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

10.2Regional Wellbeing data

The 2015 Regional Wellbeing Survey included a number of questions asking survey respondents about their expectations of how the Basin Plan would impact:

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  the health of the environment in the Murray- Darling Basin
  
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  the economy in the Murray- Darling Basin
  
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  communities in the Murray- Darling Basin
  
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  the Murray-Darling Basin as a whole
  
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  the respondent’s household
  
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  the business the respondent works in
  
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  the respondent’s local community
  
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  the health of the respondent’s local environment
  

Appendix 1 reports the responses provided by 285 Victorian irrigators in north-west and north central Victoria (the Loddon-Mallee and Hume RDAs). A high proportion of responses considered that the Basin Plan would have a ‘very negative’ impact on the economy and communities of the MDB and the household/business/community that the respondent worked in.

The “Farmers and agriculture” report (UC 2015) looked at irrigators who have invested in improving on-farm irrigation infrastructure in the last five years.¹⁷ Victoria had the lowest proportion of irrigators who had made such investments (55%), compared to the Australian average of 61%. Of all irrigators surveyed, 23% responded that a Government grant was a source of funding used to invest in on-farm irrigation infrastructure (however, this is not reported by State). Farmers who had invested in upgrading infrastructure reported, on average, very similar life satisfaction to those who had not.

The survey also asked questions about water trade. 7% of Victorian irrigators responded that they had sold water shares to the government in 12 months to October 2014. Over the same period, 7% bought water shares, 11% planned to buy water shares but did not), 6% sold water shares to a private buyer, and 6% planned to sell water shares but did not.

Irrigators who had sold or transferred entitlements, or who had wanted to sell but had not done so, were asked why they wanted to sell entitlements (Figure 11.15). They could select more than one reason for wanting to sell. At the Australian aggregate level, the most common reasons were financial: high fixed entitlement charges (41%), and a higher relative return being achieved by selling water versus using water on their own property (35%). This was followed by having opportunity in the form of surplus water (31%). Financial necessity was a driver of many sales, particularly low return from the farm business (27.5%), and needing to reduce debt (27%). Others were selling entitlements to fund other farm investments (27%). Less commonly, irrigators transferred entitlements as part of requirements to access infrastructure upgrade programs (20%). Least common was selling as part of downsizing the farm enterprise (14%) or planning to exit farming (9%), although this sample does not include those irrigators who sold and subsequently exited.

The most common reasons for buying allocation were needing additional water to meet farm business needs (72%), and low rainfall (71%). Just over a quarter of those who reported buying allocation did so because they were using a business model in which they had sold all entitlements and instead obtained water by buying it on the temporary market (26%). As the representativeness of respondents to these questions is not known there is a large potential margin of error for these findings.

The dairy farmers surveyed were dominated by Victorian dairy farmers (87% of the sample)¹⁸. However, this would have included dairy farmers outside northern Victoria, such as in Gippsland. In 2014, dairy farmers on average reported higher ‘global life satisfaction’ compared to other farmers. Dairy farmers also were much more likely to be engaged in water allocation purchases than the ‘all farmers’ average.

11The impacts of the Basin Plan for three future SDL scenarios

This section considers the impacts of three future SDL scenarios. The scenarios are:

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  The recovery of 2,100 GL (i.e., with 650 GL of offsets being subtracted from the Basin Plan target recovery of 2750 GL).
  
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  The recovery of 2,750GL, which is what is targeted in the Basin Plan – without any offsets being achieved.
  
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  The recovery of 3,200GL, which includes the Basin Plan target of 2750 GL plus an additional 450 GL recovered through on-farm efficiency measures achieved with neutral or positive socio-economic impacts.
  

The composition of the required water recovery for each scenario is set out in Appendix 13.

11.1A broad comparison with the counterfactual

The scenarios for future water recovery all involve constraints on water availability (as compared to the counterfactual of no Basin Plan water recoveries).

In terms of additional water recovery:

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  The low water recovery scenario — the additional water recovery required (beyond that already contracted in 2015/16) is negligible.
  
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  The medium water recovery scenario — the additional water recovery required from 2015/16 is in the order of 650GL LTAAY.
  
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  The high water recovery scenario — the additional water recovery required from 2015/16 is in the order of 650GL LTAAY as above plus an additional 450GL from on-farm efficiency investment, totalling 1,100GL LTAAY.
  

Even though the low water recovery scenario would not require significant additional water recovery, the future impacts would include the impact of current water recovery when drought conditions return as well as the interaction between industry changes and the reduced consumptive pool of water available for irrigation and urban use (as compared to the counterfactual of no water recovery) under future climate variability and potential climate change.

In the absence of Basin Plan water recovery, the growth of horticulture in the north-west of Victoria is still expected to occur. This in itself changes the structure of water demand between relatively fixed horticultural demands and the interruptible and semi-interruptible water demands that coexist in the southern MDB.

The water recovery activities will also change the structure of water demand, directly and indirectly. On-farm water recovery projects will directly change the way in which water is used on the farm invested in: this may be new investment that would not have otherwise occurred; or may bring forward investment that would have occurred in the future; or it may subsidise investment that was already going to occur. There will also be indirect effects on the way farmers intend to use water as they adapt to the higher opportunity cost of water (i.e. water allocation prices) and the increasingly variable water available for use by interruptible and semi-interruptible water demands.