Basin buyouts could cost taxpayers up to $10 billion

One of Australia’s largest water holders has warned the government’s Basin buyouts are immoral and would cost billions to complete.

A hundred trucks and tractors rolled into Shepparton on Monday to rally against further water buyouts.

One of Australia’s largest water holders has warned taxpayers face a $10 billion bill to strip another 700 gigalitres of water out of irrigation communities to boost Murray Darling Basin environmental flows.

Argyle Capital chairman Kim Morison, whose team manages about 250GL of water entitlements for their investors, said “we anticipate the taxpayer expense to acquire that volume of water entitlements within a confined time period will be up to $10 billion”.

The costing comes as the Labor Government, the Greens and two crossbenchers struck a deal this week to pass amendments to the Basin Plan through the Senate, to ultimately recover at least 700GL by December 31, 2027, via direct purchase and some leasing.

Mr Morison said the federal government had already been forced to pay a 24 per cent premium to entice irrigators to sell just 10GL of NSW Murray irrigation entitlement, under its current water tender.

“In the May 2023 tender for 10GL of NSW Murray, the government accepted tender offers up to $2100/ML for Murray general security entitlements, Mr Morison said. “The prevailing market rate for those has been circa $1700/ML.”

But ratcheting up buyouts to recover another 450GL by December 31, 2027, and at least another 250GL in Sustainable Diversion Limit Adjustment Mechanism water efficiency project shortfalls are set to push premiums to even higher levels.

Argyle’s more conservative modelling puts the cost of buyouts at $7.6 billion, based on the federal government having to pay irrigators 15 per cent above market prices over the next two years, after which the premium would need to rise to 50 per cent to ensure 700GL was recovered by the 2027 deadline.

To date the government has refused to reveal how much it has budgeted for buybacks and neither ABARES nor the Parliamentary Budget Office has been able to estimate the cost.

Mr Morison said “we’re morally opposed” to buyouts as “it robs regional communities of jobs, processing facilities, transport networks and export dollars”.

He also pointed out that CSIRO modelling had shown irrigators diverted about 30 per cent or 10,500GL of the 30,000GL of the water flowing through the basin, which meant stripping another 450-700GL out of basin communities amounted to “a pitifully small amount” for the environment at an enormous cost to basin communities.

Much of the cheap water has already been recovered during the previous Rudd-Gillard Government’s years in power, with 63 per cent of the 2100GL already recovered under the basin plan coming from purchases.

Irrigation communities fear most of the 700GL that must now be recovered under the amendments due to be passed by the Senate this week will come from buyouts, not water savings projects.

National Irrigators Council chairman Jeremy Morton said “the Commonwealth department was incapable of delivering these projects”, which would take years to deliver.

Mr Morton said the government would go for the quick option and run buybacks.