Water Journal : Current May 2016
49 www.awa.asn.au No value for money in farming the north During the 2013 Federal election campaign, both major political parties announced plans to develop northern Australia. The Coalition in particular pledged to turn the north into a food bowl. And they have pursued this goal in government with some vigour, releasing in 2015 a policy paper on developing northern Australia and announcing a $500 million National Water Infrastructure Development Fund as part of its Agricultural White Paper. Harsh environmental conditions in northern Australia -- shallow, infertile and erosion-prone soils and an extreme climate that s hot and dry, or intensely wet -- mean without massive taxpayer subsidies for irrigation infrastructure, private production is uneconomic. But history warns us that irrigation schemes in northern Australia are not a sound economic solution either. The most spectacular of many economic failures is the Ord River Irrigation Scheme in WA. The Ord is home to Lake Argyle, the largest contiguous freshwater lake in Australia, holding enough water to fill Sydney harbour 20 times over. Despite this immense water resource, as well as generous price supports, direct subsidies, and massive public infrastruc- ture spending that in current dollar terms totals well over $1 billion, the Ord Scheme has consistently failed to sustain profit- able agriculture since opening in 1963. Given this history of failure, the Federal Government should be upfront about the inevitable net costs to the taxpayer if they pursue further spending on irrigation in northern Australia. We crunched the numbers* and our calculations confirm irrigation in the north is an economic bust. Using public informa- tion about the cost of irrigation infrastructure and an extensive database of farm values we find that in the most optimistic circumstances, for every $1 of economic benefit, at least $1.10 would need to be spent constructing irrigation infrastructure. These estimates are conservative. Factoring in the costs of new roads, damage to the ecosystem from damming rivers, risks to downstream industries such as fisheries or tourism, or subsidies to agricultural production, makes the case for the taxpayer even worse. The average Australian would receive no economic benefit from the construction of major new water storages in northern Australia; rather the construction of dams and distribution systems will represent a significant transfer of wealth from taxpayers to private irrigators, with the Ord River Irrigation Scheme a clear case in point. Will such schemes nonetheless build the wealth of the country as a whole? Our benefit-cost analysis says no. Given the competing demands on the public purse, there are surely more worthy uses of scarce taxpayers money than irrigation pipe dreams in the north Australian outback. The fact no rigorous and transparent economic benefit-cost analysis has been put forward by advocates says it all. *Food Bowl or Folly? The economics of irrigating Northern Australia by Jared Dent and Michael B Ward MICHAEL B WARD PROFESSOR OF ECONOMICS IN THE MONASH BUSINESS SCHOOL AT MONASH UNIVERSITY. AGAINST THERE ARE MORE WORTHY USES OF SCARCE TAXPAYERS MONEY THAN IRRIGATION PIPE DREAMS.
Current Feb 2016
Current August 2016