Friday, April 20, 2007

Irrigators must experience tough love

This is stunning news. Irrigators in the Murray-Darling Basin may be denied water allocations for the first time throwing into doubt up to $10 billion worth of agricultural production. This will push up food prices and reduce Australia’s GDP growth below 3%. According to PM Howard only town and urban water supplies in the MBD will be guaranteed this year unless drought-breaking rains occur in the next 6-8 weeks along the river system. The Bureau of Meteorology is forecasting only a 50% chance of above average rainfall over the coming winter.

The Federal Government is now spending $17 million per week assisting 17,500 farmers – an 80% increase over last years. It has also committed to a $10 billion national water reform package of which nearly $7 billion is devoted to an inept attempt to provide a technological solution to the underlying problem of excessive water allocations. The main advantage of the plan will be to give the Commonwealth the power to address water resource issues as a national problem.

Politically the fear is than, in an election year, the incumbent government will attempt to address concerns with more handouts that fail to address underlying problems. Likewise, the attempt by Julia Gillard and Anthony Albanese to link the current drought with global warming is opportunism that does not address real issues of concern.

Water allocations in the Murray-Darling Basin must be decisively reduced and agricultural activities such as dairying, viticulture and orcharding, that require smoothed delivery of water in an environment where drought is intrinsic, should not be dealt with as special cases that call for exemptions from general restrictions. Raising dairy cattle in semi-arid regions where there is total dependence on erratic irrigated water supplies is nonsense.

Tough love is needed. If assistance is to be given to farmers it must direct them to adjust permanently to environmental and economic realities – not just to provide incentives to hang on and perpetuate what everyone in the community (including the farmers themselves) know is an underlying problem.

Rising food prices will hurt consumers short-term but will offer advantages to efficient producers who are not reliant on overstretched irrigation supplies. They will help resolve chronic issues of excess capacity in areas such as viticulture. They also provide the right types of incentives for farmers to think intelligently about their agricultural product mixes and their incentives to invest in improved irrigation efficiencies.

The drought is a disaster for households depending on incomes maintained by overallocated water supplies. This disaster can and should be addressed with government aid but aid that offer long-term solutions to long-term water supply issues not temporary solutions that reflect a short-term need to vote buy.


Francis Xavier Holden said...

As an ex dairy farmer I have been shocked over the years at the shift of farming up to around the Murray due to what amounts, at the previous prices, to the the dumping of water in the area.

This has shifted dairying from the high rainfall districts, Otways, Western and Gippsland to dryland marginal land areas.

A freeze on irrigation will at least drive dairying back to where it belongs. A price rise of a few cents a litre is bugger all to pay.

I'm afraid that the pollies(of all stripes) aided by media sob stories will squib it and end up propping up the industry up near the Murray rather than bite the bullet.

Expect a rash of AUSTRALIAN STORYs of "lifestyles', "walking off farms" and "been in the family for generations" - there won't be an TV Stories of car workers lifestyles needing protecting, or typewriter repair businesses that have been in the family for generations.

Mike said...

While an "efficient farmers win through" scenario might be good for agriculture in the long run, it's going to be tough even for efficient farmers given the conditions at the moment.

Bad water management in this instance appears to have penalised not just the inefficient, but the efficient as well.

procrustes said...

FXH's prop up point is a good one - Australian drought policy has been plagued with this problem fro years. Inefficient but low income farmers receive incentives to say in production through Exceptional Circumstances assistance, much to the chagrin of farmers who do more to drought-proof their properties.

That said, this situation looks pretty serious.

It is also a good test for establishing whether certain politicians are nutters or not.

Any pollie who says the situation would not have arisen if the Howard Government had done more about the greenhouse effect is a populist idiot. In saying this, I'm not denying the existence of AGW, just suggesting that even if Australia's 1-2% of world emissions had been entirely turned off it would not make a bit of difference to a global phenomenon.

whyisitso said...

Yes procrustes, the current debate goes even further than you point out, virtually implying that both the causes and effects of global warming are localised. That is, what we do (or don't do) in Australia is visited on us by droughts, as if in direct punishment. Kevin Rudd is one of the worst irrationalists in this respect.

chrisl said...

Whyisitso Agreed! Melbourne's weather invariably comes from the south west. It's electricity is generated in the east,in the Latrobe Valley so the Co2 has to travel against the wind to change the climate! It is just simplistic claptrap to say that we can "address climate change"

Tony Healy said...

Water allocations must be reduced, but some of the focus above is wrong.

Low-income and small farms are not the problem, and it's also not necessarily true that such farms are less efficient than bigger ones. What's more, such farms are not likely to feature in media sob stories because they won't be affected by the cut-backs that need to be made.

The big problem has been the expansion of large-scale water intensive farming along the rivers over the past 15 years. Much of that has been driven by loose city capital and dodgy tax concessions, such as for managed investment companies. The Howard government has in fact started to tighten that up, but it must do more.

Orchards and grapes as water users were sustainable up to about 1990. The problem since then has been cotton, rice and accountant-friendly olives and other rubbish.

Also, FYI, drought-proofing refers to dryland farms and grazing properties, and so is not terribly relevant to reducing irrigation use.

As well, the recipients of government assistance are often the bigger, wealthier farms with sophisticated accounting advice and large debts, rather than smaller farms. Small farms are more frugal and often more efficient.