Social and Economic Impacts of the Basin Plan in Victoria

The Victorian Government today released its findings on the social and economic impacts of the Murray-Darling Basin Plan in Victoria. This includes a joint report by TC&A and Frontier Economics (Asia-Pacific) which the government commissioned to assist its own analysis.

The Murray-Darling Basin Plan formally commenced in November 2012 and sets limits on the amount of water that can be extracted from the
 Basin. The recovered water will be used to help improve the environmental health of Basin rivers, wetlands and floodplains and the habitats of plants and animals that rely on the river system. The Basin Plan’s overall Sustainable Diversion Limit (SDL) aims to recover 2750 gigalitres (GL) of water for the environment and comes into effect in 2019. There is scope within the Basin Plan, however, for the SDL to be in the range of 2100 GL to 3200 GL with the use of offsetting measures and on-farm efficiency measures.

The report by TC&A and Frontier Economics was commissioned to assist the Victorian Government undertake a socio-economic analysis into the impacts in Victoria of water recovery through the Basin Plan. This analysis will inform discussions with the Commonwealth Government and help to make sure that all future water recovery from Victoria is based on robust evidence that it can be done with neutral or positive social and economic impacts. The report sets out a systematic and repeatable method for analysing the impacts of the Basin Plan in Victoria. It is not a comparison of irrigation before and after the Basin Plan, rather it is a comparison of what happened after the Basin Plan was implemented with what could reasonably have been expected to have happened if the Basin Plan had not been implemented.

The report found that characteristics of water use in the southern-connected Basin have changed significantly as a result of the Basin Plan. The consumptive pool has decreased significantly and the mix of industries has changed; horticulture, with its relatively fixed water demands now accounts for a larger proportion of the consumptive pool. Irrigators have been adapting, but the recent relative abundance of water since buyback was completed (with the notable exception of 2015/16), has enabled many irrigators to maintain water use though water allocation purchases. Consequently many of the socio-economic impacts of the Basin Plan may not be observed until the next drought.

Frontier Economics regularly advises governments, regulators and businesses in the water sector in Australia and the region.

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