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.


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

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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.


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…

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Housing affordability is now at its best levels since 2016, the inaugural Housing Affordability Report from CoreLogic and ANZ has found.

Albury in regional New South Wales is one of the areas where it is more affordable to buy than rent.

Some 26.8% of household income goes on a rental home, however to service the repayment of an 80% LVR mortgage is only 25.4% of household income.

Broken Hill and the Far West area has one of the biggest gaps between rental and mortgage repayments.

Some 25.9% of a household income goes on a standard rental, whereas only 9.2% of household income would go on servicing a mortgage.

In regional Victoria, Glenelg and the South Grampians cost 24.3% of household income to afford to rent, as opposed to the 19.4% repayments on a mortgage.

It is cheaper in Gippsland East, Latrobe Valley, Loddon, Maryborough, Mildura, Moira, Murray River, Shepparton and Wellington to repay a mortgage than to rent.

There are no areas in Sydney and Melbourne’s CBD ring that it is cheaper to pay off a mortgage than rent, however there are a number in Brisbane.

Beenleigh, Caboolture Hinterland, Ipswich Hinterland and the Springwood Kingston region are all more affordable to have a mortgage than rent.


Sales activity has fallen 17% over the year to February 2019, according to the latest CoreLogic Regional Report.

The report, produced with figures from the December 2018 quarter, has noted housing affordability over the last two years has been improving much faster than it had declined over the past decade.

Sydney is described as being “overwhelmingly” the least affordable market to buy in, the report notes, followed by Melbourne. Darwin is the most affordable capital city.

Regional New South Wales is also the least affordable regional market across the country due to the strong value growth over recent years.

For the first time, Hobart is the least affordable capital city to rent.

CoreLogic’s head of research for Australia Cameron Kusher says the end of the housing downturn has had to be adjusted.

“The recent drop in property values follows a long period where prices increased at a much faster pace than household…

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How savvy investors can cash in on suburban zoning changes


The greatest argument in city planning is about density. Most state governments want to contain city growth within the existing urban footprint.

The alternative is urban sprawl, which is impractical and costly, because there’s no infrastructure in greenfield areas.

To create growth within existing suburbs, you have to allow increased density. That means the old model of a family home on a big allotment has to be relaxed.

In February, the Victorian treasurer Tim Pallas warned Melbourne residents to expect more density to absorb rapid population growth, in which Victoria leads the nation.

But homeowners in leafy suburbs don’t want six-packs on their street.

The NIMBY backlash has been considerable and local politicians have become opponents of density, claiming it creates congestion.

The NSW government has, in effect, banned new unit development in Sydney local government areas (LGAs) such as Ryde.

Brisbane City Council has also moved to stop unit…

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In 2016 Rebecca Grace purchased a single-storey four-bedroom house in Sydney for $660,000. However, after purchasing the property she was informed by her mother that the former owner was the serial killer Ivan Milat. Milat also known as the ‘backpacker murder,’ hid his victim’s belongings in the roof and wall cavities, and is currently imprisoned for several life sentences. Ms Grace now wishes she knew the history of the house before purchasing the property. This begs the question, are real estate agents obligated to disclose the past of ‘stigmatised’ properties?

In Queensland, there is no state law that explicitly provides that real estate agents must disclose to potential buyers the unsavoury history of a house, such as a violent crime or illegal drug activity. However, under federalAustralian Consumer Lawreal estate agents must not engage in misleading or deceptive conduct. Silence may constitute misleading or deceptive conduct where in…

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Business owners who have used their property in a different way since originally intended after purchase may have some extra legwork on their hands.


If you have claimed GST credits on property purchases, you may need to report adjustments in your June activity statement.

The amount of GST credit you can claim on a purchase or importation depends on the extent to which it is used for a “creditable purpose.”

The creditable purpose of a purchase changes if either there is a difference between how you planned to use it and how you actually use it, or the way you use it has changed over time.

Right now, the ATO is reminding owners to check if they have changed the use of their property from how they originally intended, as they will need to make an adjustement.

The ATO is also reminding owners who have built a property for sale and rented it out while finding a buyer that they need to keep records to show they are holding the property for a ‘dual…

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The rate of property price decline continues to ease-Overall we are seeing further evidence that the worst of the housing market conditions might now be behind us. Hear all the national and state based insights here.

The rate of property price decline continues to ease-Overall we are seeing further evidence that the worst of the housing market conditions might now be behind us. Hear all the national and state based insights here.

In this month’s housing marketing update, CoreLogic share that Australian dwelling values fell half a percent last month as the pace of home value declines continued to ease after moving through a recent low point in December last year when national dwelling values were falling at a much faster rate.  The latest figures take national housing values 7.2% lower over the past twelve months to be down 7.9% since peaking in September 2017.

The slowing of the rate of decline is attributable to an easing in the market downturn across Sydney and Melbourne where an improving trend in the rate of decline has been evident over the past three months.  In December last year, Sydney dwelling values were down -1.8%, with the pace of falls progressively moderating back to a month on month decline of 0.7% in April.  Similarly, Melbourne values were down -1.5% in December, with the rate of decline slowing to -0.6% in April.

Although the national rate of decline has improved, the geographical scope of falling values has broadened.  In April, dwelling values fell across every capital city apart from Canberra, while regional areas of Tasmania, Victoria and South Australia also avoided a fall.  The broad-based nature of weak housing market conditions highlights that tighter credit conditions are having a dampening effect across all markets.

Annually, national dwelling values were down -7.2%; the largest decline since the twelve months ending February 2009, which was associated with the Global Financial Crisis.

Overall we are seeing further evidence that the worst of the housing market conditions might now be behind us.  Values are still broadly declining, however the pace of decline has moderated since December last year and there are some tentative signs that credit flows have improved, albeit from a low base.

Considering that tighter credit conditions were one of the primary catalysts for the housing market downturn, any sign that credit availability is improving would be a welcome outcome for the housing market.

According to the Australian Bureau of Statistics, lending to households for dwellings, excluding refinancing was up 2.7% on a seasonally adjusted basis in February.  Additionally, a rise in CoreLogic valuation platform activity throughout March hints at a further improvement in housing finance, which will likely be reported in the next ABS release.

Another indicator of a subtle improvement in the housing market can be seen in auction clearance rates that are holding around the mid-to-low 50% range, albeit on low volumes relative to a year ago. The correlation between auction results and housing market conditions is strongest in Melbourne and Sydney where auctions comprise a larger proportion of selling activity.

While a mid-50% clearance rate doesn’t suggest housing prices are set to bounce back, it does imply a closer fit between buyer and seller expectations and the improved auction success rate supports the reduced rate of decline in housing values across Sydney and Melbourne.

Watch “Brisbane Housing Market Update | May 2019” on Vimeo:

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One of the nation’s top economists has revised his house price predictions in light of a Coalition victory. Here’s what his property roadmap looks like for the nation’s investors.

According to Mr Oliver, a range of pricing and economic factors caused the downturn:

Firstly, a correction to the huge surge in 2017, where properties where overvalued and mortgagees were left with high debt
The end of the mining booms in 2014 for Perth and Darwin
Tightening lending standards that cracked down on lending to investors and interest-only loans
A surge in supply of units in the major capitals
80 per cent collapse in foreign demand
A big pool of interest-only borrowers switching to principal and interest loans
Price fall feeding on themselves with a fear of not getting out of the market driving down the price
Investors started to fact in the probability of Labor victory, which would restrict capital and capital gain taxes, meaning another 5 to 10 per cent could fall
Recent wins for the property market

While the drags remain significant, several positives have become apparent over the last few weeks. Mr Oliver believes these will help stabilise the market:

First home buyers are now on the way as the government’s First Home Loan Deposit scheme takes effect.
Secondly, APRA is lowering the 7 per cent mortgage buffer making it easier to access capital.
The RBA governor has all but confirmed that rate cuts are on the way.
The threat to changes to negative gearing and CGT is gone with a Morrison government victory.


AMP chief economist Shane Oliver saidthe combination of Labor’s negative gearing plans not coming into effect, a cash rate cut likely for next week, Mr Morrison’s promised financial help for first home buyers and the banking regulator relaxing its 7 per cent interest rate test points to house prices bottoming earlier and higher than previously expected.

Mr Oliver now anticipates capital city average house prices to have a top-to-bottom fall of 12 per cent – 10 per cent of which is already done – rather than 15 per cent.

Further, he expects prices to largely hit their floor at the end of the year.

A return to boom time?

However, given the still poor affordability, high debt levels, tighter lending standards and rising unemployment, a quick return to the boom time is unlikely.

Simply put: the fall has been big, and it will take a while to recover.

According to

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Australia finally knows who is in government for the next three years. Take a look at what that now means for the business community.

The Liberal/Nationals Coalition has held onto power for another three years. The government made a number of promises in the lead up to the election, and its budget handed down in April was also used as part of its election platform, containing an array of measures aimed at the business community.

Here is a look back at what was promised and it will mean for business.

Federal budget measures

April’s budget formed a central part of the Coalition’s bid for re-election. Among the measures that were announced, or were reaffirmed, included:

– The extension of the instant asset write-off and increase of the threshold to $30,000. This is already in effect, having been passed by parliament in the days after the budget. Eligibility was also increased to businesses with turnover of up to $50 million, up from the original $10 million.

– Under the government, the $30,000 threshold is set to expire on 30 June next year, at which point it will revert back to its original $1,000 limit.


– Confirmation that it planned to cut the business tax rate to 25 per cent for all businesses with turnover of less than $50 million. Labor has already pledged to support the cuts.

– The establishment of a Small Business Taxation Division within the Administrative Appeals Tribunal, to expedite tax disputes for SMEs with a lower application fee.

– A $9.2 million spend to create a dedicated sham contracting division within the Fair Work Ombudsman.

– The allocation of $249.8 million over five years to trial a new employment services model for 95,000 jobseekers.

– The launch of a National Labour Hire Registration Scheme.

– $60 million in funding for export development grants.

– Ongoing funding for the Fair Work Commission’s Workplace Advice Service clinics.

– The rollout of e-Invoicing in a bid to reduce business transaction costs.

– Reaffirmed commitment to the establishment of a $2 billion Australian Business Securitisation Fund, which it said would improve SMEs’ access to finance.

– A recommitment to having federal government agencies pay SME contracts within 20 days, and force larger businesses tendering for government contracts to commit to the same.

New policies

As of Thursday (16 May), the government said that it had made “$1.4 billion in new spending commitments over the forward estimates” since the budget was announced.

Much of this additional spending was focused on targeted health initiatives.

Specifically for the business community, new funding promises included:

– The creation of a new Manufacturing Modernisation Fund, designed to support Australian manufacturers make the transition to digital technologies. The fund would reportedly launch with an initial injection of $50 million.

– $3.5 million in funding for the emerging space industry, and $900,000 to “explore Australia’s growing readiness in launch capability”.

– A $75 million commitment for “new mid-career checks” for women, aimed at helping women return to the workforce after having children.

– Millions of dollars in additional funding aimed at increasing employment opportunities for indigenous Australians.

– Additional commitments on specific infrastructure projects, such as transport links in Melbourne and upgrades on the Hume Freeway.

– A further $15 million to create five additional Regional Study Hubs – a scheme designed to support university students to remain in their local communities rather than move to major towns and cities.

– The launch of a new $10 million hub for nurturing Indigenous entrepreneurs and small businesses in Perth.

Other commitments

Even before the budget was handed down or the election date formalised, other election promises had already been made by the government.

At the end of March, the government matched Labor’s pledge to introduce legislation that would ban unfair terms being used in standard form contracts issued to SMEs by larger businesses.

It also pledged to spend $6.4 million to reduce red tape for Tasmanian small businesses, centralised around four “priority regulatory reforms”.

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