Australia’s ‘watergate’: here’s what taxpayers need to know about water buybacks

 

Australia’s ‘watergate’: here’s what taxpayers need to know about water buybacks

In 2017, the then agriculture minister, Barnaby Joyce, signed off on an A$80 million purchase of a water entitlement from a company called Eastern Australia Agriculture.

The problem is that Energy Minister Angus Taylor used to be a director of Eastern Australia Agriculture – though he didn’t have a financial interest – and the company is a liberal party donor. What’s more, the value of the water purchased for A$80 million is under question.

Now, as the election looms, this issue has resurfaced. But why should taxpayers be concerned?

Water buybacks using an open tender were halted by the current government in 2015, even though this is the most cost-effective way to set aside water for the environment. Instead, the government pronounced that subsidies for irrigators were a better deal.

Until 2015, the government bought back most water using an open tender process, before it was replaced by a subsidy scheme for irrigation and occasional closed tenders.

The problem with the closed tender process is that it tends to lack transparency, which raises questions about how effectively the government is spending public money. And it’s hard to prove closed tenders deliver the most cost effective outcome.

The Murray-Darling Basin is a very productive agricultural zone and its rivers have been used to boost agricultural outputs through irrigation.

State governments spent much of the 20th century allocating this water to agricultural users. By the 1990s it was clear too much water was being extracted. This resulted in both harm to the river environment and potential reduced reliability for those with existing water rights.

Various attempts to rein in extractions were made around this time, but ultimately the Murray-Darling Basin Plan was adopted to deal with the problem.

In agreeing on the plan, the federal government committed to spending A$13 billion to reduce the amount of water being extracted from the Murray-Darling Basin. To accomplish this the government has two basic strategies.

One involves buying up existing rights for water use. The other hinges on using subsidies so farmers use less water when irrigating.

Reducing water extraction from the basin

The second approach of using subsidies is generally more politically appealing. This is because few farmers ever object to receiving a subsidy and the public has an affinity with the idea of “saving” water.

The problem, however, is that subsidies are a more costly way of returning water to the river system than simply buying back existing water rights. And so-called water savings are hard to measure how much water savings are a result of subsidies or some other factor.

This is why some analysts even claim subsidies are reducing the level of water available for the environment.

Buying back water rights is generally more cost-effective than providing subsidies. But a clear and transparant process still matters because water rights are not the same for everyone and it’s a complex process to determine their overall value.

Allocations and entitlements

First, most water users hold a legal right, known as an entitlement. Water entitlements represent the long-term amount of water that can be taken and used – subject to rain, of course.

Second, water allocations represent the amount of water currently available against a given entitlement – this is the water that is available now.

If a farmer owns an entitlement in the River Murray, chances are the annual allocation will be determined by how much water has flowed into upstream storages like Hume Dam, Dartmouth Dam or Lake Eildon.

Even then the allocation will vary, depending on which state issued the original entitlement. For instance, New South Wales water is generally allocated more aggressively. This means NSW entitlements tend to be less reliable in dry years than Victorian or South Australian entitlements.

If a farmer owns an entitlement where there are no upstream storages, as is the case with much of the Darling River system, then the allocation will vary depending on how much water is flowing in the river.

So what?

All of this means the amount of water that can actually be used for the environment when an entitlement passes to the government will depend heavily on the underlying characteristics of the water right.

Partly for this reason, water buybacks were historically conducted using an open tender process.

This meant the government would announce its willingness to buy water entitlements. Farmers would then notify the government about what entitlements they held and the price they were prepared to take.

Running an open tender allowed the government to assess the value for money of the different entitlements on offer at the time.

Water buybacks through open tender began seriously in about 2007 to 2008. This meant the price owners were prepared to sell for would be registered, and then the government would determine which offer provided the best value. Around 60% of all water now held for the environment by the Commonwealth was secured through open tenders.

As a general rule, a relatively high-reliability water entitlement was bought for about $2,000 per megalitre and this has become the metric for many in the market. But the current government halted this process in 2015.

Now, the government buys water through direct negotiation with water-entitlement holders.

The government justified ending open-tender buybacks on the basis that the water being secured was causing undue harm to rural and regional communities. And, instead, much more expensive subsidies would supposedly generate a better overall return.

This view is not universally shared. The receipts from openly tendered water entitlements were being used by many farmers to adjust their business, while still staying in the region.

Many rural communities continue to thrive, regardless of the strategy chosen to secure water for the environment. Subsidies also tend to favour particular irrigators rather than the community in general.

Having set aside the cheapest option of open-tender buybacks and declaring support for irrigation subsidies, the problem the government now faces is that it must explain why closed tenders persisted (albeit in isolated cases) and were signed off by Ministers as good value for money.

Closed tenders need not deliver a poor outcome for taxpayers. But it does mean the likelihood of establishing the best value for money is reduced, simply because there are fewer reference points.

And if it’s legitimate to overspend public money on irrigation infrastructure subsidies, the credibility of a supposedly cost-effective closed tender is also brought into question.

Economics and Head of School, University of South Australia

Disclosure statement

Professor Lin Crase is the South Australian branch president of the Australasian Agriculture and Resource Economics Society.

Partners

University of South Australia provides funding as a member of The Conversation AU.

http://theconversation.com/australias-watergate-heres-what-taxpayers-need-to-know-about-water-buybacks-115838

Advertisements
Posted in Australian Properties, Empowerment, Foreign Investment, HOME, infrastructure, Interest Rates & Global Economy, LANDLORDS, ljgrealestate, MAINTENANCE, Property Investment, Property Law, Property Management & Sales, QUEENSLAND, sino australia investment, TENANTS | Tagged | 1 Comment

Quarterly rents have increased across all capital cities, bar Sydney and Darwin.

Brisbane rents are starting to climb again, with Brisbane now having a median weekly rent of $436. This is an increase of 0.8 per cent over the past quarter, and 1.4 per cent over the past 12 months.

ljgrealestate

At a glance:

  • CoreLogic has released its first Quarterly Rental Review for 2019, showing rents have risen by 1 per cent during the first three months of this year.
  • Sydney is the most expensive capital city to rent with a median weekly rent of $582 per week, while Perth is the cheapest at $385.
  • Quarterly rents have increased across all capital cities, bar Darwin and Sydney.

The first CoreLogic Quarterly Rental Review for 2019, which tracks median rents and rental yields across Australia, shows that national weekly rents have risen by 1 per cent during the first three months of the year.

“This seasonally strong first quarter has delivered the highest increase in weekly rents since the corresponding first quarter a year ago”, says Cameron Kusher, Research Analyst for CoreLogic. “Our regional housing markets are performing marginally better than the capital cities, many of which have been experiencing weaker rental…

View original post 1,862 more words

Posted in Empowerment, HOME, infrastructure, LANDLORDS, LJ Gilland Real Estate Pty Ltd, ljgrealestate, Property Investment, Property Management & Sales, QUEENSLAND, TENANTS | Tagged , , , , , , , , , , , , , , , , | Leave a comment

‪http://ljgilland.blogspot.com/2019/10/housing-market-conditions-have-turned.html‬

LJ Gilland Real Estate: Housing market conditions have turned a corner, wi… https://ljgilland.blogspot.com/2019/10/housing-market-conditions-have-turned.html?spref=tw

ljgrealestate

LJ Gilland Real Estate: Housing market conditions have turned a corner, wi… https://ljgilland.blogspot.com/2019/10/housing-market-conditions-have-turned.html?spref=tw‪http://ljgilland.blogspot.com/2019/10/housing-market-conditions-have-turned.html‬

We wanted to let you know 4 Celica Street, RUNCORN which is located at possibly the highest point of Runcorn, hence classified as Runcorn Heights, away will have an Open Home this Saturday 19th October 11 am to 11.30 am.

PRESENT ALL OFFERS Be quick or miss out as there’s much interest in this property.  This property represents great value & won’t last long.

View original post

Posted in Uncategorized | Leave a comment

Credit is Key – Australia 23-9-19

Credit is Key Property market has a spring in its step, but a rebound is not yet in the bag.

ljgrealestate

Credit is the key

Westpac’s economics team has a relatively positive view on things, arguing the market will likely put on almost 15 per cent from its June low to the end of 2020.

However, the bank says it all comes down to lending — which is not surprising given the Sydney and Melbourne corrections were in lock-step with a 15 per cent fall in new loans over the second half of last year.

Credit has remained tight for most of this year, but June and July saw an 8 per cent spurt in home loans.

Investor loans rose 5 per cent in July alone, but still remain 20 per cent down over the year.Easier to get a home loan
Rate cuts and looser home loan requirements mean people may be able to borrow 10pc more, writes Warren Hogan.

“Banks are likely addressing their issues in the aftermath of…

View original post 1,626 more words

Posted in Uncategorized | Leave a comment

Pets in rental properties

Securing a rental property comes with an undeniable set of challenges – location, parking, affordability and cranky neighbours must all come into consideration

across Australia one consistent gaping hole in the rental market has forever remained unchanged: the notable shortage of pet-friendly listings.

More than half the population, about 62 per cent, own a pet. However between just five and 10 per cent of properties nationwide are advertised as being pet friendly.

.https://au.news.yahoo.com/the-truth-behind-the-gaping-hole-in-australias-rental-market-100811180.html

Posted in Uncategorized | Leave a comment

LJ Gilland Real Estate:RBA announces cash rate

Linda 姬琳达珍 Debello (LREA) 琳达姬琳达珍Debello LREA – LJ Gilland Real Estate Pty Ltd has sent you a link to a blog:

Blog: LJ Gilland Real Estate
Post: RBA announces cash rate
Link: https://ljgilland.blogspot.com/2019/08/rba-announces-cash-rate.html


Powered by Blogger
https://www.blogger.com/

f18dQhb0S7ks8dDMPbW2n0x6l2B9gXrN7sKj6v4Lz1jW63K6BH5wvqRKN64J7hMQFLCHW1l_Hj91k1H6H0?si=6075850934059008&pi=1be21b10-e34f-49df-a899-95208a77129f

Posted in Uncategorized | Leave a comment

Play the long game

Play The Long Game

A wonderful reminder of the wisdom of holding quality property assets for the long run popped up in my data feed this week.

Dwelling Price Changes over 20 years till August 2019

9b7775bade3753d0ac9974c8c60530e5.jpeg?r=2135892903
The tide of growth flows one way for residential real estate in Australia in you have a long enough time frame, there are definitely exceptions and we are painting with a broad brush but the wisdom remains that you are betting on prices appreciating rather than falling longer term.

Looking at this table there are a few interesting points I noted:

1) If you are holding residential property for longer than 10 years it is a challenge not to make money.

2) These are ‘index’ prices and well chosen and well purchased investment properties could be out performing these numbers, some times significantly.

3) Leverage can be applied to real estate in a way that’s is not easy to copy for other asset classes. There are rarely margin calls in residential compared with investing in the stock market.

4) Timing is a great way to add value, however it’s also fine to buy when you can afford to buy and steadily accumulate buy and hold property as a core strategy.

5) It’s possible that property can remain steady or decline in nominal and inflation adjusted terms for long periods also, just have a look at Perth and Western Australia in this table as a painful example over the previous decade.

Best Regards

Linda 姬琳达珍 and Carlos Debello (LREA)

LJ Gilland Real Estate Pty Ltd

Linda Debello LREA推荐书LJ Gilland房地产
http://ljgrealestate.com.au/testimonials/

Request FREE Rental Appraisal here!

"Your Local Property Management & Sales Specialists"

PO BOX 19
ZILLMERE 4034
Ph: 07 3263 6085

0413 560 808

0400 833 800

0409 995 578 (L)

054f30b2e800c16b00bcc211d421520c4b63da89.png?u=1826866http://ljgrealestate.com.au/competitive-commission/ http://ljgrealestate.com.au/property-management/

http://www.facebook.com/ljgrealestate

The information in this message is intended for the recipient named on this email. If you are not that recipient, please do not read, copy, distribute or act upon the message as the information it contains may be privileged and confidential. If you have received this message in error, please notify us immediately by return email. Thank you for your co-operation

 Please consider the environment before printing this email

f18dQhb0S7ks8dDMPbW2n0x6l2B9gXrN7sKj6v4Lz1jW63K6BH5wvqRKN64J7hMQFLCHW1l_Hj91k1H6H0?si=6075850934059008π=be822576-39d2-4dec-abd9-e145eadc42a5

Posted in Uncategorized | Leave a comment

Yahoo Finance: Australian properties are reselling at losses not seen for six years, led by Melbourne and Sydney

Yahoo Finance: Australian properties are reselling at losses not seen for six years, led by Melbourne and Sydney.
https://au.finance.yahoo.com/news/australian-properties-reselling-losses-not-020528581.html

Posted in Uncategorized | Leave a comment

Yahoo Finance: The simple property formula that works: a tip from a millionaire

Yahoo Finance: The simple property formula that works: a tip from a millionaire.
https://au.finance.yahoo.com/news/simple-property-formula-that-works-tip-from-a-millionaire-210000233.html

Posted in Uncategorized | Leave a comment