Crying Wolf comes at a risk

Professor Lin Crase

Professor Lin Crase


Predictably, the irrigation lobby has responded to the release of the Draft Murray-Darling Basin Plan with exaggerated claims of job losses and farm closures.  The odd thing about these claims is that they believe the extent of adaptation and adjustment that has been witnessed in agriculture for decades.  They also ignore the fact that about half of the water for the environment has already been acquired with no obvious changes to employment trends in the basin.

This creates an interesting contradiction for those who are pushing this line.  On the one hand these lobbyists would have the voting public believe that farmers cannot make the adjustment to using less water, at least not without substantive taxpayer support.  On the other hand, the high productivity growth of the sector is presented as a reason why government intervention in the sector should be treated with suspicion.  In simple terms, the industry could be seen as better off without any support from government, regardless of the motivations. 

The differing interpretations of agricultural adaptiveness also underpin the alternative predictions of employment impacts.  The Murray-Darling Basin Authority went to considerable lengths to try to estimate the short and long term impacts of moving 2,800 Gigalitres to the environment.  The models used to undertake this work included differing responses from the farming community.  For example, some models took into account the prospect of groups switching to dryland agriculture, while others accounted for the possibility of trading water between districts.  Others also incorporated the benefits of cash accrued by farmers from selling water to the government or the impacts of public spending on infrastructure.

In simple terms, the more adaptation embedded in these models, the less likely it is that the employment outcomes will be significant.  Put differently, farming communities are likely to take measures to adapt to less water and it is this adaptiveness itself that reduces the impact on employment levels. That’s why the MDBA’s estimates of around 1,600 jobs foregone over 7 years are more credible than the doomsayer’s claims of tens of thousands.

The so-called analyses that generate large job losses are necessarily based on the least adaptive assumptions about farmers and farming communities.  Spurious ideas, like linking a specified number of jobs to a volume of water across the basin or even across districts in the basin, are the basis of these models.  They are guaranteed to generate big, but meaningless, numbers.  Whilst the weak intellectual rationale for this type of approach is pretty obvious to many, the numbers are presented as ‘credible research’, undoubtedly for political advantage.
Farming is amongst the most adaptive of enterprises with farmers using a host of inputs, not just water, to modify their activities as market conditions change.  The resilience of the agricultural sector is testament to this fact as is the regular emergence of new agricultural enterprises spurred by research and development. 

It is precisely because of this adpativeness that it is hard to be certain about the employment impacts of the Basin Plan by 2019.  Some commodity prices will rise and others will fall between now and then.  These changes alone will generate more employment changes than any water policy adjustment.

To expect a government authority to predict these types of changes with certainty is a step too far, for even the most ambitious economic modeller.  One thing can nonetheless be guaranteed – farmers will be more adaptive than the lobbyists have assumed in their doomsday models of employment in the Murray-Darling Basin.  It is also the case that these lobbyists run the risk of seriously misrepresenting the capability of communities they purport to represent.

Lin Crase is Professor of Applied Economics and Director of the Centre for Water Policy and Management at La Trobe University