DISCUSSION PAPER: Creative destruction in Australian water markets

Published 26 Feb 2021

Broadacre irrigation in the southern MDB is set to change dramatically: is this the creative destruction we want?

In discussions about the Basin Plan and re-balancing extractive water rights in favour of environmental needs, one key reform has been consistently underestimated in its significant and permanent effect on irrigation industries and communities: separation of water title from land, and its subsequent tradability.

As much as environmental water recovery itself, the trading framework that enabled acquisition from irrigators on fair terms will be the reform that has the greatest enduring effect on irrigation communities. In enabling water to be traded to ‘highest value’ use, the aggregate effects of water recovery and drought have indeed been cushioned by ensuring that what is available in any given season has tended to find its most profitable use.

This Discussion Paper by Dr Leigh Vial and Andrew Bomm notes that governments across the Murray-Darling Basin need to work out what they are aiming for from this reform process. Is it to keep allowing the market to find balance in the long run and assist affected businesses and communities along the way? Or jettison some market efficiency by limiting water tradability or directing its productive use, to buffer against the rapid changes to water use we are observing?

These are difficult choices but a choice needs to be made, and explained with honesty to communities in the middle. Particularly in our rapidly-changing global environment, not all destruction is creative.

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