Improved water supply set to reduce prices in 2020-21

By Rodney Woods

Water prices are forecast to fall in 2020-21 under all but one weather scenario in response to considerable improvements in the volume of water supply — but price gaps could occur due to inter-valley trade limits.

The Australian Bureau of Agricultural and Resource Economics and Sciences’ Water Market Outlook report looked at the water availability levels under ‘extreme dry’, ‘dry’, ‘average’ and ‘wet’ conditions.

Under ‘wet’ and ‘average’ scenarios, ABARES is estimating average annual prices of between $207/Ml and $287/Ml, while prices under the ‘dry’ scenario are modelled to decrease from the 2019-20 average high of $543/Ml to $450/Ml.

Under the ‘extreme dry’ scenario, prices are modelled to increase slightly from last season's average high to $544/Ml, as most regions are modelled to have less water available if this scenario was to occur.

“The promising Bureau of Meteorology climate outlook aligns most closely with the ‘average’ scenario in the report, however it's important to remember there's still much uncertainty,” ABARES executive director Steve Hatfield-Dodds said.

“Conditions better or worse than the scenarios tested are possible, which would result in prices higher or lower than those estimated in the latest outlook.”

Dr Hatfield-Dodds said prices would also vary due to inter-valley trades expected to be binding in the 2020-21 irrigation season.

“Another significant determinant driving prices in 2020-21 will be where water is located, compared to where water demand is highest, with recent increases in demand for irrigation water in regions below the Barmah Choke,” he said.

“Inter-valley trade limits are expected to be binding, leading to higher prices in regions that import water.”

With the BoM outlook aligning most with the ‘average’ scenario, this is good news for Victorian irrigators who rely on both Murray and Goulburn high security, as an average season will see a full allocation for the 2020-21 season.

However, NSW Murray general security irrigators won't be as fortunate, as a ‘wet’ year won't even see their allocation reach 60 per cent.

To accompany the Water Market Outlook report, ABARES has prepared a dashboard visualisation, allowing users to explore the forecasts in depth.

Read the latest ABARES Water Market Outlook report and view the dashboard visualisation at: https://www.agriculture.gov.au/abares/research-topics/water/water-market-outlook