly over the last ten years. Buyback commenced at the height of the drought and finished at a time when water allocations combined with carryover volumes could sustain use in excess of entitlement volumes for four years in a row.

Off-farm infrastructure savings do not reduce the consumptive pool. By contrast, while on-farm water savings have similar characteristics to off-farm water savings in wet-to-average years. In dry and extreme dry years the on-farm projects reduce the consumptive pool. Given the average to wet conditions that have prevailed since these programs commenced, with the notable exception of 2015/16, on-farm efficiency measures may not, in effect, have significantly reduced the consumptive pool. As will be described several times in later chapter that one dry year is important to understand in terms of the socio-economic impacts of the Basin Plan.

In the absence of the Basin Plan, water use by horticulturalists, including LMW diverters and LMW district irrigators would have been the same as what has been observed since the Plan commenced. Water use in the GMID and by GMW diverters would have been higher.

4The impacts of the Basin Plan at the farm scale

4.1Overview

Much of the discussion about water recovery revolves around the impacts at the farm scale. It is at this scale that vendors receive payments in return for transferring their entitlements to the Commonwealth. And it is at this scale that irrigators invest in on-farm infrastructure savings in return for transferring part of the savings to the Commonwealth.

This chapter begins with an overview of the MDBA’s preferred approach for evaluating the socio-economic impacts of water recovery at this scale, before discussing the benefits at the farm scale. It then provides empirical evidence of the observed, after the fact, water market behaviour of Victorian irrigators who participated in the buyback to determine the extent to which the buybacks have “assisted [them] to transition to the Sustainable Diversion Limits”. This data from the Victorian Water Register is then compared with data from the ABARES Farm Surveys (ABARES, 2015).

An analysis of the assumptions implicit in the vendors’ acceptance of the prices at which buyback occurred is then followed by an examination of the trends in reported water use per hectare for different industries.

4.2The MDBA’s preferred approach to socio-economic evaluation

The Basin Plan evaluation framework (MDBA 2014c) outlines how the MDBA will work with partner governments and the community to evaluate the implementation of the Basin Plan. Figure is an excerpt from the MDBA socio-economic evaluation regarding elements of ‘productive and resilient industries and communities’ (MDBA, 2014c p. 4). Figure shows its sample evaluation questions (MDBA, 2014c, p. 7).

Figure : The MDBA’s expected outcomes from the Basin Plan

Source: MDBA 2014c.

Figure : The MDBA’s sample socio-economic evaluation questions

Source: MDBA 2014c.

These questions are linked together by a chain of logic expected from Basin Plan water reform mechanisms that were specifically designed to achieve social and economic outcomes. The MDBA’s preferred approach to the analysis of the socio-economic impacts of the Basin Plan is to compare what has happened with what would have happened if the Plan did not exist, taking into account the influences of factors other than the Basin Plan. This is the approach adopted for this report.

4.3Benefits of water recovery at the farm scale

As is elaborated in more detail in Chapters 5, 6 and 8, there have been undoubted benefits at the farm scale for irrigators who participated in the buyback. The money invested in the buyback aided structural adjustment in response to the drought and in response to the collapse in the wine industry. And without it there would now be more dairy farmers grappling with low milk prices. It is also possible that buyback helped to forestall a serious disruption to horticultural expansion by LMW diverters.

As evidenced by the Participant Profiles on Goulburn Broken CMA’s website (which were referenced above in Section 3.4), the investment in on-farm efficiency measures has also helped many irrigators save time and money in their farming operations. Some quotes from those profiles are reproduced below.

Graeme Nurse of Stanhope described the following benefits:

The work needed to be done and it would have taken me 10 to 12 years to do otherwise. There’s no doubt we’re more efficient – we’re using less water and saving time and labour. The work has definitely at least doubled the value of the property – it’s so much easier to run.

Vin Warnock of Goomalibee experienced the following benefits:

After years of drought and poor milk prices it’s been a bit tight (financially). Things are turning around, but they’re turning around very slowly. This funding has allowed me to carry out work now that I probably couldn’t have afforded to do at this time otherwise.

Bill Gread of Katunga (among others) sees the benefits extending beyond the farm gate as well:

I reckon this Goulburn-Murray region is a golden region – a real Garden of Eden – but because of the drought, we were watching it wither before our eyes. This modernisation work and extra funding for on-farm work is completely reinvigorating the region, it’s given us all a new lease on life.

Bill Gread’s observations suggest that there are synergistic benefits, at the farm-scale, from the Commonwealth’s investment in both on-farm and off-farm efficiencies. As will be discussed in more detail however in Chapter 9, the off-farm investment has tended to work at cross-purposes with the buyback.