Regional economic implications of water allocation and reliability

Abstract

The understanding of how allocation decisions can maximise the economic returns to the community from water for irrigation has received little attention, but is a significant issue for regional councils, those interested in water allocation policy development, and for irrigated farmers. There is a tradeoff between the amount of irrigated area and the reliability with which it can be undertaken. Overseas studies have generated a curve with optimum levels of allocation which maximise the economic return to the community from the resource. The study on which this paper is based used a single case study to model the individual and regional economic outcomes for four scenarios of water allocation, using daily time step simulation models of the hydrological, irrigation, farm and financial systems over the 1973 – 2000 period. The results show that there is an increasing return to the region as the allocation from the resource increases, at the expense of lower returns to existing users.