How the Murray-Darling irrigators rort was allowed to happen

Irrigators have been getting hundreds of millions of dollars in taxpayer handouts to return water to the Murray-Darling when far less expensive, and more effective, ways of achieving the same goal have been ignored by governments.

South Australia’s Murray-Darling Basin Royal Commission has once again shone a light on one of the biggest rorts in Commonwealth history: the waste of billions of dollars in handouts to irrigators, agricultural groups and farmers under the guise of grants for infrastructure efficiency.

Around $4 billion of taxpayer funding has been poured into concessional loans and grants for water infrastructure projects from the Commonwealth alone in recent years, including $1.6 billion on a grants program designed to fund infrastructure upgrades to return “water savings” to the Murray-Darling system. In his notorious 2015 agriculture White Paper, Barnaby Joyce boasted:

The Government is funding the largest investment in upgrading and refurbishing irrigation infrastructure in Australia’s history, investing in the future of competitive irrigated agriculture, as well as community sustainability. To implement the Murray–Darling Basin Plan, the Commonwealth has committed almost $13 billion through a range of programmes in the Basin through to 2024.

But it’s been known for years that irrigation efficiency spending is a rort, particularly when used to meet water savings targets, which can be much more cheaply met with market mechanisms such as water buybacks. In 2010, the Productivity Commission — then chaired by Coalition favourite Gary Banks — criticised the use of irrigation efficiency funding, saying it was “a poor use of taxpayer funds”:

[T]hey are generally much less cost effective and efficient than buybacks. For example, infrastructure projects financed under the Living Murray Initiative recovered water at a cost almost 40 per cent greater than the cost of market-based measures.

The National Water Commission — later to be abolished by the Abbott government for being too independent — was also critical of irrigation infrastructure funding in successive reports on the National Water Initiative. In 2014, it lamented the “overly optimistic estimates of a project’s viability” that bedevilled infrastructure grants. In 2017, the PC again criticised wasting taxpayer funds on efficiency projects in a report on the broader water reform process, noting “the business cases supporting irrigation infrastructure projects have often been found to be inadequate in the past.”

Governments often tried to slip regional development benefits into business cases, but, the PC noted, “unfortunately, there has been a tendency for public investment in water infrastructure to deliver less than the anticipated benefits with respect to regional development” and reeled off a list of significant examples.

Unviable and unsuccessful projects (and the resultant high cost of jobs to deliver regional development) have not deterred governments from commissioning new water infrastructure. The marginal prospects for many new projects means that poor outcomes are likely to continue if government investment decisions on new infrastructure continue to be made as they have previously.

Needless to say, this repeated evidence over many years hasn’t deterred federal and state governments and especially the federal Coalition from pumping billions into the pockets of irrigators, agricultural groups and a mini-industry of taxpayer-funded outfits like Irrigation Efficiency Partners that help broker grants. The Coalition even banned water buybacks above 1500 gigalitres (GL) in 2015 and pumped more money into irrigation grants.

Now Bret Walker’s royal commission has taken the issue a step further with evidence that the PC was far too generous in its assessment of just how expensive irrigation infrastructure funding is in obtaining water savings compared to buying water back off irrigators. The royal commission, based on undisputed evidence from experts, found that buybacks were far more effective at recovering water than infrastructure upgrades, and far cheaper. While the PC suggested back in 2010 that infrastructure measures were 40% more expensive than buybacks, Walker found:

Data provided by the DAWR to Professor Grafton and Professor Wheeler for the period 2007–08 to 2017–18 shows that the cost of the Commonwealth purchasing a megalitre of water under the Return The Balance Program (buyback purchases) was $2026. The cost of purchasing a megalitre of water through efficiency upgrades funded under SRWUIP was $4970.

That means taxpayers are spending two and a half times what they should to return water to the Murray-Darling system. That’s free money to irrigators.

Walker also demolished arguments that water buybacks are somehow detrimental to communities — a claim long peddled by the NSW and Victorian governments (the Victorians were at it again today) and irrigators. “The Commissioner is unaware of any convincing economic or other research which justifies this assertion,” Walker found. Evidence to the commission showed that “claims in relation to the ‘Swiss cheese’ effect or a reduction in local populations or jobs as a result of water recovery … are not supported by the research … the vast majority of irrigators who sold water to the Commonwealth only sold a partial entitlement. Further, of those who sold an entire entitlement, the vast majority maintained delivery rights … There is an abundance of robust evidence that farmers adapt to reduction in water use.”

Even so, the truth about the great irrigation infrastructure swindle hasn’t been accepted by politicians in the last 10 years. There’s no reason to believe it will be now.