Water allocation prices in 2019–20 are unlikely to reach the peaks seen during the worst of the Millennium Drought, according to new ABARES research.
“Prices have been high in 2018–19, largely due to low allocation percentages and hot and dry seasonal conditions, within New South Wales. In recent weeks, we’ve seen water allocations trading at around $450 per ML,” said ABARES head of farm performance and forestry, David Galeano.
“Under the dry scenario, water availability for the southern basin would fall overall, but still remain above levels observed during the worst of the Millennium Drought, back in 2007 to 2009, with ABARES’ model simulating an average annual water price of $473 per ML.
“There is a risk that prices in the Murrumbidgee could increase even more than that next year, with the Murrumbidgee import limit estimated to remain in force, unless conditions improve in NSW.
“However, if we do see a shift to wetter conditions this winter, prices are expected to fall quickly and substantially, similar to what occurred in 2016-17.
“It’s important to remember there’s still plenty of uncertainty about seasonal conditions in 2019-20. Conditions better or worse than the scenarios tested are possible – and hence water prices higher or lower than those estimated in our latest outlook – remain a possibility.
“Aside from seasonal conditions, water demand in the lower Murray has continued to grow in recent years contributing somewhat to higher water prices. However, this growth is not unexpected and remains within the bounds of scenarios presented in a previous ABARES study,” Mr Galeano said.
The full ABARES Water Market Outlook is available on the department website.