Economic Impacts of SDLs and Water for the Future Peter Gooday

22 October 2010 www.abare-brs.gov.au

Objectives of the reports

• To examine the effect on agriculture and regional economies of

– The Basin plan (3500 GL option) – Water for the Future – Government additional funding commitment to bridge any remaining gap

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Methodology

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Model Regions

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AusRegion model baseline 2001-02 Region

Northern NSW Riverina NSW Western NSW North East VIC North West VIC Queensland MDB South Australia MDB $ billion 15.4

11.3

1.5

8.6

10.9

7.9

3.3

GRP

% of GDP 2.0% 1.5% 0.2% 1.1% 1.4% 1.0% 0.4%

Ag. share of Output

% 17.6

26.8

25.2

12.7

17 14.5

30.9

MDB Total

Australia Total

59

759.2

7.8%

100.0%

18.3

3.6

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Employment in MDB and Australia by sector, 2006

Agriculture Services to agriculture Manufacturing Electricity, gas and water supply Retail Government administration and defence Education Health and community services Other industries

Total employed persons Murray-Darling Basin Number employed

No.

90,520 5,690 83,760 8,470 128,740 94,710 71,550 97,270 340,590

921,300 Proportion of people employed

% 9.8

0.6

9.1

0.9

14 10.3

7.8

10.6

37

100 Australia Proportion of people employed

% 2.7

0.2

11 0.8

14.3

4.7

7.5

10.7

48.1

100 www.abare-brs.gov.au

Data & Model Assumptions

• Regional SDL data were provided by MBDA • Data provided by DSEWPaC included – Original water purchase (WP), average price is $2073/ML – Infrastructure Investments, average price is $4606/ML – Infrastructure water savings occur when SDLs are implemented – Additional WP to bridge the gap to SDLs occurs between now and when SDLs are implemented

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Limitations

• Water supply variability is not investigated • Analysis provides estimates over large regions, estimates at finer scale are not available due to limitations in the models • Considers only productivity improvement from increased water use efficiency through infrastructure investment

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Effects of the Basin Plan and ‘Water for the Future’ water entitlements in the MDB – a conceptual outline Existing Diversion Limit (the ‘Cap’)

Environmental water

Water to be reallocated from consumptive to environmental use SDL Farmer’s Share Commonwealth’s Share Gap to be addressed by continued buy-backs System savings from infrastructure investments on and off farm Buy-back

Consumptive water

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Impacts on Irrigated Agriculture

Change in Basin-wide GVIAP -6 -8 -10 -12 0 -2 -4 -14 -16 20 07 /0 8 20 08 /0 9 20 09 /1 0 20 10 /1 1 20 11 /1 2 20 12 /1 3 20 13 /1 4 20 14 /1 5 20 15 /1 6 20 16 /1 7 20 17 /1 8 20 18 /1 9 20 19 /2 0 20 20 /2 1 Year SDLs www.abare-brs.gov.au

Impacts on Irrigated Agriculture

Change in Basin-wide GVIAP -6 -8 -10 -12 0 -2 -4 -14 -16 20 07 /0 8 20 08 /0 9 20 09 /1 0 20 10 /1 1 20 11 /1 2 20 12 /1 3 20 13 /1 4 20 14 /1 5 20 15 /1 6 20 16 /1 7 20 17 /1 8 20 18 /1 9 20 19 /2 0 20 20 /2 1 Year SDLs SDLS and Government actions www.abare-brs.gov.au

Economy-wide impacts

Change in Gross Regional Product Scenario: SDLs and Government Actions 0.3

0.1

-0.1

-0.3

-0.5

-0.7

-0.9

20 07 /0 8 20 08 /0 9 20 09 /1 0 20 10 /1 1 20 11 /1 2 20 12 /1 3 20 13 /1 4 20 14 /1 5 20 15 /1 6 20 16 /1 7 20 17 /1 8 20 18 /1 9 20 19 /2 0 20 20 /2 1 Year MDB Australia www.abare-brs.gov.au

-35

% change in GVIAP by region

Scenario: SDLs and Government Actions 0 Eastern Mt Lofty SA Murray Lower Murray Murray VIC Murray NSW Loddon Wimmera Campaspe Goulburn Broken Ovens Murrumbidgee Lachlan Barwon Darling Gwydir Moonie Macquarie Namoi Paroo Warrego Border Rivers (NSW) Border Rivers (QLD) Condamine -30 -25 -20 -15 % change in GVIAP -10 -5 www.abare-brs.gov.au

GVIAP by region

Eastern Mt Lofty SA Murray Lower Murray Murray VIC Murray NSW Loddon Wimmera Campaspe Goulburn Broken Ovens Murrumbidgee Lachlan Barwon Darling Gwydir Moonie Macquarie Namoi Paroo Warrego Border Rivers (NSW) Border Rivers (QLD) Condamine 0 Baseline 200 400 600 $ million/year SDLs and Government Actions 800 1000 www.abare-brs.gov.au

Town Level Analysis

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Towns that are highly reliant on irrigation expenditure www.abare-brs.gov.au

Land Use in Murray & Murrumbidgee www.abare-brs.gov.au

Land use in Condamine –Balonne, Gwydir & Namoi www.abare-brs.gov.au

Sensitivity Analysis

Reduction in Basin GVIAP, with and without interregional trade www.abare-brs.gov.au

Sensitivity Analysis

Basin GVIAP by industry, with interregional trade www.abare-brs.gov.au

Thank you

Science and economics for decision-makers

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