The southeast corner of Australia has a long history of bushrangers. In the nineteeth century they lived rough, robbed banks and stole gold. There is a modern day equivalent, only they sit in parliament and board rooms, targeting consumers and the water market. Supply and demand is the most fundamental equation of modern economics. Droughts, which were once something to be feared, are now extremely profitable. They enable traders and governments to increase the price of water to use “market forces” to “drive its conservation”. Irrigators on the Murray have had their water allocations cut by 90%, meaning a farm with a 500 megalitre allocation now has 50 — but they can still earn money. The introduction of managed investment schemes whereby city-based investors can reduce their tax liability by borrowing to invest in agriculture has expanded agriculture in the Murray Darling, and therefore the demand for water. Their days may be numbered but it was this type of investment in grapes that lead to a glut and flooded the export local markets, wiping out many smaller farms. Now its almonds and olives. The demand from these schemes has pushed the price of water up to $1400 a megalitre. Now farmers with only 10% of their 500 megalitre allocation can still earn up to $70,000, less the $40 per megalitre they pay the State government. The state still charges the farmer for the full 500 mega litres at $40 per meg, so the profit is $50,000, less any water brokers’ fees. The means that the farmer who sells his allocation does not have to start the tractor, buy seed or fertiliser, or risk low commodity prices. In fact, on many farms the water is worth more than what they can produce with it. So who pays? You, dear taxpayer, because the government has to make up the shortfall in revenue from the lost tax income and consumers pay for the increasingly expensive fresh food.
So who profits? Large agricultural companies that can afford to buy water, benefit of higher food prices and have taxpayers subsidise the cost of piping water in irrigation canals. Then there’s the water brokers, companies that reduce tax liability through investment schemes and the state government that effectively gets $400 a megalitre from a 90% cut in allocations. And finally, the bureaucracies which grow to manage water infrastructure, allocations and trading. Right now people in Melbourne pay around $50-$100 per megalitre for water, but Victorian Premier John Brumby has said that the price of water will double in the next five years say to around $100-200 per magalitre to consumers. By piping even 100 gigalitres of water from the Goulburn-Murray Darling system to Melbourne he can more than double the price the state gets. If 200 million megalitres eventually sold in Melbourne he can make $10,000 million pa at $50 profit per megalitre, less the costs of piping and infrastructure maintenance. Is this how Brumby will pay for the desalination plant, with handsome tax revenues from water taken from the Goulburn? Like Ned Kelly with a plastic bucket. Send your tips to email@example.com or submit them anonymously here.