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Water prices are set to rise in the Murray-Darling, but we cannot afford to profit

With the cost of water in the Murray-Darling basin at its highest level in a decade and the World Bank calling for responsible access for all, our responsibility is to not turn this crisis into a business opportunity.

 

 

Siobhan Kenna of Ten Daily today made the point that climate change is affecting the dwindling supplies of the world’s water. In her piece, she noted that “Last year, 100 per cent of New South Wales was declared drought-affected, and the impacts still continue to this day. Farms are parched, animals are dead and dying, and rivers have run dry. A dam in Tenterfield, in NSW’s northwest, dropped to 33 per cent capacity in June this year as the need for a solution to boost the area’s water supply becomes more desperate.

“It is a race against time to find, extract, pump, and transport more water to the dam,” Tenterfield Council told the community. The council has received $373,000 from the NSW State Government to help with water augmentation, but it’s simply not enough.”

It is the question of buying water that should be the one we focus on. According to a senior economist at the Australian Bureau of Agricultural and Resource Economics and Sciences, “water prices in the southern Murray-Darling Basin have reached their highest levels since the worst of the Millennium drought more than a decade ago.”

Hughes believes that a lack of rain is one aspect, but tied with existing market reforms, the issue comes into focus. Hughes writes, “market reforms in the 1980s and 1990senabled water trading in many parts of Australia. By far the most active market exists in the southern Murray-Darling basin, which covers the Murray River and its tributaries in northern Victoria, southern New South Wales and eastern South Australia. The market allows users – mostly irrigation farmers – to trade their water allocations (shares of water in the rivers’ major dams). This trading helps ensure limited water supplies go to the farmers who value them the most, which can be crucial in times of drought.

Historical data shows the main driver of water market prices in the southern basin is (the) change in water supply.”

 

This chart shows storage volumes (in orange) and water prices (in red) in the southern basin since 2006. Prices peaked at the height of the Millennium drought in 2007. During the floods of 2011, they fell to near zero. Prices have increased again during the latest drought, and are now at their highest levels in a decade.

 

Access and cost remain the primary puzzle to solve. According to the World Bank, “…climate change expresses itself through water…water-related climate risks cascade through food, energy, urban and environmental systems. If we are to achieve climate and development goals, water must be at the core of adaptation strategies.

“With nine out of every 10 natural disasters being water-related, the World Bank said the resource needs to be managed so humans can both access and conserve it.

This includes investments in water storage, water reuse and recycling and, where viable, desalinisation. These interventions must be accompanied by policies to promote water efficiency and improve water allocation.”

As Hughes notes, “research shows that between 2003 and 2016 there was little change in irrigation demand (aside from that linked to rainfall). Growth in demand from expanding activities such as almonds and cotton was offset by reductions in others including dairy, rice and wine grapes. However, there is evidence since 2016 that demand for water has started to increase, contributing to higher water prices. Longer-term projections suggest this trend may continue.”

Clearly, there’s less to go around, and more demand for it. The below chart notes the gross water levels for the Murray-Darling basin, illustrating that the average level is 40% lower than the average of the entire 20th century.

 

 

Clearly, the purchase of water is both big business and a humanitarian crisis. Whether we can favour the right one and ignore the other is set to be the next great test of this drying time.

 

 

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