Selling the Farm Silver? Understanding Water Sales to the Australian Government

Abstract

In 2007–2008 the Australian federal government committed $3.1 billion over 10 years to purchase water from irrigators in the Murray-Darling Basin and to deliver this water to key environmental assets. Given that water entitlements often represent one of the most valuable assets owned by irrigators, this study investigates irrigators’ willingness to sell water, and their actual water sales, to the government. It uses 1,570 surveys from 2008–2009 and 2010–2011 in the southern Murray-Darling Basin. Water sales can be classified as either last resort or strategic. Overall, the results suggest that farmers who do not hold strong traditional farming attitudes, and have higher debt, lower farm income, larger high security water entitlements, lower water allocations over the past 5 years, and those who have been net sellers of water allocations are more likely to have sold water or are thinking of selling water to the government. A dynamic comparison of how water sale preferences change, and an estimate of the total amount of water entitlements irrigators are willing to sell, indicates that it is probable that there will be enough water offered to the program in the future, at least to meet initial minimum environmental water targets. However, other concerns indicate that a potential restructure of the program may be required.