Water Economics

Water economics is a growing area in Australia due to the drought that the country has suffered over the past 15 years. This has been exacerbated by increased concern about global warming. The debate over water entitlements is complicated because licenses are granted on a state by state basis rather than a federal one.

The issue largely surrounds large irrigators who have historically had property rights access to water upstream on very favourable terms when acquiring licenses. The most infamous of these irrigation centres is Cubbie Station (located in Qld) which holds more than 50 water licenses. The Station is licenses to take more than 460,000 megalitres (which is equivalent to the water in Sydney Harbour). There are several other large irrigators through Queensland, New South Wales, Victoria and South Australia who all have licenses of various forms.

The issue that arises is that water is licensed on a state basis rather than a federal one. The arguments that the most downstream settlements (such as South Australia) put forward is that there is little incentive for other jurisdictions (such as Victoria, NSW and Qld) to price water correctly as a reduction in water entitlements effect those states ability to produce and hence the economy. The net result of this is that the Murray/Darling system has been deprived of water for more than 10 years to the point where the famous Murray Mouth has not flowed freely for the majority of that time.

For water to be managed properly in Australia, Federal intervention is required. Left in the hands of the stats a totalitarianism approach  can never be realised as each state tends to maximise its own revenue with the South Australia being the ultimate loser being the most downstream of the states in Australia. The Federal Government has indicated from time to time that it might buy out some water entitlements to reduce the overall volume taken from the river upstream. In addition to this, more efficient means for irrigation and damming are being investigated to maximise productivity on reduced water consumption.