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Money down the river

While the headlines are (rightly) awash with the shady dealings surrounding the Murray-Darling Basin, new research released by The Australia Institute examines the economic and employment effects of the Ord River irrigation schemes – and it’s not pretty.

Expansion of Ord irrigation is part of the Federal Government’s vision for developing northern Australia, but faces opposition from indigenous groups, the Northern Territory government and is dogged by decades of economic failure.

The new report finds that over $2 billion has been spent on the Ord irrigation scheme, yet it supports only around 260 jobs. The last expansion of irrigation cost taxpayers $334 million, a budget overrun of $114 million, but resulted in just 61 jobs in 2016.

“The last expansion of the Ord scheme cost taxpayers $5.5 million for every job created. Clearly this isn’t an economically viable way to bring development to northern Australia,” said lead author Rod Campbell.

“Cost benefit analysis shows that for every dollar taxpayers have invested in the Ord scheme since inception, they’ve been returned around 17 cents.

“The lesson here is that large-scale irrigated agriculture is not the way to increase prosperity and populations in the north of Australia. Even if the economic losses were much smaller, irrigated agriculture is capital intensive – it uses lots of machines and pumps lots of water but employs very few people.

“The Ord region has around 260 agricultural jobs, but at least 60 were in non-irrigated agriculture. This shows that northern regions do have viable agricultural enterprises and agriculture can be a part of northern development, but that large scale irrigation isn’t the way to do it.

“There is scope for further development of agriculture in northern Australia, but efforts should be directed towards enterprises that are commercially viable, sustainable and generate employment and other benefits for northern Australian communities.

“Irrigation enterprises working with existing infrastructure can be viable and worth supporting now that the infrastructure is already built – in economics jargon the costs are ‘sunk’. The key message to come out of decades of losses on Ord infrastructure is that new irrigation infrastructure in northern Australia is unlikely to be viable or provide significant community benefits. The money can be far better spent.

“Investment in services and infrastructure that directly benefit communities will be vital if these communities are to retain existing populations and attract new people and businesses. Transport, communications, health and education are all likely to bring greater benefits.

“Another industry that is labour intensive and has strong potential in northern Western Australia is the tourism industry. According to Tourism Western Australia, in the year ending September 2016 there were 1.4 million visitors to the north west of WA, who spent $1.2 billion. Tourism and transport infrastructure will also play a major role in developing the north.

“Investing in the indigenous community should also be a focus for northern development. Programs such as the Indigenous Protected Area and Indigenous Rangers schemes provide training and employment for indigenous people in environmental management. Cost benefit analyses of indigenous social programs consistently show that they provide large net economic benefits.

“In short, there is no shortage of industries, infrastructure and community projects that can help develop northern Australia in an way that is economically viable, community-oriented and sustainable. Long experience with the Ord River Irrigation Area shows that government spending on irrigated agriculture is financially dubious and not likely to lead to development that benefits the wider community of northern Australia.”

 

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