the draft basin plan: making it work paper presented at risk and sustainable management group...
TRANSCRIPT
The Draft Basin Plan: Making it
WorkPaper presented at Risk and Sustainable
Management Group Workshop, Brisbane 21 October 2010
John Quiggin
Federation Fellow
Risk and Sustainable Management Group, Schools of Economics and Political Science,University of Queensland
Making it Work: Three Key Principles
Willing sellers = No cuts in allocations
Buyback price should be basis for assessment of infrastructure projects
Social infrastructure should be funded where benefits are greater than for irrigation infrastructure
No cuts in allocations
Voluntary sales are not “cuts”
A major communications failure
Has partly derailed process, but can be restored
Need to understand history of risk allocation
The National Water Initiative
Attempt at a fully specified risk allocation
Governments bear risk of changes in policy
Users bear risk of new information about changes in sustainable allocations
Risk of climate change is shared
The National Water Action Plan (2007)
Effectively abandoned market-based approach
A big bucket of money $6 billion for on-farm works
$3 billion for buybacks
All back-loaded
Restoring the Balance in the Basin
Shifts priority to buybackBut no reallocation of funds
Effectively precluded substantial cuts in allocations
Undermined NWI risk allocation principles
Cutting the Gordian knot
The Draft Basin Plan
All changes are policy changes
Hence Commonwealth must bear entire risk
All reductions must arise from voluntary choices
Buyback the only realistic option
Market repurchase and infrastructure improvements
No necessary conflict
Market price should inform benefit-cost evaluation
Most large projects fail this test so far Wimmera
Food Bowl
Repurchase will drive private infrastructure
improvements
Water savings on-farm allow sale of entitlements
Need to be careful in accounting for return flows
Laser levelling
What kind of infrastructure?
Hard infrastructure: Irrigation works, other physical infrastructure
Soft infrastructure: Education, health, services, support for tourism
Physical investment or operating support
Targets and instruments
If goal is to minimise reduction in agricultural output, priority should go to hard irrigation infrastructure
Implied rejection of markets
If main concern is with communities and people, soft infrastructure is more likely to be productive
Funding
Wisely used, $10 billion sufficient to meet all goals
Buyback, cost-justified irrigation infrastructure, soft infrastructure for communities, adjustment assistance
Need to free funds currently earmarked for irrigation infrastructure
Where are we now?
A bumpy start, but ...
As close to a solution as we have ever been
The Draft Basin Plan: Making it
WorkPaper presented at Risk and Sustainable
Management Group Workshop, Brisbane 21 October 2010