Investigating the delayed on-farm consequences of selling water entitlements in the Murray-Darling Basin

Abstract

Up to one-fifth of all irrigators in the Murray-Darling Basin sold water entitlements to the Australian Commonwealth in the period from the beginning of 2008 to the start of 2012. The sale of water entitlements has positive and negative consequences for irrigators and rural communities. This study focuses specifically on these potential on-farm consequences, by providing an overview of the reasons irrigators sell water, examining fluctuations in water use by irrigators over time, and modelling the delayed impact of water sales in the previous five years on net farm income. It suggests that to date, many irrigators who sold water to the Commonwealth and continued farming in the southern Murray-Darling Basin have predominately sold their surplus and buffer water (water not used in production). There is only weak to no significant evidence from the regression modelling to suggest that there is a delayed negative impact on net farm income from selling water entitlements, which supports the notion that the reduction in farm production has been offset by many irrigators using water sales proceeds to reduce debt (and hence interest payments), restructure and reinvest on farm. However, given the advent of climate change and future water scarcity, all irrigators, but particularly for some of those who have sold part of their water entitlements, will need to plan for further incremental adaptation, water management or on-farm changes, or risk facing regular water shortages.