REINTRODUCING $20,000 grants for drought-stressed irrigators is crucial for rural communities this season, says RICHARD ANDERSON
The threats to the irrigator communities along the Murray are greater than they have ever been.
Allocations are at historically low levels, predicted inflows are heading towards the worst-case scenario and the South Australian Government is about to cause a $67 million market distortion.
The case for a reintroduction of the $20,000 Federal Government irrigator grants is more compelling now then when they were introduced in September last year and a better option than a state government buying water for its irrigators.
The move by the South Australian Government to enter the water market with a $67 million bankroll is an indication of the desperation in irrigator communities, but bad news for Victorian irrigators.
It will also be a challenge in implementation.
Exactly how this market intervention is meant to work is a puzzle.
For example, which irrigators will receive government-sponsored water purchases? And in what amounts?
Governments entering the market, particularly when water is in such short supply, can only result in inflated prices that disadvantage Victorian irrigators and their communities.
At today's price of $550 a megalitre, $67 million would buy 120,000 megalitres of temporary water, which is 58 per cent of the water available on the Murray system at the current 13 per cent allocation.
This level of trade could not occur without causing significant market distortion. In addition, as water is transferred interstate, the economic activity that it generates is taken with it.
This will only make it harder for those communities that are already under enormous pressures from the drought.
Last irrigation season, without any government-sponsored purchases, saw a net trade of 144,000 megalitres of temporary water into South Australia.
More than a third of this came out of Victorian irrigation districts.
While the policy of the South Australian Government is fundamentally flawed, it is a sign of the desperation in these communities.
It is also a sign that the Federal Government should revisit the support given last year via irrigator grants.
The provision of assistance that is not directed at a specific action will be more effective in maintaining farm production and avoiding distortions in markets.
Farmers are the best equipped to identify and explore strategies to address their particular problems with managing the drought and low water allocations.
These types of support measures also flow through to the local community.
By assisting farmers maintain their businesses, the grants are generally spent in the local community, and farm production will be higher than it would otherwise be.
Both outcomes lead to increased economic activity in the local towns and businesses.
The criteria applied for this program last year would seem to still represent a sensible set of rules.
That is, the grants cannot be used to buy water or fodder.
This will ensure that these two important markets are not influenced by the program.
The exclusion of irrigators with significant off-farm assets also remains appropriate.
The stresses on irrigator communities, particularly horticulturists who have largely missed out on increases in commodity prices, have grown worse.
While there may be long-term structural adjustment issues to be resolved, and the principles of the irrigator exit package announced by Federal Water Minister Penny Wong looks to be the right approach, the immediate crisis must be dealt with.
The irrigator grants available last season made a major difference to local communities and individual farmers.
As the situation has deteriorated the reintroduction of these grants is vital.
Richard Anderson is chairman of the Victorian Farmers Federation water council.
