Water debate – when agricultural values can be a pain in the environment
Severe water restrictions are being imposed on our communities because we haven't come to grips with how we reallocate water away from agriculture, says La Trobe economist Dr Lin Crase.
Dr Crase, Head of the University's Albury-Wodonga campus, is the editor and major contributor to a new book, Water policy in Australia: The impact of change and uncertainty.
Following a decade researching the implications of different water property rights and commenting on the economic implications of water policy, Dr Crase argues the environment can no longer support Australia's values relating to the exploitation of water resources.
'Historically Australians thought it a noble thing to allocate water to agriculture, to relocate people inland and develop an irrigation sector,' he says.
'We think that "high-value" agriculture is fruit trees and grape vines. That may be the case now, but what is it going to be like in an era of climate change when we have thirty percent less stream flow? Vines or trees that need water every year face the real prospect of not having any water some years.
'I'd suggest high-value agriculture is more likely to be a system that you can turn off in a really dry year, sell the water to places like Melbourne, and then in a wet year turn the agriculture back on.'
Dr Crase says structural adjustment is a fact of life. Resources will never stay the same year in year out.
'Water is a resource – and if you think about it in those terms it's going to move around; some industries will contract and others will expand. That's how a vibrant economy is supposed to respond to change.'
People will protest, he concedes, but often the most vocal are those involved in agriculture who have something to lose.
'The farmer who's really struggling, who wants to get out and sell his water rights and get the best price he can, is obviously a clear contender for selling. What the protesters are really advocating is to lock that person into poverty.
'To me a rational policy response is to help the market better allocate the resource and then, if that generates wealth and you're concerned about adjustment, you redistribute the wealth, and not the resource.'
Dr Crase says while the Victorian Government's north-south pipeline is creating a lot of controversy, he thinks it is a great idea.
'But the government is pacifying country voters by saying "we're going to rejuvenate your irrigation district" to help offset this. I think that's nonsense. Investing a lot of money in infrastructure is not going to count for much if you have thirty per cent less streamflow.
'We have a national water plan which was cobbled together by the former Howard government at the last minute, without the gaze of Treasury, and to many people it's a significant waste of public money. We're spending three billion dollars to buy back entitlements and seven billion dollars on infrastructure.
'So we need to be careful. We are spending a lot of public money to line channels or even worse, to actually underpin and subsidise investments by farmers in their farms, which ultimately they'll appropriate when they sell their farms.
'So this is money that is being spent to create quite spurious water savings. I think it's not a very wise use of public money.'
Dr Crase says until the 1980s, the engineer was 'king' and policymakers viewed water as an endless resource for driving economic growth, but over the last twenty years, policymakers have been forced to acknowledge that it is not possible to perpetually supply more water at a low cost.
Water policy in Australia: The impact of change and uncertainty is published by RFF (Resources for the Future) Press, based in Washington DC, part of a series on water resource policy edited by Dr Ariel Dinar of the World Bank.
The book provides insight into the challenges of institutional change, as well as lessons on the design of property rights for complex resources. It looks beyond recent reform, and examines hydrological, biophysical, economic and social factors as well as specific issues, such as irrigation in the Murray-Darling Basin.
Dr Crase discusses the book, and his views on water policy, in an online interview.