January 28th 2021
The price of irrigation water in the southern Murray Darling Basin (sMDB) has varied considerably in recent years. This has been driven by variation in the supply of water and changing demand patterns across the sMDB. Commonwealth water recovery and changing land and water use in the sMDB have been key drivers of the water market.
Perennial horticulture development will continue to put pressure on the water supply and use balance in the lower Murray (below the Barmah Choke). It is estimated that in an “extreme dry” season (water allocations similar to 2007-08), allocation for the lower Murray in that season could be less than half the water use from perennial horticulture (assuming no offsetting by other horticultural industries).
Inter-valley trade and carryover would be important risk management tools in those seasons for irrigators in all industries. The increasing demand for water by horticulture also has implications for the water price across the sMDB.
Below the Barmah choke, prices rose from below $200/ML in the 2017-18 season to $970/ML in 2019-20. While prices in other trading zones did not reach the same peak, variations in prices between trading zones have recently become a feature of the sMDB. Differences in price between trading zones are likely to remain and water prices will continue to vary from year to year.
Looking out to the year 2035, the climate is likely to be the biggest driver of allocation price. If the future climate is similar to the long-term average (since 1895), then modelling indicates the long-term median price of allocation water could be $130-$280 /ML across the sMDB. However, if the future climate is similar to the last 15 years, then the long-term median price of allocation water in the sMDB is could be $300-$400 /ML.
For more information, please watch the webinar recording, refer to the PowerPoint slides, or read the following reports.