Abstract
The Australian government’s water buyback program started in earnest during a prolonged drought. TERM-H2O modeling indicates that in the short term, drought-induced job losses amount to around 6,000 jobs. Despite a recovery to average seasons, depressed investment during drought lowers levels of farm capital in the long run. In turn, long-run employment in the region will remain around 1,500 jobs below forecast. In both the short and long terms, job losses arising from drought appear to be manyfold those arising from water buybacks.
This chapter reproduces with permission substantial portions of Wittwer and Griffith (2011).
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Notes
- 1.
A map showing rainfall deciles for the 3 years ending December 2008 is downloadable from http://www.bom.gov.au/jsp/awap/rain/archive.jsp?colour=colour&map=decile&year=2008&month=12&period=36month&area=nat.
- 2.
Farm income in the Murray statistical division in the 2006 TERM database accounted for around 12% of total regional income. One town, Albury, accounts for 40% of the population of Murray (ABS 2009). Within the Murray statistical division, the farm share of GDP excluding Albury SSD (i.e., the Central Murray and Murray-Darling statistical sub-divisions) exceeds 20%.
- 3.
Dixon and Rimmer (2002, pp. 222–225) derive a formula for export demand elasticities based on import substitution equations. This formula makes such elasticities in a national model consistent with the Armington parameters in a global model such as GTAP.
- 4.
In dynamic modeling, we run a baseline forecast and a policy run. In the case of an adverse event such as drought, the ‘policy’ run is more accurately labelled the ‘perturbation’ run.
- 5.
- 6.
Watermove weekly data, downloaded from www.watermove.com.au, authors’ calculations.
- 7.
National employment is exogenous in the policy simulation. Section 3.2.3 discusses the choice of regional labour market theory in TERM-H2O
- 8.
A regional terms-of-trade variable, with separate commodity and water contributions, has been added to later versions of TERM-H2O. During drought, the water component makes a substantial positive contribution to Lower Murrumbidgee’s terms of trade.
- 9.
Wittwer (2010) modeled the impacts of buybacks purchased gradually between 2011 and 2022. The baseline differed from that of Chap. 6, in terms of water availability and consequent prices.
- 10.
This is based on data from the Goulburn basin only. Anecdotal evidence indicates a close correspondence between prices across regions in the southern basin where inter-regional trading is possible.
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Wittwer, G., Griffith, M. (2012). The Economic Consequences of a Prolonged Drought in the Southern Murray-Darling Basin. In: Wittwer, G. (eds) Economic Modeling of Water. Global Issues in Water Policy, vol 3. Springer, Dordrecht. https://doi.org/10.1007/978-94-007-2876-9_7
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