Responsiveness of Demand for Irrigation Water: A Focus on the Southern Murray-Darling Basin

Abstract

This working paper was released in August 2004. This research is part of a suite of research related to water reform, including the effects of expanding water trade and the management of environmental externalities associated with the supply and use of irrigation water. A foundation for this research is a detailed understanding of irrigated agriculture in the southern Murray-Darling Basin, including: the existing patterns of water use; the emerging trade in water property rights and the likely behavioural responses of individual irrigators to changing water prices. This paper explores the determinants of the elasticity of demand for irrigation water. It focuses on three main irrigated industries - rice, dairy and horticulture - to gain a greater understanding of the value that farmers place on water as an input. The paper provides detail relating to farm decision behaviour and biophysical production realities faced by irrigators in the southern Murray-Darling Basin.