The Albanese government will face a tougher time buying back water to fulfil the Murray-Darling Basin plan due to increased corporatisation, fewer water holders and a socioeconomic impact test that cannot be met, experts have warned.
Ben Williams, of water analyst Aither, which publishes an index of water entitlements, said the volume turning over annually in the southern basin had dropped 60% since 2011-12 – after the last water buybacks under the Rudd government.
He said it would take a long time to secure significant buybacks in the current market. The government would need to pay a significant premium if it was required in a short timeframe.
“We’ve had an influx of large investors who have amassed large portfolios of water which are either leased out or sold on an annual basis on allocation markets,” Williams said.
“We’ve had the consolidation of agricultural businesses increasing corporate agriculture so the holdings have become more concentrated.
“Obviously, a boom in permanent horticulture as well, which has sort of gone hand in hand with both influx of investors in corporatised agriculture.”
He added that 25% of entitlements in the southern basin were already held by environmental water holders.
The Murray-Darling Basin Authority has already formally advised there would be a shortfall of 750 gigalitres – about 25% of the target – by June 2024.
The environment minister, Tanya Plibersek, announced a further 49 gigalitres of water buybacks in February.
Williams said water was valued higher and was more tightly held now than during the first round of buybacks 12 years ago.
“That makes it more difficult for anyone to extract large volumes out of the market, whether they’re wanting to buy for commercial reasons or whether it is indeed to the government buying back in this instance for basin plan delivery,” he said. “But everyone has a price.”
The water law expert Dr Erin O’Donnell, a lecturer at the University of Melbourne, said the biggest barrier to buybacks would be the social and economic impact test in the basin plan, which states that water recovery must not cause negative socioeconomic effects.
“It’s simply not possible to buy water without there being any kind of social or economic impact on anyone – that’s the nature of markets,” she said.
“They simply can’t meet that test if they’re going to comply with the basin plan commitments, which, as we know, are now the absolute minimum. All of the rest of it is window dressing.”
O’Donnell said changing the socioeconomic test would require the government to argue that communities can wear a bit of pain. The government would have to make the case for the shared benefits of increased environmental flows rather than trying to argue that there’s not going to be any impact.
“Australia has actually been very successful at managing large-scale water recovery for the environment in a way that doesn’t leave people stranded and that preserves a really viable, flourishing irrigation sector,” O’Donnell said.
“It was that 2015 decision to stop buying that was really where the rot set in,” she said.
Taylor Hall is the general manager for his family’s agricultural logistics business, Valley Pack, which employs 45 people in Mooroopna, Victoria. He is against buybacks in any form, arguing that they drive up the cost of food production “for improvements that are not tangible”.
Hall said every megalitre of water bought back by government represents 5,000 bags of white table grapes, 97,000 apples or 10 tonnes of zucchinis.
“Every single piece of produce that we move for export or we store for domestic consumption is created with the use of irrigation,” Hall said.
“Our families wouldn’t live here without irrigation. Our town wouldn’t exist.”
Hall argued that buybacks would have an inflationary effect on food prices because they would increase water prices, which would see farmers growing higher value commodities for the export market to cover the cost.
“They are not going to land on our supermarket shelf,” he said. “They’re going to be exported where the price can be achieved to meet that cost of production. So it’s just inflationary.”
The Mildura-based general manager of Ruralco Water, Phil Grahame, said much of the easily available water buybacks had already been logged. The expansion of permanent plantings for higher return crops such as almonds, over annual crops, has reduced the amount of tradable water because the trees need water year on year.
“A lot of the low-hanging fruit is gone, and if the commonwealth came with a big bucket of money, it would be harder to shake loose,” Grahame said.
O’Donnell said buybacks were still “feasible” if they were staged over a longer timeframe.
Plibersek’s office was contacted for comment.
