FINAL REVIEW REPORT FOR THE MURRAY-DARLING BASIN … · 19 of 27 Sept MDBA report. Ongoing work...

FINAL REVIEW REPORT

FOR THE MURRAY-DARLING BASIN AUTHORITY (MDBA)

AN INDEPENDENT REVIEW OF THE SOCIAL AND ECONOMIC

MODELLING INPUTS TO THE NORTHERN BASIN REVIEW

RFQ Nos: MD3480 & MD003604

12 October 2016

Prepared by Dr Boyd Blackwell1, Mr Jim McFarlane1, & Mr Richard Stayner2

1. UNE Business School, University of New England

2. Institute for Rural Futures, University of New England

FINALNORTHERNMURRAYDARLINGBASINSOCIO-ECONOMICMODELLINGREVIEW12OCTOBER2016

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©2016Blackwell,McFarlaneandStaynerUniversityofNewEngland,ArmidaleNSW2350Sourcesoffiguresfrontpage:Fromtoprightclockwisewww.mdba.gov.au/basin-plan-roll-out/northern-basinMDBA.(2016).NorthernBasinReview:TechnicalOverviewofSocioeconomicAnalysis,FinalReport,27Sep2016.Canberra:MDBA.MDBA.(2015).FishandFlowsintheNorthernBasin:ResponsesofFishtoChangesinFlowintheNorthernMurray-DarlingBasin.Canberra:MDBA.Retrievedfromhttp://www.mdba.gov.au/kid/files/2555%20-%20Fish%20and%20Flows%20in%20the%20Northern%20Basin%20Stage%203%20Final%20Report%20August%202015%20-%20Executive%20Summary.pdfBettles,Colin.(2015,29September).CountingBasinPlan'sSocialCosts.TheLand.Retrievedfromhttp://www.theland.com.au/story/3388655/counting-basin-plans-social-costs/?cs=4963Asuitablereferenceforthisreportis:Blackwell,Boyd,McFarlane,JimandStayner,Richard(2016).FinalReviewReportFortheMurray-DarlingBasinAuthority(MDBA):AnIndependentReviewoftheSocialandEconomicModellingInputstotheNorthernBasinReview,12October2016.Armidale:UniversityofNewEngland.


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TableofContents1. ExecutiveSummary..........................................................................................................4

Overallviewofmodelling...........................................................................................................4Socialandeconomicmodelling..................................................................................................4CommunityConsultationReport................................................................................................6LowerBalonnefloodplaingraziersmodellingreport.................................................................9

2. Introduction...................................................................................................................11Backgroundandcontext...........................................................................................................11Materialsprovidedandimplicationsforreview.......................................................................12Generalapproachtoundertakingmodellingreview................................................................13Outlineofreport.......................................................................................................................16

3. LiteratureReview...........................................................................................................17Globalassessmentofriverbasinwaterproductivity................................................................17Critiqueoftraditionalwaterefficiency.....................................................................................17WaterproductivityintheAustraliancottoncontext................................................................17WorkundertakenbyMDBA......................................................................................................18Regionaleconomicresilience,commuting,andtechnologicalshifts.......................................22Australianwaterpolicyspecificstudies....................................................................................23Internationaleconomicassessmentofwaterreductions.........................................................24Summaryandconclusiononliteraturereview.........................................................................25

4. CommentsonGeneralApproachtoModelling...............................................................28Introduction..............................................................................................................................28Generalapproachandfactorsofproduction...........................................................................28

5. CommentsonSpecificAspectsofModelling...................................................................31Broaderconsiderationofsectorsforregionalandlocaleconomies........................................31UseofABSemploymentdata...................................................................................................31ThelinearrelationshipusedinMDBAwater(ML)toland-usemodelling................................33Relationshipbetweenhectaresandjobs..................................................................................34Longerperiodfordata..............................................................................................................34Referencingofdatasourcesandassumptions.........................................................................34Clearandexplicitpresentationoftheeconometricresults......................................................35Correctionforomittedvariablebias.........................................................................................35Otherreviewercomments........................................................................................................36

6. CommunityConsultationOverModelling.......................................................................37Introduction..............................................................................................................................37Briefreview...............................................................................................................................37

7. LowerBalonneFloodplainGrazierModelling..................................................................40Introduction..............................................................................................................................40ReviewItems.............................................................................................................................42


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1. ExecutiveSummaryOverallviewofmodellingTheMDBAisreviewingthewaterrecoverytargetsfortheNorthernBasinandtoinformtheirdecision-making,inourindependentview,theyhaveundertakenanextensiveseriesofworksonmodellingthesocialandeconomicimpactsofwaterrecoveryfromthecommunitiesoftheNorthernBasin.Theybringthistogetherinaninterimsummaryreport1thatallowsthereaderthentoseetheextentofworkandthekeyassumptionsandresults,whileatthesametimeifrequired,beingabletodrilldeeperintothedetailoftheaccompanyingreports.2Undertakingthismodellingworkisnoeasytask,givendatalimitationsandmethodologicalhurdles,howeverweareconfidentthatthroughourreviewprocess,theMDBAhaveshownawillingnesstorefineandenhancetheirmodellingbytakingonboardthemajorityofourimprovementrecommendations,ifnotintheshorttermduetotimeconstraints,thenaspartoftheirmediumtolongertermplannedworkprogram.WearealsoinagreementwiththeMDBAsoverallapproachtotheuseofthemodellingwork,andrefertoFeldstein’squotethat“ausefulmodelisnotonethatis‘true’or‘realistic’butonethatisparsimonious,plausibleandinformative”.3Becauseofthisinherentlimitationinallmodels,theMDBAhasabroadrangeofsupportingsocial,economic,contextualandlocalinformationthatispresentedandshouldbedulyconsideredalongwiththemodellingoutputsinreachinganygivendecision.Similarly,noruralcommunityexistsina‘stablestate’ofperfectpredictability,butisadynamicallycomplexsystemthatisinacontinualstateofadjustmenttosomesocio-economicchangeoranother.Havingahealthyappreciationofthiscomplexity,suchasbyunderstandingthateachcommunityhasadifferentadaptivecapacitytochange,showsthattheMDBA’smodellingandsupportinginformationaretogethercriticaltomakingdecisionsoverwaterwithdrawals.SocialandeconomicmodellingTheMDBAhaveprogressedtheirsocialandeconomicmodellingworkfortheNorthernBasincommunitiesbyusingthekeyindicatorforsocialandeconomicwellbeingforcommunities:employment.Aspartourindependentreviewwehavemade14recommendations(notedinthemaintextofthisreportasRecommendation#andinyellowhighlights)whereinouropiniontheMDBAwasabletoimproveitsmodellingwork.Theserecommendationsshouldbetemperedbyourthreecaveatsorfindings(alsonotedinthemainbodytextasFinding/Caveat#inbluehighlights).Table1summarisesourrecommendationsanddocumentshowtheMDBA,inconjunctionwithKPMG,havefolloweduponthemajorityoftheserecommendationsasnotedinthefinaltwocolumnsinredorsubsequentlyingreen.Table1:Summaryofrecommendationsandfindingsorcaveats,andresponseperiod(Sourceandnotes:seeRecommendation#orFinding/Caveat#intext;*meansimportantmatterstoaddress)Recommendation#• Finding/Caveat#

Detail ShorttermMDBAresponseandsubsequentresponse,subsequentresponse

MediumtolongtermMDBAresponseandsubsequentresponse,subsequentresponse

R1 Considerationofwaterwithdrawalimpactsonotherfactorsofproduction

✔ Atleasttobediscussed✔

4 ✔ andaddressedonpp.8-9,

19of27SeptMDBAreport.

✔ Ongoingworkprogramcouldincorporatethetechnicalinclusionoffactor

1MDBA.(2016).NorthernBasinReview:TechnicalOverviewoftheSocioeconomcAnalysis,DraftInterimReport,27Sep2016.Canberra:MDBA.2Forexample,KPMG.(2016).NorthernBasinCommunityModelling:EconomicAssessmentofWaterRecoveryScenarios,16August2016DraftReport.Sydney:KPMG.3Feldstein,Martin.(1982).Inflation,TaxRulesandInvestment:SomeEconometricEvidence,The1980Fisher-SchultzLectureoftheEconometricSociety,Econometrica50(4),825-862,p.829.http://www.jstor.org/stable/19127664KPMG.(2016).pp.18-19.


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Recommendation#• Finding/Caveat#



tolabour,likelandandcapital

impactsandsubstitutability.✔ Responsivewagedatamayhelpcapturesubstitutioneffects5

R2 Theneedtoattachmonetaryvaluesviaimpactsonreturnstofactorsofproductionortheassetvaluesofthesefactors

✔ Atleasttobediscussed✔ asabove–assetvaluesnotexplicitlyaddressedthoughmentionede.g.p.17KPMGreport✔ andaddressedonpp.8-9,19of27SeptMDBAreport.

✔ Ongoingworkprogramcouldincorporatetheinclusionofmonetaryvaluesforfactorimpacts✔ asabove–assetvaluesnotexplicitlyassessedthoughmentionede.g.p.17KPMGreport,

• F/C1 Exogenousfactorsmayhaveagreaterinfluenceonfactorimpacts,substitutability,returnsandassetsvalues

✖ Ifsuchacasecanbeproven,Nil;MDBAhavecapturedthenuboftheissueceterisparibus✔ AddressedinMDBAreporte.g.p.2,27Sep2016version

?Influencescouldbetemporallycontrolledforandmonitored

• F/C2 Jobsonlycapturespartofthesocialandeconomicimpactpicture

SeeR1&2above SeeR1&2above

R3 Incorporationofrelativeemploymentmeasuresintothemodelling

✖ (Currentlyas%oftotalemploymentsufficient)✔

✔ Areviewtoidentifymostdesirablerelativeemploymentmeasurese.g.employmentconcentration,utilizationcombinedwithStenekesetal.6✔ notedonp.33ofKPMGreport

• F/C3 Joblosseslikelytobeoverestimated7duetoimpactsoftechnology(e.g.GMcotton)andsubstitutionoflabourwithcapital

✔ Canbenotedassuch✖notexplicitlyaddressed:substitutiondiscussedp.19ofKPMGreport,thoughdiscussedasdriverofchangeonp.20ofMDBAreport.8✔–counterreasonsforunderestimationnowincludedin27SeptMDBAreport,pp.18-19

✔ Couldbeexplicitlyaddressedinongoingmonitoringandevaluation✖(NeedasectionlikeinKPMGreportaboutfuturework)✔–futureworksectionnowincluded

R4 Greaterexplicitbreakdownofemploymentimpactsby720industrialsubsectorsforeachcommunity

✔ Willbetterinformagreementmakingbyhelpingstakeholderswithfocusingadaptationresponses✔ notedresultsbasedon720;MDBA,p.15and✖ MDBAbreakdowncouldbeprovidedwhererequestedbycommunity.

R5 Mappingofspatialimpacts ?Thoughveryusefulinhelpingreachagreement,timeframeslikelytobetooshort

✔ ✖recommendationstillstandstobeaddressed.Couldbeincludedinpossiblefuturework

R6 Identifyspatialemploymentimpactsthroughvarioustypesofemployment(local,inbound,andoutbound,microsubsectorsources)

?SeeR7whereinsufficienttimetodothis,thoughdoingsocouldeasedecision/agreement-making

✔ ✖recommendationstillstandstobeaddressed.Couldbeincludedinpossiblefuturework

R7 SourceofABSemploymentdataandhowitwas

✔ importanttoprovideanearlyindicationofspatialconsequencesofjoblosses,orto

5KPMG.(2016).p.33.6Stenekes,N,Kancans,R,Randall,L,Lawson,K,Reeve,I,&Stayner,R.(2012).RevisedIndicatorsofCommunityVulnerabilityandAdaptiveCapacityAcrosstheMurray-DarlingBasin:AFocusonIrrigationinAgriculture.Canberra:ABARES.http://www.mdba.gov.au/kid/files/1715-Revised-indicators-of-community-vulnerability.pdf7Seepreviousfootnoteaboutcaseswherejobsmayalsobeoverestimated.8MDBA.(2016).NorthernBasinReview:TechnicalOverviewofSocioeconomicAnalysis,DraftReport,2Sep2016.Canberra:MDBA.


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Recommendation#• Finding/Caveat#



extractedneedstobediscussed

providecaveatsondegreeofoverorunderestimation ✖notyetdiscussedinMDBAorKPMGreports.✔–nowidentifiedasPlaceofUsualResidencee.g.p.19of27SeptMDBAreport

R8 Relationshipbetweenwateruseandyield

✔ Asperbelow✔ nowexplainedthoughourviewisthattheunderlyingseriesistimedependent

R9 Relationshipbetweenhectaresandjobsneedsasuitabletransformationandalagofdependentvariableasexplanatoryvariable

✔ Standardstatisticalpracticeswithtimeseries(orpanel)data✔ nowexplainedinMDBAreportthoughourviewisthattheunderlyingseriesistimedependent

R10 Obtainalongerperiodforthedata,i.e.largernumberofobservations

✔ (toimprovethestatisticalpowerofthemodelling)✔ nowexplainedinKPMGreportp.5thatlimitedbyverysmallnumberofobservations

R11 Referencingofdatasourcesandassumptionsinmodellingspreadsheetsand‘groundtruthing’datawithstakeholderse.g.industry

✔ ✔ nowdetailedandhaveundertakencommunityconsultation(MDBA,p.8)–itisnotwithinthereview’sscopetoverifytheveracityofthisconsultation

R12 Clearandexplicitpresentationofstatisticalresultsofmodellingincludingstandarddiagnostictesting

✔ ✔ nowdetailedinreporting,includingautocorrelationasatimeseriesdiagnosticaltestwithexplanationgiven9

R13 Inclusionorresultsofpotentialomittedexplanatoryvariablesinregressions

✔ Otherwiseresultscouldbemisinformingorinsufficientlydocumented.✔ reportingnowexplainsprocessundertakentocheckforomittedvariables

R14 Otherreviewercomments ✔ Havenotcheckedforthese;thesearelefttoMDBAtoaddress.Thesearenotwithinthescopeofourtermsofreference

Asshowninthetable,anumberofopportunitiesexistfortheMDBAtobetterpresentresultstotheaffectedcommunitiesaspartoftheirongoingworkprogram,includingaspartoftheirmonitoringandevaluationframework,particularlythroughtheadditionofasectionintheirsummaryreportofplannedfuturework(F/C3)asKPMGhaveintheirdraftreport.Thisfutureworkcouldincludespatialmappingofimpactsandbetteraccountingforleakageintheemploymentimpactanalysis.Thereportshavebeenimmediatelyimprovedbyprovidingabriefdescriptionofthetypeofsourceofemploymentdataprimarilyused,thatis,placeofusualresidenceisusedratherthanplaceofworkorplaceofenumeration(R7).WhilewewouldliketoseeamoredetailedbreakdownofimpactedindustrialsectorstohelpwithcommunityadaptationandeconomicplanningwearesatisfiedwithhowtheMDBAorKPMGhaveaddressedourpriorconcerns.CommunityConsultationReportInadditionwereviewedtheMDBAconsultationreportandsummarisetheoutstandingissuesinTable2.Thefullreviewcanbereadinsection6ofthisreport.Ofnote,realestatevaluechanges,accountingorplanningforlagtimesfornewindustriestostart-up,costsbeinggreaterthanbenefits,significanceofimpactsontownsandbusinessesfrombuybacks,andthefactthatlocalirrigatorsdonotwanttoselltheirwaterneedtoallbeaddressedintheMDBA’s(orKPMG)modellingreporting.9MDBA.(2016).NorthernBasinReview:TechnicalOverviewoftheSocioeconomcAnalysis,DraftInterimReport,10Oct2016.Canberra:MDBA,pp.14-15.


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Table2:IssuesraisedthroughCommunityConsultationPhase210IssueNo.

Issue Detail MDBAresponse Ourresponse(subsequent)

DataandInformation

CCI1 Datapaucity MDBAaskedhowhandingdatagapspost2011.

ConstrainedbyABScensusyears–2011mostrecent(2016inprogress,availablemid2017&willbeincludedinfuturereports)yetsupplementedthrough(i)annualABSagand(ii)ABARESfarmsurveysand(iii)AustralianCollaborativeLandUseandManagementProgramMay2016updateaswellasTownsend(iv)talkingwithlocalfarmers,businessesandpeopleinthecommunity.

✔MDBAresponsevalid,except(iv)whileprovidingcontextcannot,aspresented,bevalidatedasrepresentative✖

CCI2 Jobnumbers Preferenceforactualjobnumbersratherthanpercentagechange

Incorporatedintoanalysis ✔

CCI3 Full-timeequivalents(FTEs)versusemploymentlevels

EmploymenthaslowcorrelationwithFTEs:PeaksandtroughsnotcapturedbyFTEs.

Variabilitytakenintoaccountinanalysis

✔

CCI4 Realestatevaluechanges

Whynotincludedintheanalysis?

(Noresponseprovided) ✖ ShouldbeaddressedbyMDBA,similartoourcommentinregardstoaccountingforsubstitutionbetweenfactorsofproduction:Land,LabourandCapital.✔ nowaddressedonp.19of27SeptMDBAreport.

Impactlagtime

CCI5 Impactsfrompreviousbuybacksstillflowingthroughcommunities

Dirranbandiusedasaanexample

Seebelow Seebelow

CCI6 Lagtimefornewindustriestostart-up

Temporalnatureofimpactsandconsequencesforclosuresandstart-upsneedsgreaterconsideration

Lagtimelikelytobe2-5yearsforadaptationoradjustmenttowaterrecoveryshock.Wheretownsarelookingtonewindustriesandinnovation,theyshoulddiscussbroadrangeofissuesincluding:credit,supply,andfarm-townconnections.

✖ Theanalysisshouldincorporateatleastsomediscussionoftemporalimpacts–atleastshorttermandintermediatetolongerterm.

ManagementofBusinessandCommunityDiversityandConnectivity

CCI7 Communityboundaries

WhydidtheyusethosedifferenttoABS?

BecauseboundarieswereestablishedbasedontakingaccountofthediverseeconomyandcommunitycontextforeachBrokenlinesindicateconnectivitybetween

✔ butnotedifficultlyforthirdpartytoreproduceresultswithoutconversionofstandarddatatonewboundaries

10ThistableprovidesasummaryofMDBA.(2016).NorthernBasinReviewPhase2EngagementProgram:CommunityMeetings,July2016.Canberra:MDBA.


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IssueNo.


communitiesandmorebroadly–demarcationalwaysdifficult.

CCI8 Noagandagbusinessrelationship

Arenotallindustriesconnectedanddependentonaginsmallagtowns?

Nonagincludes:hairdressers,retailandaccommodation.Appreciatethesearen’tunrelatedtoagesp.insmalltowns.KPMGmodellingdesignedtoaccountfortheserelationships.

✔ again,sometimesdemarcationdifficultbuthastobedone.

CCI9 StructuralchangesinStGeorge

Resultedinislessdiversityofbusinesses

(Noresponseprovided)

Buybacksversusadditionalinfrastructureinvestment

CCI10(i)

Buybacks–v-infrastructurehavedifferentimpacts

TheseneedtobeunderstoodbyMDBA

(Noresponsenecessary–seebelow.)

NA

(ii) Coststocommunitiesgreaterthanwhatpresented

Whynotafullcost-benefitanalysis?

(Nodirectresponseprovided) ✖ Needstobeexplicitlyaddressed.✔ Nowaddressedonp.7ofMDBA27Sepreport:limitedinformationtodoso,wouldrequirevaluejudgments,andmonetizationmayobscuresocialandeconomicrelationshipoutcomes.

(iii) Significantimpactsontownsandbusinessesfrombuybacks

HowisMDBArespondingtothis?

(Nodirectresponseprovided) ✖ Needstobeexplicitlyaddressed

(iv) Localirrigatorsdonotwanttoselltheirwater

ReasonwhyAustralianGovernmentisprioritizinginfrastructurespendingoverbuybacks11

ImplicitreferencetoAustralianGovernmentWaterRecoveryStrategy?

✔ WhilestrategysetsoutGovernment’sstrategydoesthisaddresscommunityconcernsandideologicaldividebetweensavingwaterfortheenvironmentthroughbuy-backsandcreatingmorewaterforgrowersthroughinfrastructureinvestment?Thereisacaponwaterbuy-backsandplanforinvestment.✖

Climatevariabilityandchange

CCI11 Impactofdrought

Discussed Modellingthroughscenariostakesalong-termviewtotakeaccountofarangeofpressures,incl.drought,whichcommunitiesneedtomanage.MDBApresentedshiftsindeclineincasuallabour,changeinagestructure,impactsonbusinessresultingfromdroughtovertime

✔

CCI12 Climatechangeimpactsoncommunity

Havethesebeenincluded?

Hydrologicalmodellingdoesnotincorporateclimatechangescenariosratherincorporatesarangeofhistoricalclimateconditions12thatmorethanadequatelycapturesaverageclimate

✔

11DepartmentofEnvironment.(2014).WaterRecoveryStrategyfortheMurray-DarlingBasin,June2014.Canberra:CommonwealthofAustralia.Retrievedfromhttp://www.environment.gov.au/system/files/resources/4ccb1c76-655b-4380-8e94-419185d5c777/files/water-recovery-strategy-mdb2.pdf12MDBA.(2012).HydrologicalModellingtoInformtheProposedBasinPlan,February2012.Canberra:MDBA.Retrievedfromhttp://www.mdba.gov.au/sites/default/files/pubs/Hydrologic_Modelling_Report.pdf


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IssueNo.


changeimpactsonwateravailability.ReferredtoMDBAsapproachtoclimatechange13

Movingforward

CCI13 QldMurray-DarlingCommittee

ComplimentaryaboutworktodateandneedtoworkwithUniversitiesonimpactsforfishandbirds

(Noresponserequired) NA

LowerBalonnefloodplaingraziersmodellingreportFinally,wereviewedthemodellingofimpactsforthefloodplaingraziersintheLowerBalonne.Overallthemodellingappearsthoroughbeingcontextualizedbyconsultationanddiscussionwithgrazierstobetterinterprettheresults;themodellinghasbeenpreparedinasufficientlycomplexwayyetgroundedbyin-builtrulesthatmirrorpracticalgrazierdecision-making.OurconcernswiththemodellingcentreonthatdoneforgrazierearningsassummarizedinTable3butwebelievethesehavebeenrespondedtobytheMDBAasnotedinthetable.Ifnecessary,furtherMDBAmodellingworkinthelonger-termcouldincludethesesuggestions.Table3:SummaryofreviewitemsIssueNo.

Issue Detail MDBAresponse(whererelevant,oursuggestion)

GI1 Earningsmodelling–inclusionoffullcosts

Overheadorfixedcostscouldbeincludedintheearningestimatestoprovidenetearnings(toensuregrazierstakeaccountoflandtaxes,capitalassets,managerincome–notedonp.15–andforgoneincometothemselves),however,onlyconsideringthemarginalcostsisaneconomicallyvalidapproachandfixedcostandwealtheffectsareexplicitlynotedasnotincludedinthemodellinginAppendixB,p.43andasalimitation.

✔Floodplainmodelledasasingleunitratherthanforindividualbusiness–toogreatavariation(10-20timessizedifference,smallesttolargest)tomodelatypicalbusinessplusmodellingcomplexities(changesinbusinessstructure/processes)fromwaterchanges)outsidescopeofproject.14

GI2 Earningsmodelling–inclusionofrelevantmarginalcosts

Establishingwhetherfloodplaingrazingisviableshouldincludeconsiderationofallrelevantmarginalcosts(asnotedabove)butalsoforgoneincometograziersthemselves–toensuretheyearnenoughtopaythemselvesfortheirefforts),otherwisetheseco-benefitsofenvironmentalflowsshouldbeseenasco-costs/non-benefitsofwaterfortheenvironment.

✔Labourcosts(variable)explicitlyincludedinmodelling,thoughnot‘forsell-offs’or‘agistmentwhichmostlyinvolveloadingandunloading’stock.15

GI3 Yearlyearningsestimates–incorporationoftimevalueofmoney

Asnotedbyauthoronp.32,theseneedtobesummedovertimebecausetheyaretypicallyearnedatpointsintime.Hastheauthorconsideredtimevalueofmoneyintheirearningsmodelsandifnot,itmaybebettertoconvertannualbenefitstonetpresentvaluestoaccountforthemismatchofcostsandbenefitflowsovertime.

✔Yeswasconsideredthoughresultstobeinterpretedaswhatisexpectednextyearunderthedifferentscenarios,NPVmayconfoundsomeofimportantmessagesaboutsequenceofflowsbecausevolumesnotrandomlydistributedthroughtime,itdoesnotincludecostsandbenefitsforcottonreducedupstreamandisonlyapartialanalysis,andresultsrelatetowholefloodplainandnotindividual

13Neave,I,McLeod,A,Raisin,G,&Swirepik,J.(2015).ManagingwaterintheMurray-DarlingBasinunderavariableandchangingclimate.Water,42(2),102-107.Retrievedfromwww.mdba.gov.au/sites/default/files/pubs/Managing%20water%20in%20the%20murray-darling%20basin%20under%20variable%20and%20changing%20climate.pdr14Wakerman-Powell(2016)Pers.Comms(Email),16Sep2016,MDBA,Camberra.15Ibid.Wakerman-Powellprovidedspreadsheetmodelthatincludes‘workingcosts’assheepandpricingvariables.


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IssueNo.

Issue Detail MDBAresponse(whererelevant,oursuggestion)

businesses.(Recommendtheinclusionofthesecomplexitiesinfuturemodelling)

GI4 Modeldrivenbywaterinputratherthancommodityprices

Otherfactorsmaydrivegrazierdecisionsmorethanenvironmentalflows,suchascommoditypricesandexchangerates.Wakerman-Powellspecificallynotesthisonp.43ofAppendix,particularlywhereafterdroughtrestockingisassignificanttodecisionmakingasreturnofwater.

Notnecessary


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2. IntroductionBackgroundandcontextThisreportprovidesanindependentreviewofthesocio-economicmodellingundertakenbytheMurray-DarlingBasinAuthority(MDBA)forarangeofwaterscenariosforthe21communitiesoftheNorthernBasinasshowninFigures1and2.Figure1:LocationofNorthernBasincommunities,Qld&NSW,Australia(Source:MDBA201616)

ThisreportfollowsthatwhichwehavepreparedfortheMDBA’ssocio-economicmodellingundertakenfortheStGeorgeandDirranbandi(Hebel)communities.17Bybuildingonthispreviousreport,thecurrentreportincludessomenecessaryduplicationincludingtheliteraturereviewandsomegeneralreviewcommentsfromthepreviousreportwhichremainrelevanttomodellingthe19othercommunities.

16UpdatefromBradley,J.(2016)Pers.Comms(Email),12Oct,Canberra:MDBAofMDBA.(2016).Socialandeconomicchange–Bourke,10Aug2016.PowerPointPresentation.Canberra:MDBA.17Blackwell,Boyd,McFarlane,Jim,&Stayner,Richard.(2016).IndependentReviewofMDBADirranbandi(&Hebel)andStGeorgeSocio-EconomicModellingfortheNorthernBasin:FinalReport23June2016.Armidale:UniversityofNewEngland.


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Figure2:MapofNorthernBasinandTributaries(Source:www.agforceqld.org.au)

CopiesofthetermsofreferenceinpreparingthisreportareprovidedinFigure3.MaterialsprovidedandimplicationsforreviewWehavebeenpresentedwithinitialandfinaldraftsanddescriptionsrespectivelyof:

1. the21communityprofilesanddescriptionsaswellas2. thecommunity‘narratives’preparedbyAmandaBarwick3. KPMGmodellingreport184. MDBA’s‘Documentationforthehydrology-landusemodelingreport’andtwosupporting

18VariousdraftsincludingKPMG.(2016a).NorthernBasinCommunityModelling:EconomicAssessmentofWaterRecoveryScenarios,16August2016DraftReport.Sydney:KPMG;andKPMG.(2016b).NorthernBasinCommunityModelling:EconomicAssessmentofWaterRecoveryScenarios,September2016DraftReport.Sydney:KPMG.


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modellingsheetsentitled‘NBRhydro-landusemodel’and‘NthBasinrainallocnag’195. MDBA’sPresentation,‘TripleBottomLineAssessmentofSDLsfortheNorthernBasin’206. MDBA’scommunityconsultationreport217. MDBA’sLowerBalonnefloodplaingraziersreport228. MDBAtechnicalsummaryreport239. UniversityofCanberrareport24

thefinalversionsofwhichwehavenotyetseenbutwebelieve1and2provideessentialcontextandadditionstothemainmodelingworkdonethrough3and4fromqualitativeaswellasquantitativeperspectives.ThemarryingofqualitativeandotherquantitativecontextualinformationtothemodellingmeansthattheMDBAisnotrelyingonthemodellingsolely,thoughthishasthepotentialtoaddtoevidenceinsupportingtheirdecisions.Forexample,theMDBAisapplyingtheTripleBottomLine(TBL-5)approachtoitsdecision-making,asdepictedinFigure4.Thecommunityconsultationthathasbeenundertaken(6)iscriticaltohelpaddresscommunityconcernsoverwaterwithdrawals.Waterwithdrawalswouldrarelybeacceptabletoregional,ruralandremotecommunities.However,agreatdealofangstandstresscanbereducedifafairapproachusedtodeterminetheallocationofwithdrawalsamongstcommunities(thoughthisiscomplicatedbythehydrologicalandphysicalconstraintswithinthebasinaswellasenvironmentalflowrequirements)–thatisifproceduraljustice25isfollowed–distributionaljusticeiswhatcommunitiesmaybemostconcernedaboutbutwehavenotbeencommissionedtocommentonthisdirectly–ratherwehavebeenaskedtocommentonthesocialandeconomicmodelling,howitcanbeimprovedandwhethertheMDBAapproachisreasonable.TheMDBAtechnicalsummaryreportisakeytocommunicatingtothepeopleofthe21communitiesthemodellingapproachusedbyMDBAandsynthesisingthefindingsfromthevariousreportsandelementstotheirmodellingapproachfortheNorthernBasin.GeneralapproachtoundertakingmodellingreviewOurgeneralapproachtoassessingthemodellingispresentedinFigure5andentailsassessingthereliabilityandvalidityofthekeylinksordriversbetweenvariouswaterscenarios,allocationstoenvironmentalassetsandproduction,andhowthesewaterinputsarethenusedinproduction(suchasthroughthelandusemodelforDirranbandiandStGeorge),andtheresultingbenefitsthatresultlikeemployment,profitandsocialbenefitsorcosts.Employmentoffersanidealinitialmeasureofthesocialandeconomicconsequencesofwaterallocationsandthisisthekeyindicatorofsocio-economicimpactthattheMDBAhasfocusedoninitsmodelling.Aspartofthisfinalreportwefocuson:

1. whethertheapproachandtheresultsobtainedcanbeusedbytheMDBAtohelpreachadecisionabouttheeffectsofchangesinwateravailabilitybyinterpretingthemodeloutputs(i.e.hectaresusedinproductionandemploymentimpacts)

2. limitationsinthisregardand3. considerationsforfuturework.

19ReceivedfromTownsend,Phil(2016).Pers.Comms(Email),Canberra:MDBA,26August2016.20MDBA.(2016).TripleBottomLineAssessmentofSDLsfortheNorthernBasin,1August2016.Canberra:MDBA.21MDBA.(2016).NorthernBasinReview:Phase2EngagementProgram,CommunityMeetings,July2016.Canberra:MDBA.22Wakerman-Powell,Kai.(2016).LowerBalonneFloodplainGrazingModelReport-Draft,September2016.Canberra:MDBA.23MDBA.(2016).NorthernBasinReview:TechnicalOverviewofSocioeconomicAnalysis,DraftReport,2Sep2016.Canberra:MDBA.24Tanton,Robert,Vidyattama,YogiandPeel,Domonic.(2016).MDBACommunityProfilesdataextraction.May,Canberra:NATSEM,UniversityofCanberra.25Lukasiewicz,Anna,&Baldwin,Claudia.(2014).Voice,power,andhistory:ensuringsocialjusticeforallstakeholdersinwaterdecision-making.LocalEnvironment,1-22.Retrievedfromhttp://dx.doi.org/10.1080/13549839.2014.942261


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Figure3:TermsofReference(Source:MDBAExecutedContractMD3480,pp.26-27)


15


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Figure4:ApproachtopreparingPlanamendment(Source:MDBA2016a26)

Figure5:BuildingBlockApproachtoAssessingModelling(Source:Blackwell2016)

OutlineofreportAsanoutlineoftheremainderofthereport,inregardstoitems2and3weidentifyelementsofthemodellingwhichwebelievemightbeconsideredbytheMDBAasareaswhereimprovementscanbemadeingeneralinSections4throughtoSection7.Insections4and5,wedistinguishbetweenthosepiecesofworkthatcanbedonerelativelyquicklyandeasilyintheshort-termandthosethatmightbecomepartoftheMDBA’songoingworkprograminthemediumtolongterm.PriortodoingthiswepresentarapidreviewoftherelevantliteratureinSection3tohelpidentifywhatmodelinghasbeendonepreviouslyandlessonslearnedforimprovements.

26MDBA.(2016a).‘TripleBottomLineassessmentofSDLsfortheNorthernBasin’.PowerPointpresentation.MDBACanberra:providedbyPhilTownsendviaemail1August2016.

Waterscenarios

Production/ecosystemhealthbeneiits

Economicandsocialconsequences(jobs,proiit,socialbeneiits/costs)


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3. LiteratureReviewGlobalassessmentofriverbasinwaterproductivityCai et al. undertook a water productivity assessment in 10 river basins across Asia, Africa and SouthAmerica, reflecting a rangeof socio-economic and agro-climatic conditions.27They found that intensivefarmingintheAsianbasinsgivesmuchgreateragriculturaloutputandhigherwaterproductivitythanthelargely subsistence agriculture in Africa. Theymodelledwater productivity as the output derived fromwaterusedividedby thewater inputwith cropyieldsmeasuredas tonnesperha.Theyusedkg/m3or$/m3asmeasuresofwaterproductivityforrice.Thesefindingsmeanthatwaterproductivityisimportantforincreasedfoodsecurityandfarmers’livelihoods,thoughconsiderationsofthecostofimprovingwaterproductivity, including environmental trade-offs, need to be considered within context and analysedcarefully. Importantly, the authors note that current large-scale assessment of whole basins ‘reliesoverwhelminglyonstatisticaldata,whicharevariableinquality,thespatialscaleisoftenpooranddoesnot correspond to hydrological boundaries’.28These are similar limiting factors for the socio-economicmodellingworkdoneby theMDBA.However,Caietal.dopoint to remotesensing forestimatingcropproduction and water consumption combined with basin-scale hydrological modelling to understandwater cycling, to examine existing interventions and better understand processes on the ground(Literature insight 1, LI1). This reinforces the approach taken by the MDBA in its current social andeconomicmodellingwork.CritiqueoftraditionalwaterefficiencyGleick, Christian-Smith, and Cooley (2011) critique traditional approaches to water efficiency such asthroughawholeofbasinefficiencyapproach29which,thoughhelpingclarifyissuesaroundthescaleandscopeofwaterefficiency,isflawedby:30

• excludingordiscountingunproductiveconsumptiveuse,called‘wet’water,amajorcomponentofinefficientwateruse

• onlyvaluing‘new’waterandnotusingabroadmeasureofwaterproductivityand• failing toaccount formanyco-benefitsofefficiency suchas improvedwaterquality, increased

production, greater reliability, decreased energy demands (i.e. impacts on other factors ofproduction),andreducedordelayedinfrastructureinvestments.

WhatthismeansfortheMDBAisthatassessingwaterproductivity,howmanygoodsandservicescanbeproduced bywater use, rather than efficiency, or howmuchwater is used relative to total amount ofwater available, is important to account for in the modelling (LI2). For example, crop yield, GDP orhouseholdsservedperunitofwaterratherthansimplytheproportionoftotalwaterused.Measuringthemarginal changes in jobs (through land area under cropping via changes inwater availability), in part,takesaccountofthesedevelopmentsinmeasuringwaterproductivityvis-à-visefficiency.31WaterproductivityintheAustraliancottoncontextWateriscriticaltothecottonindustryintheMDBtomaximisecropyieldsandfibrequality.Roth,Harris,Gillies, Montgomery, and Wigginton (2013) found that 80% of Australian cotton-growing area usedsurface-irrigation systems with 6-7ML/ha applied to cotton crops (dependent on the amount of rain

27Cai,Xueliang,Molden,David,Mainuddin,Mohammed,Sharma,Bharat,Ahmad,Mobin-ud-Din,&Karimi,Poolad.(2011).Producingmorefoodwithlesswaterinachangingworld:assessmentofwaterproductivityin10majorriverbasins.WaterInternational,36(1),42-62.doi:10.1080/02508060.2011.542403.28Caietal.2011,p.59-60.29Thisapproachinvolvesmeasuringhowmuchofthewaterthatentersabasinisrecoveredandused.30Gleick,PeterH.,Christian-Smith,Juliet,&Cooley,Heather.(2011).Water-useefficiencyandproductivity:rethinkingthebasinapproach.WaterInternational,36(7),784-798.doi:10.1080/02508060.2011.631873.31Seeourcommentsinthenextsectionaboutadditionalmeasuresofsocialandeconomicchangeresultingfromwaterwithdrawals.


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received) and 729mm of seasonal evapotranspiration over 23 years, and in the decade ending 2013,water-use productivity increased 40% for Australian cotton growers (due to whole farm irrigationefficiencygainsof57-70%andacropwateruse indexof>3kg/mm.ha(highby internationalstandards))(Rothetal.2013,p.1033).32TheyalsofoundthatinmanyAustraliancotton-growingregions,cropwaterdemandexceedstherainfallsupplysowater-useperformanceishighlyvariablebetweencottongrowingregions. These findings reinforce the necessity of site-specific measurement or studies, as beingundertaken by the MDBA with the modelling of 21 communities beginning with St George andDirranbandi(Hebel)tocapturetherelationshipbetweenwateruses,hectaresirrigatedandthesocialandeconomicconsequences(LI3).WorkundertakenbyMDBASince2009,theMDBAhasundertakenanextensiveprogramofresearch, includingthoseintothesocialandeconomicimplicationsofthedraftBasinPlan(LI4).TheextentofanalysisissosignificantthatMDBAhasalsoundertakentosynthesisethework-to-dateatcertainpoints in time,e.g., see itssynthesis thataccompaniesthePlan.33Thefollowingprovidesaselectionoftheirresearchprogram.34• Irrigated Agriculture in the Murray-Darling Basin: An Economic Survey of Irrigators, 2012-13 to 2014-15

(ABARES)presentskey farmperformancemeasures for irrigatedhorticulture,dairy,cotton (‘mostly located inthe Northern Basin’ p. 19) and rice farms in the Basin, including data on water trading, use of irrigationtechnologies and with an emphasis on results from 2012-13 to 2014-15.35Because of the severe drought,incomesof horticulture, dairy, rice and cotton farmswere relatively low for the first three survey years from2006-07to2008-09withrecordlowriverinflowsandirrigationwaterallocations.Incomesimprovedin2010-11following improved conditions and water allocations. However from 2012-13 to 2014-15 average farm cashincomeofcottongrowersdeclined(stillsignificantlyhigherthanotherindustriesataround2014-15$0.5m(p.9),whilehorticulture and rice growers’ remainedevenanddairy farmersearned recordhigh levels in real termssince2006-07.Averagereturnstocapitalsince2006-07washighestforcottongrowersat4.9%(3.5%-8%,p.16)(horticulture1.8%,diary2.2%,rice1.5%,p.1),reflectinggreatervariabilityincottonpricesorriskofreturnthanthose for other irrigated industries (p. 5). During the drought, water trading provided irrigators with animportant tool for managing low water allocations, with horticulture being the largest net buyer of waterallocations, irrigated broad acre and dairy being largest net sellers. As conditions improved, trading declined.Cottonfarmshadthesmallestproportionsoffarmssellingpermanentwaterentitlements.90%ofdairy,riceandcottongrowersused floodor furrow irrigationsystemsand19%ofcotton farmsand28%ofdairy farmsusedtravelling irrigators (p.1).Averagewateruseper farm for cotton remainshigh ranging from1250-2750MLperyear, thoughforall industrieswateruse increasedsignificantly from2010-11(p.21).Cottonwaterapplicationratesataround4.5-7ML/ha(LI5,p.24)wereaveragecomparedwithvegetables,citrus,stonefruit,promefruit,rice(significantlyhigherat10.5-15ML/ha),dairypastureandwinegrapes.

• Condamine-BalonneSustainableYieldRegionalProfile (MDBA)providesinformationontheregionasdefinedby CSIRO’s Sustainable Yields, and includes data on population, employment, agriculture, and communitycharacteristics.Theprofilewasproducedtoallowmeaningfulcomparisonsbetweenregionalcharacteristicsandpopulationsandbetweenthosepopulationsover.36

• Lower Balonne Community Profile: Irrigation Region (MDBA) provides a brief socioeconomic profile of theLowerBalonneirrigationregionintheMurray-DarlingBasin.Itincludesresponsesfromregionalstakeholdersto

32Roth,Guy,Harris,Graham,Gillies,Malcolm,Montgomery,Janelle,&Wigginton,David.(2013).Water-useefficiencyandproductivitytrendsinAustralianirrigatedcotton:areview.CropandPastureScience,64(12),1033-1048.doi:10.1071/CP13315,p.1033.33MDBA.(2012a).SocioeconomicAnalysisandtheDraftBasinPlanPartA-OverviewandAnalysis.RetrievedfromMDBACanberra:http://www.mdba.gov.au/sites/default/archives/proposed/social_economic_analysis_part_b.pdfMDBA.(2012b).SocioeconomicAnalysisandtheDraftBasinPlanPartB-CommissionedandNon-CommissionedReportsWhichInformedTheMDBA'sSocioeconomicAnalysis.RetrievedfromMDBACanberra:http://www.mdba.gov.au/kid/files/2129-social_economic_analysis_part_b.pdf34Thefulllistofsocialandeconomicanalysiscanbefoundhere:www.mdba.gov.au/publications/archived-information/basin-plan-archives/socio-economic-analysis(asat16June2016).35ABARES.(2015).IrrigatedAgricultureintheMurray-DarlingBasin:AnEconomicSurveyofIrrigators,2012-13to2014-15.RetrievedfromMDBACanberra:http://data.daff.gov.au/data/warehouse/9aas/2015/IrrigatedAgMDB/IrrigatedAgMDBEconSrvy_v1.0.0.pdf36MDBA.(2009).Condamine-BalonneSustainableYieldRegionRegionalProfile.RetrievedfromMDBACanberra:http://www.mdba.gov.au/kid/files/1366-ABS-Revised-Regional-Profile-Condamine-Balonne.pdf


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a series of water availability scenarios, including the impacts they believe those scenarios will have onagriculture,theagriculturalvaluechain,andlocalbusinessesandservices.37

• Integration of SocioeconomicAssessments of theMurray-Darling Basin (Nous) seeks todistil andsynthesizekey findings and conclusions arising from the following two studies commissioned by the MDBA: 1 -"EnvironmentallySustainableDiversionLimitsintheMurray-DarlingBasin:SocioeconomicAnalysis”(ABARE);2-“Delivering the Basin Plan: Economic and Social Profile and Impact Assessments in theMurray-Darling Basin”(MarsdenJacobAssociates-ledconsortium).38

• ReporttotheMurrayDarlingBasinAuthorityontheLiaisonbetweentheMDBAandtheBankingSectorontheDraftBasinPlan(MDBA).Thiswasa2012reportcommissionedbytheMDBAandpreparedbyTheHon.DeanBrownAO.ItreportsonaseriesofconsultativemeetingsandbriefingsarrangedbytheMDBAfortheBankingSectoronthedraftMurray-DarlingBasinPlanatwhichthemodellingoftheeconomicandsocialimpactsofthedraftBasinPlanwaspresented.39

• ReviewingTheScientificBasisofEnvironmentalWaterRequirementsintheCondamine-BalonneandBarwon–Darling: Summary Report. The MDBA engaged a panel of independent scientists to consider the scienceunderpinningtheenvironmentalwaterrequirementsfortheCondamine-BalonneandBarwon-Darlingsystems,asastartingpointformoreworkonsurfacewatersustainablediversionlimits(SDLs).40

• People and Place in Australia: The 2014 Regional Wellbeing Survey (University of Canberra). This reportcomparestheexperiencesofpeoplelivingindifferentregions,andofpeopleofdifferentages,gender,andwhoareandaren’tengagedinfarming.Intotal,12,125peopletookpartinthe2014RegionalWellbeingSurvey,anincreaseofalmost3,000comparedtothe9,135whotookpartinthe2013.41

• Review of the MDBA's Socio-Economic Impact Modelling (KPMG). The MDBA commissioned a report todetermineanassessmentof the (CGE) socio-economic impactmodellingundertaken for theBasinPlanwhichincludedtheworkofWittwer,ABARESBRSandUQRSMG.42KPMGfoundthatthethreegroupsofindependentresearchers produced a set of informative studies that serve to ‘(a) provide important insights into particularcomponentsoftheproblemand(b)highlighttheneedforalargerscale,moreintegratedapproachtothesocio-economicmodelling……(througha)morecoordinatedandcooperativeapproach……thatincludesagreementonscenarioanalysisandtheappropriatefoundationofmodelbaselines’.43

• AssessingtheSocio-EconomicImpactsofSustainableDiversionLimitsandWaterfortheFutureInvestments:An Assessment of the Short-Term Impacts at the Local Scale – Final Report.ArcheConsulting andGillespieEconomics were engaged by the Department of Sustainability, Environment, Water, Population andCommunities (DSEWPaC) and theMDBA to undertake input-output analysis of the short-run impact of policychanges in theMDB at the local community scale using 12 representative Local Government Areas (LGAs).44MoreePlains(NSWBorderRiversSDLregion)andBalonne(Condamine-BalonneSDLregion–i.e.StGeorgeandDirranbandi,Hebel)LGAswereincluded,eachencompassingmultiplecommunitiesrelyingondifferenttypesofwater.Theanalysisprovidedcompressedresults for the7years to2018-19 inasingleyearwhichallowedforwatertrading,Commonwealthbuybackstodate,WaterFortheFutureinfrastructureupgrades,andcommodityprices from 2005-06.With a 19.6% and 8.6%withdrawal ofwater for irrigation respectively for Balonne andMoreePlainsShires,impactsonirrigatedproduction(-49,-37jobs),potentialoffsettingincreasesinthevalueofdryland or cereal production (+3, +6 jobs), net impacts on farm employment (-46, -31 jobs), and flow-onemployment impacts for the local community (-59, -41 indirect jobs, with -4.9%, -1.3% of total jobs) were

37MDBA.(2010).LowerBalonnecommunityprofile:irrigationregion.RetrievedfromMDBACanberra:http://www.mdba.gov.au/kid/files/1296-Community-Profile-Lower-Balonne-Irrigation-Region-May-2010.pdf38Nous.(2010).IntegrationofSocioeconomicAssessmentsoftheMurray-DarlingBasinRetrievedfromCanberra:http://www.mdba.gov.au/kid/files/1280-Integration-of-Socioeconomic-assessment-report.pdf39MDBA.(2012c).ReporttotheMurrayDarlingBasinAuthorityontheLiaisonbetweentheMDBAandtheBankingSectorontheDraftBasinPlan.RetrievedfromMDBACanberra:http://www.mdba.gov.au/kid/files/2499_Report_to_MDBA_Banking_Sector_on_the_Draft_Basin_Plan.pdf40MDBA.(2014).ReviewingtheScientificBasisofEnvironmentalWaterRequirementsintheCondamine-BalonneandBarwon-Darling.RetrievedfromMDBACanberra:http://www.mdba.gov.au/sites/default/files/pubs/NBSR-Synthesis-accessible-summary-report.pdf41CentreforResearchandActioninPublicHealth,HealthResearchInstitute.(2015).PeopleandPlaceinAustralia:The2014RegionalWellbeingSurvey.RetrievedfromUniversityofCanberra,Canberra:https://www.canberra.edu.au/research/faculty-research-centres/ceraph/regional-wellbeing/survey-results/2014-survey-results/2014-Regional-Wellbeing-Survey.pdf42KPMG.(2011).ReviewoftheMDBA'sSocio-EconomicImpactModelling.RetrievedfromMDBACanberra:http://www.mdba.gov.au/kid/files/1719-ReviewOfTheMDBAsSocioEconomicImpactModelling.pdf43KPMG.(2011),pp.9-10.44ArcheConsulting,&GillespieEconomics.(2012).AssessingtheSocio-EconomicImpactsofSustainableDiversionLimitsandWaterfortheFutureInvestments:AnAssessmentoftheShort-TermImpactsattheLocalScale–FinalReport.RetrievedfromSydney:http://www.mdba.gov.au/sites/default/files/archived/proposed/Arche-Basin-Case-Studies-final-report.pdf


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assessed (forBalonneandMoreePlainsLGAs respectively). Losses incottonandcerealproductionamount to$48.89m,$37m(19.9%,9.9%) inGVIAPandlocalvalueaddedof$27.9m,$19.4m(11.4%,3%)forBalonneandMoreePlainsShiresrespectively(pp.20,23,24,27).

• Commenton“AssessingtheSocio-EconomicImpactsofSustainableDiversionLimitsandWaterfortheFutureInvestments”.KPMGreviewed theworkofArcheandGillespie45asencompassinga reasonableapproachbutthat their methodology would overestimate the impact of the Basin Plan (and underestimate impacts ofinfrastructureupgrades)(LI6)asArcheandGillespienotedthemselves.Thisisbecauseoftheinherentlimitationsinavailabledataandthemethodology itself,andthemodellingcouldbe improvedby including likely inherentadjustmentprocesses(includingemploymentforfallingpopulationsandagriculturalsector,automated(ratherthanmanual)adjustedland-usebasedonmarginalvalueofwater,andadjustablelabourandcapitalratios,likelylagininfrastructurespendandproductivitygains)overtheperiodandincorporatingregionalvariationinwateruseintensity(pp.1-2).

• Revised Indicators Of Community Vulnerability And Adaptive Capacity Across TheMurray-Darling Basin: AFocusOn Irrigation InAgriculture.Stenekesetal.werecommissionedtomeasurethevulnerability, resilienceandadaptivecapacityofBasincommunitiestochangesinwateravailability-duetoarangeoffactors-inorderto informMDBAplanninganddecision-making.46Inparticular, ‘(t)he indicescould……beusedasabaselineofinformation to measure future socioeconomic changes and as part of a potential framework for measuringeffectsoftheBasinPlanoncommunities’,thatis,thesocialandeconomicmonitoringandevaluationframeworkof the Plan (see Figure 6). Of note are a series of comprehensive maps in Appendix B (pp. 31-41) that aregeospatiallyexplicitfortheLowerBalonneincludinglocationofStGeorgeandDirranbandi.Resultsinclude:

o StGeorgeandDirranbandirelativevulnerabilitytochangesinwateravailabilitypriortotheBasinPlanreadasmedium(~0.5)andhighlevel(~0.75)respectively(1.0isthehighestrankedindex)

o subindexofrelativesensitivitytowateravailability,similarresultso higheraverageadaptivecapacityresults(~0.75forbothlocations),o lower(~0.5)forrelativecommunityvulnerabilityfor2800GLwaterrecoveryscenario,o around12.5%waterreduction(relativetomaximumof25%)forexposurerequiredtomeet2800

GLSDLaftermodeledwatertradeandusing2005-06commodityprices,o similarresultsforaverage2006-07and2010-11commodityprices,o arelativeimpactsubindexrankingofapproximately0.5forbothlocations(max1.0)using2005-06

commodityprices(higherthanmostsurroundinglocationsbutnotcomparedwiththeareawestoftheseabuttingtheborder),

o similarresults forvariationwith2400to3200GLSDLscenarios,andforcommunityvulnerabilitywiththesescenariosandlattercommodityprices.

o moststrikingisforSLAirrigationintensity(MLapplied/no.ofirrigatedfarmestablishments)withStGeorgeandDirranbandifallingintothehighestcategory(5242-6551ML)inthebasin.

o employment in agriculture as apercentageof total employment varieswidely for the SLAs andbecauseStGeorgeandDirranbandiabutvariousSLAs,thepercentagerangeisfrom30%-75%butagain,theregiontothewestandontheborderhasthehighestcategoryat90%.

Theresultspointtotheneedfornuancedandspecific(ratherthangeneralized)localinformationonthesocialand economic consequences of waterwithdrawals and provide a useful starting point for comparison acrossSLAsandcontributetoabaselineforongoingmonitoringandevaluationofthePlan’simplementation(LI7).

• EffectsofChange inWaterAvailabilityon IndigenousPeopleof theMurray-DarlingBasin:A ScopingStudy.ThisreportconsiderstheimpactsoftheBasinPlanonAboriginalandTorresStraitIslanderpeopledrawingonareviewofthe literature,casestudyanalysisfromtheMurrumbidgee,Barwon-DarlingorMurrayRiverRegions,descriptivecharacterizationofimpactsbasedoncasestudiesandliterature,andrecommendationstoenhanceormitigatethe impacts fromtheplan includingfutureresearch.Someofthekeyfindingsarethat impacts forAboriginalandTorresStraitIslandersareleastwellknownofthesocialandeconomicimpactsandthisisbecauseof a paucity of information, limited water reforms and institutions to strategically capture these people’saspirations,andtheneedforanMDBAongoingworkprogramtoaddressthispaucity.47

45KPMG.(2012).Commenton“AssessingtheSocio-EconomicImpactsofSustainableDiversionLimitsandWaterfortheFutureInvestments”.RetrievedfromMDBACanberra:http://www.mdba.gov.au/kid/files/2015-KPMG-Review-of-Arche-Method-FinalReport.pdf46Stenekes,N,Kancans,R,Randall,L,Lawson,K,Reeve,I,&Stayner,R.(2012).RevisedIndicatorsofCommunityVulnerabilityandAdaptiveCapacityAcrosstheMurray-DarlingBasin:AFocusonIrrigationinAgriculture.Canberra:ABARES.47Jackson,S,Moggridge,B,&Robinson,CJ.(2010).EffectsofChangeinWaterAvailabilityonIndigenousPeopleoftheMurray-DarlingBasin:AScopingStudy.RetrievedfromMDBACanberra:http://www.mdba.gov.au/publications/archived-information/basin-plan-archives/socio-economic-analysis


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Figure6:SocialandeconomicmonitoringandevaluationframeworkforBasinPlan48

Of the work undertaken on social and economic impacts of the Basin Plan, Wittwer (2011) used theTERM-H2OCGE(computablegeneralequilibrium)modeltoassessthelong-termimpactsofanSDLtargetentailingpurchasesof2800GLofwaterfromfarmersbetween2008and2029onGDPandemploymentwithin the MBD.49There is little change in overall economic activity (LI8). At a basin scale and givenlimiting long term view assumptions of CGE, GDP is expected to fall by about 0.3 per cent andemployment falls by 0.1 percent or 600 jobs because ‘given that the process of environmental waterpurchasesinvolveswillingsellerswhoarepaidamarketprice,thisisnotsurprising’(Wittwer,2011,p.1).Wittwer (2011) also regressed irrigation water prices in the southern basin against water availability,droughtandoutputpricesandfoundthatpriceismoreresponsivetodroughtthanchangesinirrigationwateravailability(LI9)anditissensitivetothefarmproducerpriceindex.Furthermoreandrelatedtothenextsubsectionheading,MDBAengagedEBCetal.(2011)toassessthecommunity(andregionalincludingQueenslandandCondamineBalonne)impactsoftheguidetotheplanandone interesting finding is thehighrisk levels forwaterwithdrawal identified forDirranbandiandStGeorge, given both have relatively small populations and are dependent (35-40% and 25-30%respectively)onemploymentinagriculture,processing,transportandstorage(seeFigure1.1RiskFactorsforSocialCatchments (bytown)onp.13ofVolume3:Community Impacts).Priortothismoredetailedlocal analysis, in their Synthesis Report,Marsden Jacob Associates et al. (2010, p. 11) found that as a

48MDBA.(2016b).‘Oursocialandeconomicevaluationmethodology’.MDBACanberra:http://www.mdba.gov.au/socio-economic-profile-murray-darling-basin49Wittwer,Glyn.(2011).BasinPlanCGEModellingUsingTERM-H20.ReporttotheMDBA.RetrievedfromMDBACanberra:http://www.mdba.gov.au/sites/default/files/archived/basinplan/1718-BasinPlanCGEModellingUsingTermH20.pdf


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whole(i.e.Balonne)thesecommunitieshadthesmallestgrossvalueofirrigatedagricultureof12regions,yetthehighestmeasuresofsocio-economiccondition,andwithirrigationproductaccountingfor50%oftotalgrossagriculturalproduct.Again, theseexamplesofdifferingspatial scalesofeconomicandsocialanalysespointtotheimportanceoflocalconditionsdifferingfromregionalandtheneedforthelocalizedanalyses(LI10).Regionaleconomicresilience,commuting,andtechnologicalshiftsMeasuring socioeconomic conditions is away of gauging a region’s economic resilience. The economicstructure of labourmarket areas has long been a staple of regional and urban analysis. For example,recentlyHanandGoetzmodelledandmappedtheeconomicresilienceofallcountiesintheUnitedStatesduringtheglobal financialcrisisusingemploymentasameasureofeconomicactivitybycomparingthedrop in economic activity and subsequent rebound that follows.50For the MDBA and their social andeconomic modelling, we note that Han and Goetz used employment data as a starting point butrecommended in their discussion (p. 146) that future studies should include consideration of personalincomewhich providemore nuanced qualitative changes of changes in job types rather than numbersaloneandmakeforusefulcomparisonwithemployment(LI11).WeareinformedthattheMDBAhasusedwageincometoconvertpart-timeworktofulltimeequivalent(FTE).Commutinginandoutofregionsforworkhasexpandedovertime,andtherehasbeenarecentshiftforAustralianregionsfromanagriculturaltominingbase.51Studiesshowthatnetworkdegreeandentropymeasures explain variations in county per capita income growth patterns.52Also higher in and out-commutingentropiesareassociatedwithlowerpercapitaincomegrowth,buttheirinteractionenhanceseconomic growth in places simultaneously open to both in and out-commuters. 53 Accounting forcommuting and work-migration will be important in modelling the impacts on jobs from waterwithdrawalsintheMDB(LI12).Globalisationhaschangedtheoutlookofeconomicactivityinregionsacrosstheglobe.54Alsotechnologyhas changed production techniques in many industries55, such as in the case of genetically modifiedcotton requiring less sprayingandassociated labour. Studies around theworld reflect favorablyon the

50Han,Yicheol,&Goetz,StephanJ.(2015).TheEconomicResilienceofUSCountiesDuringtheGreatRecession.45(2),131-149.http://journal.srsa.org/ojs/index.php/RRS/article/view/45.2.251McFarlane,JimA,Blackwell,BoydD,Mounter,StuartW,&Grant,BlighJ.(2016).Fromagriculturetomining:Thechangingeconomicbaseofaruraleconomyandimplicationsfordevelopment.EconomicAnalysisandPolicy,49,56-65.doi:10.1016/j.eap.2015.11.01252Hussain,R,Maple,M,Hunter,SV,Mapedzahama,V,Reddy,P,&Hunter,Sally.(2015).TheFly-inFly-outandDrive-inDrive-outmodelofhealthcareserviceprovisionforruralandremoteAustralia:benefitsanddisadvantages.Ruralandremotehealth,15(3068),1-7.http://www.rrh.org.au/articles/subviewnew.asp?ArticleID=3068Storey,Keith.(2010).Fly-in/fly-out:implicationsforcommunitysustainability.Sustainability,2(5),1161-1181.doi:10.3390/su205116153Goetz,StephanJ,Han,Yicheol,Findeis,JillL,&Brasier,KathrynJ.(2010).UScommutingnetworksandeconomicgrowth:Measurementandimplicationsforspatialpolicy.GrowthandChange,41(2),276-302.www.blackwell-synergy.com/doi/abs/10.1111/j.1468-2257.2010.00527.x54McCann,Philip,&Acs,ZoltanJ.(2015).Globalisation:Countries,citiesandmultinationals.GlobalEntrepreneurship,InstitutionsandIncentives:TheMasonYears,45,371.doi:10.1080/00343404.2010.50591555Feldmann,Horst.(2013).Technologicalunemploymentinindustrialcountries.JournalofEvolutionaryEconomics,23(5),1099-1126.http://link.springer.com/article/10.1007%2Fs00191-013-0308-6#page-2Loi,Michele.(2015).Technologicalunemploymentandhumandisenhancement.EthicsandInformationTechnology,17(3),201-210.http://dx.doi.org/10.1007/s10676-015-9375-8


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industry nonetheless56and the broader community can expect a deskilling in labour in those regionalareasandanassociatedlesseningoflabourdemand.57

Whenmeasuring the social andeconomic impactsof irrigated cotton in theMDA, resilience,migrationand commuting, globalisation and technological advancements and associated falls in labour demand,shouldbeconsidered.AllthesefacetshavebeenconsideredintheMDBAsocialandeconomicmodellingandanalysistodateexceptforcommutingandthisisdiscussedinthemoredetailinthenextsectionofthisreport(LI13)AustralianwaterpolicyspecificstudiesTherehavebeenmanystudiescoveringawiderangeofaspectsinAustralianwaterpolicyanddecision-makingwithaselectiondemonstratingtherangeofissuesconsidered:

• modellingtheeconomiceffectsoftheplanonthesouthernbasin58• a reviewof relevant environmental economics applied to developing an eclectic policy reform

framework including taxingpolluters, creationofnew formsof communalproperty rights, andregulationtoachieveenvironmentalsustainability59

• modellingofwateruseefficiencyuptakeintheNamoicatchment,amountingtoaround100GL,resulting in more water for irrigation and income, bringing into question the necessity ofgovernmentsupport60

• modellingofirrigatordecisionmakingoverwateruseusingmindmapping61and• areviewofhistoricalandfuturehydrologicalchangesintheMDB.62

Dixon,RimmerandWittwerused their TERMH2OdynamicmultiregionalCGEmodel to find thatwaterbuybacks increasedwater asset values and had little effect on aggregate farm output in the southernbasin as farms reallocated resources between activities (LI14).63Because the effects of the basin planplay-outwithtime,thesetypesofforecastscanbetested.BanjereeusedTERMH20tomodeltheeconomicimpactsofinvestmentinirrigationinfrastructureusingacasestudyof theMurrumbidgeesubcatchment (SouthernBasin).64Thispublic investment results inan

56Bennett,Richard,Kambhampati,Uma,Morse,Stephen,&Ismael,Yousouf.(2006).Farm-leveleconomicperformanceofgeneticallymodifiedcottoninMaharashtra,India.AppliedEconomicPerspectivesandPolicy,28(1),59-71.doi:10.1111/j.1467-9353.2006.00273.xQaim,Matin,&Zilberman,David.(2003).Yieldeffectsofgeneticallymodifiedcropsindevelopingcountries.Science,299(5608),900-902.http://science.sciencemag.org/content/299/5608/90057Bennett,Richard,Morse,Stephen,&Ismael,Yousouf.(2006).TheeconomicimpactofgeneticallymodifiedcottononSouthAfricansmallholders:yield,profitandhealtheffects.TheJournalofDevelopmentStudies,42(4),662-677.http://www.tandfonline.com/doi/abs/10.1080/00220380600682215Stone,GlennDavis.(2007).AgriculturaldeskillingandthespreadofgeneticallymodifiedcottoninWarangal.CurrentAnthropology,48(1),67-103.doi:10.1086/50868958Dixon,P,Rimmer,M,&Wittwer,G.(2011).SavingtheSouthernMurray-DarlingBasin:TheEconomicEffectsofaBuybackofIrrigationWater.EconomicRecord,87(276),153-168.doi:10.1111/j.1475-4932.2010.00691.x59Quiggin,John.(2001).EnvironmentaleconomicsandtheMurray–Darlingriversystem.AustralianJournalofAgriculturalandResourceEconomics,45(1),67-94.doi:10.1111/1467-8489.0013460Ticehurst,JeniferL.,&Curtis,AllanL.(2015).Canexistingpracticesexpectedtoleadtoimprovedon-farmwateruseefficiencyenableirrigatorstoeffectivelyrespondtoreducedwaterentitlementsintheMurray–DarlingBasin?JournalofHydrology,528,613-620.doi:http://dx.doi.org/10.1016/j.jhydrol.2015.06.05561Douglas,EllenM,Wheeler,SarahAnn,Smith,DavidJ,Overton,IanC,Gray,StevenA,Doody,TanyaM,&Crossman,NevilleD.(2016).Usingmental-modellingtoexplorehowirrigatorsintheMurray–DarlingBasinmakewater-usedecisions.JournalofHydrology:RegionalStudies,6,1-12.doi:10.1016/j.ejrh.2016.01.03562Leblanc,Marc,Tweed,Sarah,VanDijk,Albert,&Timbal,Bertrand.(2012).AreviewofhistoricandfuturehydrologicalchangesintheMurray-DarlingBasin.Globalandplanetarychange,80,226-246.doi:10.1016/j.gloplacha.2011.10.01263Dixon,P,Rimmer,M,&Wittwer,G.(2011).SavingtheSouthernMurray-DarlingBasin:TheEconomicEffectsofaBuybackofIrrigationWater.EconomicRecord,87(276),153-168.doi:10.1111/j.1475-4932.2010.00691.x64Banerjee,Onil.(2015).InvestinginrecoveringwaterfortheenvironmentinAustralia'sMurray-DarlingBasin.InternationalJournalofWaterResourcesDevelopment,31(4),701-717.doi:10.1080/07900627.2014.979398


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increase in regional output, incomeandemployment,whilenationally there is a small negative impact(LI15)resultingfromthetransferofresourcestothebasinandacrowdingoutofprivateinvestment.Theyalso note that ‘(w)hen water-balance modelling for a catchment does not account for return flows(reduced return flow fromwater saving infrastructure upgrades), thewater savingsmaybe overstated’andwheretheinfrastructureresultsinwater-useefficiency,returnflowsarereduced,withthepossibilityof ‘norealeffectonwatersavings’(p.72)(LI16).However,thehighergeographicalscaleofthiswork isdifferenttothelocalgeographicalscaleofsocialandeconomicimpactbeingconsideredforStGeorgeandDirranbandi(Hebel).Wheeler,ZuoandBjornlundfoundaweaktonoimpactforCommonwealthwatersalesonlaggednetfarmincomefromsellingwaterentitlementsinthesouthernMDB(LI17)acrosstheperiod2008to2012.65Thiswasusedasevidencetosuggestthatirrigatorsusedtheproceedsfromthesesalestoreducetheirdebtandinterestpayments,restructureandinvestonfarm.Interestingly,onfarmconsequencesfromthesalesincludedgreaterexistingusefromentitlements,implyingthatirrigatorssimplysoldtheirsurplusorbufferwater.Theseauthorsadvisesellingirrigatorstoundertakefurtherincrementaladaptation,watermanagementoron-farmchanges,tonotriskregularwatershortagesgiventheadventofclimatechange.Theauthorspointoutalsothattheirstudyfocusedonfarmrelatedimpacts,ratherthanthoseoncommunitieswhichmightalsobenegativeandpositive,thoughthetimeperiodandlocationofsalesisdifferenttothatofthecurrentwork.(LI18)WittwerandDixon,usingTERMH2O,foundthatpublicspendingonhealth,educationandotherservicesin thebasinweresuperior regionaleconomicmanagementoptions to infrastructureupgrades, creatingbetweenthreeandfourjobsrelativetotheonecreatedfromupgrades.66Theauthorsthereforeseejobs,and the relative impact on jobs, as important social and economic measures of wellbeing in regionaldevelopmentanalysis(LI19).Loch,WheelerandAdamsonhighlighttheimportanceofpeopleandplaceinriver-basedmanagementoftheMDBinAustralia.Historicallytherehasbeenafocusonpeople(socialandeconomicobjectives)butmore recentlyanemphasisonplace (throughenvironmentalobjectives).While jobsalone insufficientlyrepresentanappropriateassessmentof‘peopleandplace’intheNorthernBasin,theMDBAareawareofthislimitationandhaveundertakenasurveyofAboriginalandTorresStraitIslanderstoidentifythesocialand cultural values for thebasinaswell as a regionalwell-being survey,bothnotedaboveandpartoftheirongoingmonitoringandevaluationframework(LI20).67InternationaleconomicassessmentofwaterreductionsBekchanov and Lamer assessed the economic effects of upstream infrastructure developments andreducedriverrun-offondownstreamcountriesincentralAsiausingaCGEmodel.68Theyfoundthata10-20%watersupplyreductioncausedtheirrigatedareasinUzbekistantobereducedby241,000to374,000ha,withemployment lossesof712,000to868,000, resulting inanational income lossof3.6 to4.3percent(p.1).

65Wheeler,SarahAnn,Zuo,Alec,&Bjornlund,Henning.(2014).Investigatingthedelayedon-farmconsequencesofsellingwaterentitlementsintheMurray-DarlingBasin.AgriculturalWaterManagement,145,72-82.http://dx.doi.org/10.1016/j.agwat.2013.10.01566Wittwer,Glyn,&Dixon,Janine.(2013).EffectiveuseofpublicfundingintheMurray-DarlingBasin:acomparisonofbuybacksandinfrastructureupgrades.AustralianJournalofAgriculturalandResourceEconomics,57(3),399-421.doi:10.1111/1467-8489.1200167Jackson,S,Moggridge,B,&Robinson,CJ.(2010).EffectsofChangeinWaterAvailabilityonIndigenousPeopleoftheMurray-DarlingBasin:AScopingStudy.RetrievedfromMDBACanberra:http://www.mdba.gov.au/publications/archived-information/basin-plan-archives/socio-economic-analysis;CentreforResearchandActioninPublicHealth,HealthResearchInstitute.(2015).PeopleandPlaceinAustralia:The2014RegionalWellbeingSurvey.RetrievedfromUniversityofCanberra,Canberra:https://www.canberra.edu.au/research/faculty-research-centres/ceraph/regional-wellbeing/survey-results/2014-survey-results/2014-Regional-Wellbeing-Survey.pdf68Bekchanov,Maksud,&Lamers,JohnP.A.(2016).EconomiccostsofreducedirrigationwateravailabilityinUzbekistan(CentralAsia).RegionalEnvironmentalChange,1-19.doi:10.1007/s10113-016-0961-z


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Liu,HertelandTaheripourreviewedtheincorporationofwaterintoCGEmodellingattheglobalscale.ImportantlyfortheMDBA,theyfoundthatignoringsub-nationalhydrologicalboundariesinglobaleconomicanalysisofwaterscarcitymaybesufficientwhenconsideringnational-scaletrade,productionandwelfarechanges,butforassessingthe’distributionofinputsandoutputswithinaregion,preservingtheriverbasinandsectorialdetailinthemodelbringsconsiderableaddedvaluetotheanalysis’.69(LI21)Zhongetal.assessedtheeconomiceffectsofthe2000droughtinChinausingaCGEmodelwhichaccountedforthedichotomybetweenirrigation(including16provincialirrigationwatersuppliesandtheirsubsidies)andpipedwaterandparallelpricingarrangements.70SimilartotheanalysisundertakenbyWittweroftheBasinPlaninAustralia71,theeffectsofthedroughtontheChinesemacroeconomywerefoundtobenegligible(notingthatCGEmodelstheeffectsinthelong-run)(LI22).However,theyfoundsignificanteffectsonagriculturalproductionmainlyundertakeninthenorthernareasofChinawheremorecapitalandlabourwereusedtoamelioratetheeffectsofthedrought(LI23).Labourmovedfromnon-farmingagriculturalproductionsectorsintofarming.Urbanandruralhouseholdssufferedseverelossesinfoodconsumptionandwelfare,despitereceivingadditionalincome(LI24).Ruralhouseholdsinthenorthernandsouthernregionssufferedtheworstlosses.SummaryandconclusiononliteraturereviewTheMDBAhasalreadyundertakenanextensiverangeofsocialandeconomicmodellingtoinformthedevelopmentandimplementationofthePlan.Wehaveidentified24insightsfromthedomesticandinternationalliteraturewhichrequiredconsiderationinundertakingthesocialandeconomicmodellingofimpactsforwithdrawalsintheNorthernBasin.AsummaryoftheseisprovidedinTable4whichshowsthatmostofthesearealreadyincorporatedinthemodellingorprovideimpetustothecurrentmodelling,notingthatmostofourcommentshavebeenaddressed,atleastthroughexplanation,inthelatestdraftreportsasnotedintheTable’sfinalcolumninred.OnlyoneinsighthasbeenoverlookedandcouldbedoneaspartoftheMDBAsongoingworkprogramratherthanimmediately.Togainfurtherdetailsforeachinsightsimplygotothecoding(LI#)andyellowhighlightintheabovetext.Overall,these24insightsreinforceourrecommendationsinregardstothemodellingwhichareprovidedinthefollowingsection.Table4:Summaryofliteratureinsights(LI),relevance,andincorporation(Source:seeLI#intext)LI# Insight RelevancetoMDBAmodelling Whetherincorporated(✔ OR✖)byMDBA

modelling/processes(suggestedinclusiontimeframe)SubsequentincorporationbyMDBA(✔ OR✖)

1 Remotesensingcanbecombinedwithbasin-scalehydrologicalmodellingtobetterunderstandwatercyclingandlocalprocesses

Notdirectlyrelevantbutreinforcescurrentlocallynuancedapproachtaken

NA

2 Waterproductivityshouldbemeasuredthroughimpactongoodsandservicesratherthanfocusedonamountofwaterused

Assessingimpactsonjobsgoessomewaytodoingthis.

✔ Previousmodellingincorporatesimpactsforlocalcommunitiesonjobs,valueaddedandregionaloutput(ArcheandGillespie).But,morenuancedimpactscouldbeassessedforcommunitiesbybuildingsmallerlocaleconomymodels

3 Siteorlocalespecificstudiesnecessaryforestablishing

ReinforcesMDBAcurrentapproach ✔

69Liu,Jing,Hertel,Thomas,&Taheripour,Farzad.(2016).AnalyzingFutureWaterScarcityinComputableGeneralEquilibriumModels.WaterEconomicsandPolicy,2(2),1650006:1650001-1650030.doi:doi:10.1142/S2382624X16500065,p.1650006-1.70Zhong,Shuai,Shen,Lei,Sha,Jinghua,Okiyama,Mitsuru,Tokunaga,Suminori,Liu,Litao,&Yan,Jingjing.(2015).AssessingtheWaterParallelPricingSystemagainstDroughtinChina:AStudyBasedonaCGEModelwithMulti-ProvincialIrrigationWater.Water,7(7),3431.71Wittwer,Glyn.(2011).BasinPlanCGEModellingUsingTERM-H20.ReporttotheMDBA.RetrievedfromMelbourne:http://www.mdba.gov.au/sites/default/files/archived/basinplan/1718-BasinPlanCGEModellingUsingTermH20.pdf


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LI# Insight RelevancetoMDBAmodelling Whetherincorporated(✔ OR✖)byMDBAmodelling/processes(suggestedinclusiontimeframe)SubsequentincorporationbyMDBA(✔ OR✖)

relationshipbetweenwateruse,hectaresirrigatedandthesocialandeconomicconsequences

4 SignificantbodyofworkalreadyundertakenbyMDBAinitssocialandeconomicanalysisofthePlan

LargebodyofbackgroundworkthathasguidedtheMDBAandreinforcesneedandapproachforcurrentmodellingwork

✔

5 Cottonwaterapplicationrateof4.5-7ML/ha

Consistentwithcurrentmodelling ✔

6 KPMGfoundArcheGillespieI-Oapproachreasonablebuttemporalandtransitionalprocessesneedtobeincorporated

Reasonforcurrentmodelling NA

7 CommunityvulnerabilityandadaptabilityindicesprovideanimportantbaselineforongoingmonitoringandevaluationframeworkofsocialandeconomicconsequencesofPlan

MDBAhassuchaframework ✔

8 CGETERMH2Omodellingshowsemploymentimpactsacrossentirebasinrelativelysmallduetotradabilityofwater

Whilethecaseatmacro-level,isnotthecaseatlocallevelandhenceneedforcurrentwork

✔

9 Waterpricemoresensitivetodroughtandproducercoststhanwateravailability

ThisresultmaybemoreafunctionoftheCGEmodellingapproachthanreflectinglocalconditions,reinforcingneedforsuchlocalmodelling

Suchmodellingatthemicro-scalecouldbeundertakentoassesssuchsensitivitybutwouldbeconstrainedbydataavailability

10 StGeorgeandDirranbandi(Hebel)identifiedashighriskareas(proportionofirrigatedag,socio-economiccondition)inimplementationofthePlan

Reinforcesneedforcurrentworknuancedtomeetlocalconditions

✔

11 Incomemeasurescouldbeincorporatedandprovidecomparisonwithemploymentnumberanalysis

WeareinformedthatMDBAusedincomemeasurestoconvertpart-timeemployeestofulltimeequivalent.

✖ MeasuringlocalizedemploymentincomeimpactscouldbepartoftheMDBA’songoingsocialandeconomicmonitoringandevaluationframework(mediumtolong-term)✔notedinchapter5ofKPMGcommunitymodelreport72

12 Commutingandworkmigrationwillbeimportanttomodellingthespatial(i.e.local)consequencesforjoblosses

Webelievethisishighlyrelevantgivenrecentlyemergingliteratureofitssignificancenotjustforminingbutforallsectors

✖ (mediumtolong-term)✔notedasalimitationinKPMGcommunitymodelreport73

13 Resilience,migrationandcommuting,globalisationandtechnologicaladvancementsandassociatedfallsinlabourdemandneedtobeincorporatedintoanymodelling

Allthesehavebeenincorporatedexceptforcommutingandworkmigration

Seeliteratureinsight12formoredetail.

72KPMG.(2016).NorthernBasinCommunityModelling:EconomicAssessmentofWaterRecoveryScenarios,16August2016DraftReport.Sydney:KPMG,p.33.73KPMG.(2016).NorthernBasinCommunityModelling:EconomicAssessmentofWaterRecoveryScenarios,16August2016DraftReport,p.16.


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LI# Insight RelevancetoMDBAmodelling Whetherincorporated(✔ OR✖)byMDBAmodelling/processes(suggestedinclusiontimeframe)SubsequentincorporationbyMDBA(✔ OR✖)

14 TERMH2OCGEpredictedwaterbuybacksincreasedwaterassetvaluesandhadlittleeffectonaggregatefarmoutputintheSB

Thispredictioncouldbetestedwithtimeforboththesouthernandnorthernbasins,thoughitwasdoneatamacro-scaleandnotlocal/microscale.

✖ (mediumtolong-term)✖

15&16 InvestmentininfrastructureupgradesinSBincreasedregionaloutputandjobsbutcouldhavelittleeffectonwatersavings

UsedTERMH2OCGEandreinforcesneedforlocalizedunderstandingofeffectsofinfrastructureinvestment

✔ InfrastructurejobsstimuluswasincorporatedintoworkofArcheandGillespieasoffsettinggainsinjobsthoughnotedasunderestimatedbyKPMG✖ Returnflowsnegatingwatersavings(shortterm)✔discussed Collarenebri,DirranbandiflowonforMoree,StGeorge74

andsomeinfrastructurewatersavingsretainedforproductiveuses,nettedforcurrentwaterrecoveryinrelevantcommunities,75andaccountedas30%returnofwatersavingsinWeeWaa.76

17&18

CommonwealthwaterbuybacksinSB(2008-2012)hadlittleimpactonfarmnetincome

Proceedsfromsalewereusedtopay-offdebt/interestorinveston-farmandresultedingreateruseofexistingentitlements(andthislatterresponsenotsustainable).Communityimpactsnotassessedandcouldbepositiveandnegative

✖ Substitutionbetweenfactorsofproductionneedstobeincorporatedintojobsimpactwork(temporalinclusionnotyetknown))✔discussedinKPMGreport.77

19 Impactonjobsconsideredanimportantmeasureofsocialandeconomicconsequence

Foundationforcurrentwork.(Infrastructureinvestmenthasemploymentmultipliers1/3to¼ofthoseforpublichealthandeducation)

✔

20 Importanceofincorporating‘peopleandplace’thinkingintosocialandeconomicmonitoringandevaluationframework

MDBAconsciousoftheseconcernsandhaveundertakenanidentificationofculturalAboriginalandTorresStraitIslandervaluesandhasanongoingprogramofmonitoringcommunitywellbeing

✔ Wherecommunitiesbelievethisisnotthecase,thiscouldbecomepartoftheMDBA’songoingworkprogram(i.e.mediumtolong-term)

21-24 NegligibleeffectsofdroughtonChinesemacroeconomythoughurbanandruralhouseholdsexperiencedseverelossesinfoodandwelfareduetowaterwithdrawals,especiallyinnorthernandsouthernbasins

Farmerssubstitutedcapitalandlabour(movedfromnon-agtoag)forwater.Distinctionbetweennegligiblemacroandsignificantregionalandcommunityimpactsreinforcesneedforcurrentmodellingwork.AbilitytosubstitutelabourforwaterhinderedbyhigherwagesinAustralia,andalreadyincreasedcapitalizationfromdrought.

Seeinsight17and18above.

74MDBA.(2016).NorthernBasinReview:TechnicalOverviewofSocioeconomicAnalysis,DraftReport,p1.75MDBA(2016).NorthernBasinReview:TechnicalOverviewofSocioeconomicAnalysis,DraftReport,2Sep2016.Canberra:MDBA,p26.76MDBA.(2016).NorthernBasinReview:TechnicalOverviewofSocioeconomicAnalysis,DraftReport,2Sep2016.Canberra:MDBA,p33.77KPMG.(2016).NorthernBasinCommunityModelling:EconomicAssessmentofWaterRecoveryScenarios,16August2016DraftReport.Sydney:KPMG,pp.18-19.


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4. CommentsonGeneralApproachtoModellingIntroductionTheMDBAapproachtomodellinglocalizedsocialandeconomiccommunityimpactissummarizedintheirfinalreportwiththefollowingfigure.Figure7:Overviewoflocalsocialandeconomicimpactmodelling78

Figure7isconsistentwithourgeneralviewofmodellingtheimpactsofchangesinwaterrecoveryanditsimpactonlanduseandemployment(seeFigure5intheIntroductiontothisreport).Keyfactorsaretakenintoaccountincludingtheeffectofwaterrecoveryscenariosonextractionsbyirrigatorstakingintoaccounttheirlanduse,anduseofgroundwaterandseasonalrainfall.Theresultingchangeinareairrigatedthendeterminesthechangeinemploymentinagricultureandnon-agriculturesectors.GeneralapproachandfactorsofproductionWebelievetheMDBAhasfocusedonthekeyindicatoroftheimpactonsocialandeconomicwellbeingfromchangesindiversionsoncommunities,thatis,jobsoremployment.Jobsarefundamentaltothewellbeingofcommunities,providepeoplewithasenseofplaceandcontribution,andprovidemuchneededincometospendonothergoodsandservicesinthecommunity,providingfurtherstimulustothelocaleconomyandjobsandwellbeingtoothermembers.Havingsaidthat,jobsareonlyoneofthethreemainfactorsofproduction79:

• land(andnowwithwaterreform,waterhasbeenseparatedasanasset)• labourand

78UpdatefromBradley,J.(2016)Pers.Comms(Email),12Oct,Canberra:MDBAofthatprovidedinMDBA.(2016).NorthernBasinReview:TechnicalOverviewofSocioeconomicAnalysis,DraftReport,2Sep2016.Canberra:MDBA,p.8.79BlackwellBandBDollery(2013)IncomefactorsharesfrommininginremoteAustralia:AnanalysisoftheRangeruraniummineandtheTanamigoldmineintheNorthernTerritory,AustralasianJournalofRegionalStudies19(3),pp.369-395.Accessed19Aug2014from:http://www.anzrsai.org/assets/Uploads/PublicationChapter/546-BlackwellandDollery.pdf


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• capital.Itisthecombinationofthesefactorsthatresultsinproductionandsupplyofgoodsandservices.Incomparisonwithjobs,thereareotherreturnstootherownersoffactorsofproduction,notablyownersoflandandwaterandcapital,thatwillalsobeimpactedthroughthediversionofwatertomeetenvironmentalorotherobjectives.(Recommendation1)Somediscussionofthesefactorsandtheirlikelyimpactsinadditiontotheimpactonlabourorjobsisthereforerecommendedandwesuggestsomereasoningastowhythesewerenotincluded.ThishasnowbeenaddressedintheKPMGcommunitymodellingreportandMDBAreport.80Forexample,aswateriswithdrawn,theimpactonjobswillbecomplicated(offsetorcompounded)throughsubstitutionbetweenallfactorsofagriculturalproduction.Relatedtothesefactorsofproductionare‘factorshares’orreturnstothesefactorsemployedintheproductionprocess.Fromaneconomicviewpoint,economicmeasuresareusuallydescribedindollarsandsomequantificationinmonetarytermsoftheimpactsonjobs(andotherfactorsofproduction)wouldbeanimportantaddition(thoughexplainedtousthatlocalwageandsalaryestimatesarecomplexanddataisnotreadilyandreliablyavailable).InhisWealthofNations,AdamSmithobservedthat“Wages,profit,andrent,arethethreeoriginalsourcesofallrevenue”andthatthedisbursementofagriculturalrevenuetothefactorsofproduction,“eitherasthewagesof[‘inhabitant’s’]labour,profitsoftheirstock(ormachinery,geneticmaterialetc.),ortherentoftheirland”isakeyconsiderationineconomicandpoliticalanalyses.81Whileitismoredifficulttoattachwageandsalaryestimatestojobs,webelievethereissufficientdatatodosoatbelowtheshirescale,atleastbytransferringvaluesformlocalgovernmentareasorappropriatestatisticalareasaswehavepreviouslydoneforTheNorthernTerritory.82Similarly,lossesinrentsassociatedwithwaterandland,andprofitsfromtheapplicationofcrops,machineryandotherequipmenttoagriculturallandwillbeimpacted.(Recommendation2)Themonetaryvalueoftheseimpactshavenotbeenassessedintheanalysisandtheextenttowhichthesewillimpacttheselocaleconomiesandcommunitiesshouldataminimumbediscussed(shortterm)asshouldareasoningfortheirnon-inclusion(shortterm).Inthelongerterm,itwouldbepreferablethatlocalmeasuresofwageandsalaryincomebeattachedtothejoblosses.Thesearenowidentifiedonp.33oftheKPMGcommunitymodellingreportasanareaforfutureworkanddiscussedintheMDBAreport.83However,agoodpointraisedbytheMDBAinourdiscussionson31May2016,istheextenttowhichthesechangestothereturnstofactorsofproductionareimpactedbywaterwithdrawalsratherseparatefromotherexogenousfactors(likechangesincommodityprices,reductionintradebarriersetc.),orwillbeimpactedbyotherexogenousfactorsastheseplayoutthroughtime.(Finding/Caveat1)WethereforebelievetheMDBAhascapturedthenuboftherequiredanalysishereusingceterisparibus,allotherthingsheldthesameoraccountedfor.Becausethefactorsoflandandwater,labourandcapitalarecombined,theirrespectivereturnswillbeimpactedbyachangeinthevolumeofanygivenfactor(herewaterappliedtocropsetc.)asaresultofthewaterwithdrawals.Thereforeconsideringtheimpactsonjobsalonedoesnotforetelltheimpactsonlandandcapital(equipment)whicharecombinedwithwaterinproducingagriculturaloutputandincome,andsubsequentconsumptionandproductionimpactsthroughoutthelocalandregional

80MDBA.(2016).NorthernBasinReview:TechnicalOverviewofSocioeconomicAnalysis,DraftInterimReport,27Sep2016.Canberra:MDBA,pp.8-9,19.81Smith,A.(1904).AnInquiryIntotheNatureandCausesoftheWealthofNations,firstpublished1776,MethuenandCo.Ltd,London.Onlineversionaccess18Oct2012:www.econlib.org/library/smith/smWN2.html82SeeBlackwellB,McFarlaneJandSBlake(2014)LocalEmploymentofAboriginalandTorresStraitIslanderPeoplesbyLocalGovernmentAreaintheNorthernTerritory:RedDirtEmploymentandIncome,JournalofAustralianIndigenousIssues,vol.17,no.4,pp.72-90.83MDBA.(2016).NorthernBasinReview:TechnicalOverviewofSocioeconomicAnalysis,DraftInterimReport,27Sep2016,pp.8-9,19.


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economies.(Finding/Caveat2)Onlypartofthesocialandeconomicimpactpicturewillberepresentedthroughjobs.Aremeasuresofjobs,ratherthanrelativemeasuresofjoblosses,enough?Suchananalyticalextensionwouldproviderelativemeasuresofimpact,particularlywhereemploymentisconcentratedinindustrialsubsectors(asinthecaseofcommunitieswithirrigatedcotton–importantinconsideringtheresilienceofcommunitiesandtheireconomiestobouncebackfromshockssuchasfromwaterwithdrawals.Forexample,seeourworkonlabourconcentrations(relativemeasure)inFigure884.(Recommendation3)WeacknowledgethatKPMGhaveincorporatedthepercentagechangeinjobsrelativetothebasecase,butinthelongertermwebelieveareviewofrelativeemploymentmeasureswouldbeworthwhilee.g.locationquotientswhichprovidemeasuresofemploymentconcentration,employmenttoworkingagepopulationratioswhichprovideanindicationofutilizationofcommunitypopulationsintheworkforceetc.toidentifythoseofmostbenefittotheongoingmonitoringandevaluationframework.IntegratingthisworkwiththatofStenekesetal.85maypresentthegreatestsynergyfortheMDBA.Thisadditionisnownotedonp.33oftheKPMGCommunityModellingreport.(Finding/Caveat3)Overalljoblossesmaybeoverestimatedduetoanumberoftechnologicaladvances(e.g.GMcottonandtheneedforlesssprayingandemployment)andthegeneralsubstitutionoflabourforcapitalinAustralia86.Theformerwasdiscussedonp.19oftheKPMGreport,thoughdiscussedasdriverofchangeonp.20ofMDBAreport.87Thesearecounteredbydiscussionofvalidreasonsforunderestimatesonpp.18-19intheSept27draftoftheMDBAreport.

84Calculationoflocationquotientsisastandardtechniqueineconomicgeographicanalysis,thoughourparticular4waygeospatialvisualizationisunique.OtherstudiesusingLQtypeanalysesinclude:TontsM.,DaviesA.andHaslam-MckenzieF.(2008)RegionalWorkforceFutures:AnAnalysisoftheGreatSouthern,SouthWestandWheatbeltRegions.UniversityofWesternAustralia,Perth;LawrieM.,TontsM.andPlummerP.(2011)Boomtowns,ResourceDependenceandSocio-economicWell-being,AustralianGeographer42,139-64.TontsM.,PlummerP.andLawrieM.(2012)Socio-economicwellbeinginAustralianminingtowns:Acomparativeanalysis,JournalofRuralStudies28,288-301.LehtonenO.andTykkyläinenM.(2012)EstimatingRegionalInputCoefficientsandMultipliers:IstheChoiceofaNon-SurveyTechniqueaGamble?,RegionalStudies48,382-99.85Stenekes,N,Kancans,R,Randall,L,Lawson,K,Reeve,I,&Stayner,R.(2012).RevisedIndicatorsofCommunityVulnerabilityandAdaptiveCapacityAcrosstheMurray-DarlingBasin:AFocusonIrrigationinAgriculture.Canberra:ABARES.http://www.mdba.gov.au/kid/files/1715-Revised-indicators-of-community-vulnerability.pdf86SeeBlackwellBandBDollery(2014)TheimpactofminingexpenditureonremotecommunitiesinAustralia:TheRangeruraniummineandtheTanamigoldmineintheNorthernTerritory,AustralasianJournalofRegionalStudies20(1):68-97.'Accessed19Aug2014from:http://www.anzrsai.org/assets/Uploads/PublicationChapter/Blackwell-and-Dollery-final.pdf87MDBA.(2016).NorthernBasinReview:TechnicalOverviewofSocioeconomicAnalysis,DraftReport,2Sep2016.Canberra:MDBA.


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5. CommentsonSpecificAspectsofModellingBroaderconsiderationofsectorsforregionalandlocaleconomiesWeappreciatethatthemodellinghasconsideredthejobimpactsforwaterwithdrawalsandaggregatedimpactedsectorsinspecificgroupings(4intotal:farmandfarmsupplies,agriculturalprocessing,non-agriculturalprivate,governmentservices),whichisbasedon720subsectorjobcategoriesaggregatedto11industrialcategorieshoweverwebelieveinclusionofthismirco-levelanalysisofjobimpactswillrevealimpactsmorespecificallyforcommunitiesandthereforefocustheirattentiononadaptiveorresponsivestrategies(Recommendation4,shortterm).Thisrecommendationstillstandstobeaddressed.Wherecommunitiesrequest,the720industrysubsectordatacouldbeprovided.Forexample,inourtrackingandmappingofmineexpenditureinremoteAustralia–weusethe720+industrialsubsectorslikeMDBAandaggregatetheseto111subsectorsoftheeconomyandpresentaverageemploymentconcentrationgraphsforeachLGA(seeFigure8AforWesternAustraliaandFigure8Basanexampleofgeospatialjobsconcentrationimpacts).Furthermoreandalongwiththeregionalprofilinganddescriptions,mappingthegeospatialimpactsmighthelpcommunities,governments,andindustryvisualizethelikelyimpacts(Recommendation5).Thisrecommendationstillstandstobeaddressedandcouldbeincludedinthefutureworkprogram.Thismappingwouldformanidealnegotiatinginstrumentintheshort-termforvariousjurisdictionsbutthetimeframesfordecision-makingmaybesufficientlyshorttomeanthesemapsarepreparedinthemediumtolongerterm.UseofABSemploymentdataWehaveclarifiedindiscussionswiththeMDBAthatthesourceofemploymentdatafromtheABSisplaceofusualresidence(PUR).Ifthismeansthatallworkers,regardlessoftheirplaceofworkbutwhomlivelocallyareincludedintheanalysisthenthisdataaccountsforlocalresidentswhoworklocallybutalsolocalresidentswhoworkoutsidethelocalareaandreturnhomeandspendtheir‘outside’wageandsalaryincomelocally.Inthiscase,theimpactonjobsmaybeoverestimatedbecausepeoplewhoworkoutsideagivencommunity’sareaarenotlikelytobeimpactedbywaterwithdrawalsdirectlyandwillnodoubtcontinuetheiremploymentafterthesewithdrawalsareimplemented.Incontrast,ifplaceofwork(POW)datawasusedthiswouldaccountforlocalresidentsemployedlocallyaswellasresidentscommutinginforworkbutleavingtoanoutsidecommunitytospendtheirmoney.Inthislattercase,thetotalemploymenteffectsofwaterwithdrawalswillnotbeoverestimatedbecauseitisthelocallyorientedwithdrawalsthatarelikelytoimpactlocaljobs,butthelocationofemploymentimpactswillbemis-specifiedbecausesomeofthisemploymentlivesoutsidethelocalcommunity.Toprovideageneralindicationofpossiblemis-estimationofimpacts,ABSTablebuilder88indicatesthatofthe2296peoplewhoareemployedanywhere89andliveinBalonne,1886(82%)worklocally,271(12%)workelsewhereinQueensland[ofthis62(3%)identifiedaparticularLGA,91(4%)wereinQueenslandwith‘nofixedaddress’,and118(5%)werecategorizedasinQueensland‘undefined’],and139(6%)elsewhereinAustralia(ofthese56(2%)fromNSW,3(0.1%)fromWA,81(4%)‘notstated’).Inotherwords,82%ofjobsarelocallyplaced,18%areplacedoutsideBalonnebringingadditionalincometothelocalcommunitythatdoesnotrelyonlocaljobsandtheimpactsforjoblosseswilltendtobeoverestimatedforthiscomponent,thoughtheMDBAdomodelforseasonalworkers.Incorollary,ofthe2096peoplewhoworkinBalonne,1884(90%)livelocally,155(7%)liveelsewhereinQueensland,and57(3%)liveelsewhereinAustralia.Inthiscase10%ofemploymentincomefromBalonneislosttooutsideareasorstates,lesseningtheimpactlocally,butspreadingtheimpacttooutsideareas.

88ABS.(2016).TableBuilder,accessed20June2016from:http://www.abs.gov.au/websitedbs/censushome.nsf/home/tablebuilder?opendocument&navpos=24089TheonlineandspreadsheetABSnotesreferto‘POWgeographicalarea-PlaceofWorkrelatestowherethepersonworkedintheweekpriortoCensusNight.Applicabletoemployedpersonsaged15yearsandover.’


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Figure8:A.Employmentconcentrations(LQs)inWesternAustralia;B.PredictedspatialimpactsforpossiblefutureRangeruraniummineclosure(SourceandNotes:Blackwell,FischerandMcFarlane2016;AG=agriculture;MI=mining;MA=manufacturing;UT=utilities;BS=businessservices;PS=publicandpersonalservices;LQ=employmentlocationquotient.)A

B


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Thereforeanimprovementinuseofthedataandpresentationoftheimpactswouldbetoidentifythespatialimpactsbybreakingdowntheemploymentdataintoitsvarioustypes(Recommendation690):

1. Localemployment(PURcrosstabulatedwithPOWforlocalcommunity)2. Localsemployedoutside(PURcrosstabulatedwithPOWoutsidelocalcommunity)3. Outsidersemployedlocally(localcommunityPOWwithPURoutsidelocalcommunity)and4. Industrialsubsector(e.g.2or4digitlevel)toprovidecluesastothespecificindustrialsourcesof

employmentincomeleakageorgain.Whileitwouldbepreferredtobetterinformnegotiationbetweenvariousjurisdictionsandcommunitiesthatthisworkisdonequicklyintheshortterm,theshort-timeframesmaymeanthisbecomespartofthemediumtolonger-termworkprogram.Thisrefinementwouldthencapturetheextenttowhichlocaljobswillbeimpacted(Item1)andoutsidejobs(item2)thatwillnotbeimpactedbythewithdrawals,andemploymentimpactsoutsidethelocalareathatwillbeimpactedbythewithdrawals(item3).Figure8BaboveprovidesanexampleofasimilartypeofspatialanalysisforlossofjobsfromapotentialclosureoftheRangermineintheNorthernTerritory.WhiletheNorthernTerritoryisrenownedforitsiterantworkforce,thereisgrowingevidenceintheliteratureoftheneedtoaccountforlabourmigrationandcommutinginbetterunderstandingthechangingeconomicgeographyoflocalandregionalcommunities.91ThereforenotingthesourceofdataandhowitwasextractedfromtheABSisimportanttoidentifythedegreetowhichcommutingandemploymentmigrationareaccountedforandthespatialeffectsthattheneventuate(Recommendation7).Recommendations6and7havenotyetbeenaddressedintheMDBAorKPMGreportsandcouldformpartoftheMDBA’sfutureworkprogram.ThelinearrelationshipusedinMDBAwater(ML)toland-usemodellingThismodelissimplisticanddoesnotaccountfortimeseriesnatureofthedata–thereforewerecommendtheinclusionoflagsandtransformations,unlesssomeotherexceptioncanbediscussed(Recommendation8).WenowacceptthatthereportinghasattemptedtoaddressourconcernsherewithadiscussionastowhythoroughtimeseriesdiagnostictestsarenotemployedandwithanadditionofanFtesttoprovideatestoftheoverallperformanceofthemodel(seeI4inTable2below).Furtherdiscussionisprovidedinthe27SeptMDBAreportwhichoutlinesthetestingdonetoaddresstheseissues.Inaddition,weprovidedabriefandrapidresponsetotheMDBA92onthisworkasoutlinedinTable5.TheMDBAalsoco-respondedasnotedinthetable.Table5:Summaryissues(Sourceandnotes:Blackwell,201693)IssueNo.

Issue Detail MDBAresponse94

I1 Difficulttomodelreality–thoughoverall

Approachcommendablebecausethereisamodelforeachcommunitytohelp

NA

90Afurtherrecommendationaroundaccountingforlabourmigrationmaybetoincorporatelagstoaccountforwhenpeopleleaveandarrive,againthiswouldbeamediumtolongtermworkprogramrecommendation.91Seeforexample,Nicholas,C,&Welters,R(2016)ExploringdeterminantsoftheextentoflongdistancecommutinginAustralia:accountingforspace.AustralianGeographer,47(1),pp.103-120.doi:10.1080/00049182.2015.1090300;andBlackwellB,FischerA,McFarlaneJandDolleryB(2015).'MiningandotherindustrycontributionstoemploymentleakageinAustralia'sNorthernTerritory',JournalofDevelopingAreas,SpecialIssue,49(6):pp.263-278.Accessed30Sep2015from:http://muse.jhu.edu/journals/journal_of_developing_areas/summary/v049/49.6.blackwell.html92Blackwell,Boyd.(2016).RE:Updateofmodellingfiles.EmailsenttoPhilTownsend22August2016.Armidale:UniversityofNewEngland.93Blackwell,Boyd.(2016).RE:Updateofmodellingfiles.EmailsenttoPhilTownsend22August2016.Armidale:UniversityofNewEngland.94Townsend,Phil,(2016).Emailreceived22August2016inresponsetoBlackwell(2016).Canberra:MDBA.


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IssueNo.

Issue Detail MDBAresponse94

approachcommendable captureappropriatecontextandnuanceI2 Approach,assumptions

andresultsforeachcommunitydetailed

Willhelpcommunitiesseehowtheirparticularcommunitymodelled

NA

I3 Approachofmodellingrealityandthenadjustingsoperformanceofmodelbettermatchesactuality

Forexample,somedummyvariableaddedtogainabetterfitwithactualwatertolanduserelationship

NA

I4 PresentationofResultsshouldincludeFstatistic

Fstatisticneededinadditiontotandadj.R2totestoverallsignificanceofmodelinexplainingwateruse

✔ Addedtomodels(thoughdoesnotappearincurrentversionofdraftsingreycolouredresultsboxes✖)

I5 Somecommunities’pastwaterusenotpredictedbymodelsaswellasothers

Whilethisisthecase,webelieveitsimportantforMDBAtoexplainwhythemodelsarebetteratpredictingfuturewateruseratherthanpasttoprovidecommunitiesgreaterconfidence.

✔ StGeorgenotedasanexample:hydrology-modellingoutputsforwatercourseproblematic.Tobedocumentedandclarified.

I6 Needforinclusionoftimeseriesdiagnostictesting

ThoughexplicitlyexplainedinKPMGreport,timeseriesnatureofdatarequiresstandarddiagnostictestingtoshowtheseinherentbiasesareaccountedforbecausecrosssectionalresultssuggestgreaterperformancethanwouldotherwisebethecase

✔ WillexplainatfrontofDocumentwhydatanottechnicallytimeseriesbutcross-sectionalandthatcottonpricesnotstatisticallyrelatedtoareaofproduction.Usershaveadevelopmentareafrom2000setbywaterpolicy,developmentcosts,andwaterreliabilityrisk.RefertoChp.4andAppendix4ofKPMGdraftreport.

I7 Greatertimespentonmodellingonecommunityoveranother

ExplanationofreasonswhymayprovidecommunitieswithgreaterconfidenceinMDBAapproach

✔ WillbeexplainedinDocument.

I8 Whilemodellingmaypredictspastwaterusewell,thisdoesnotequatetopredictingfuturewell

IssueneedsdiscussionintermsofmodellingapproachasperI5andI3above.

✔ Modelsnotintendedtobeusedtopredictfuturebecauseofchangingproductionsystemsandefficiencies.

RelationshipbetweenhectaresandjobsWhiletakingaccountoftimedependency(throughtheTvariabletakingonavalueof1foreachsuccessiveyearofthemodel)thisrelationshipneedstobeexplainedexplicitlyintheKPMGreport.Similartothelinearwaterandland-usemodel,thehectarestojobsrelationshipusingtimeseriesdatarequiresasuitabletransformationsuchasafirstdifferenceofthedependentvariable,againunlesssomeotherreasoningcanbeprovidedandregardlessofthepreferredapproachshouldbeexplainedinthetextofthereport.(Recommendation9a).Italsorequiresalagvariableofthedependentvariableasanexplanatoryvariable(Recommendation9b).Theseissueshavenowbeenexplainedinthereporting.LongerperiodfordataCurrentlyasweunderstand,thenumberofobservationsusedintheregressionforlabourisrelativelysmallcomparedwithtypicaltimesseries(orpaneldata)analysis.(Recommendation10)Thisisthemostimportantextensionofthecurrentmodellingfromaneconometricperspectivebecausethiswilladdconsiderablestatisticalpowertothemodellingandallowfortheincorporationofotherpossibleexplanatoryvariables.WenotethedatalimitationsnowdocumentedintheKPMGreportonp.5.ReferencingofdatasourcesandassumptionsFormodellingspreadsheetstheseshouldbeexplicitlystatedinthespreadsheetssoitiscleartotheviewerwherethedatahasbeenderived(Recommendation11).Whilethevarioussourceswereverballyexplainedtous,tothelayreader,heorshewillbeleftwonderingwhatthesourceswere.SuchdocumentationwillalsohelpwithinterpretationbyotherMDBAstaffnewtotheprojectorspreadsheetsandbystakeholdersreviewingthemodel.Onthislatterpointwealsorecommendthatstakeholders,particularlyindustry,verifythedatainputsinthemodel.Referencingofdatasources,assumptionsand


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limitationsnowdetailedinthereportsandtheMDBAhasundertakencommunityconsultation(MDBA,p.8)thoughitisnotwithinthescopeofourtermsofreferencetoverifytheveracityofthisconsultationotherthanwhatwehaveprovidedinSection6ofourreport.ClearandexplicitpresentationoftheeconometricresultsThismustbeprovided(Recommendation12):

• Providingtherequiredstandarddiagnostictestresultsforrunningtimeseriesorpaneldatamodels,e.g.,totestforautocorrelation,endogeneityandomittedvariablebiasetc.95

• AdjustedR2insteadofsimplyR2toaccountforthenumberofexplanatoryvariablesinthemodels;thiswillbeimportantwherethenumberofobservationsarerelativelysmall.

• IsanappropriatetimeseriesmodifiedR2usedasperWooldridge96,page366-367,becauseR2fortimeseriesdataareinherentlyhighregardlessofthemodel’sunderlyingexplanatorypower?

• Allteststatisticsshouldbeexplicitlynamedcorrectlyinthespreadsheetstoeaseinterpretation.Wearesatisfiedthatthesearenowaddressedthroughbothreports,forexample,seepp.14-16oftheMDBAinterimsummaryreportandthedetailedresultsintheappendicesoftheKPMGReport.97However,ourviewisthattheunderlyingdataistimesseriesinnature.CorrectionforomittedvariablebiasCurrently,withonlyonemainvariableincludedinthemodelling,thereislikelytobeomittedvariablebiasintheresults.Thisoccurswhereonevariablecapturesthevariationofothersvariablesnotincludedinthemodel.Thisresultsinthecoefficientfortheexplanatoryvariable(haoragriculturallabouremployment)beinglargerthanitotherwiseshouldbeandforanygivenreductioninwater,andthusreductioninhaoragriculturallabouremployment,thepredictedlossinemploymentwillbeoverestimated.98(Recommendation13)Wethereforebelieveanumberofotherexplanatoryvariablesshouldbeincludedandreportedintheresultstoconfirmwhetheromittedvariablebiasisoccurring.Forexample,anon-exhaustivelistofvariablesthatmayimpactemploymentapriori(signsinbrackets)are:

• Priceoflabour(i.e.wagesrates,-)• Levelofinvestment99(+)asaproxyforcapital(seepreviouspointsaboutLabour,Capital,Land

andWatersubstitution)• Volumeofoutput(+)whichshouldbereadilyknowninanagriculturalenterprise(elseitcanbe

approximatedbythelevelofvalueaddedcalculatedbysubtractingfrombusinessvolumethevalueofintermediateoutput

• Priceofoutput(i.e.Cottonprice,+)ortoovercomemulticollinearitybetweenvolumeandpriceofoutput–thevalueofoutput

95ThecurrentlyveryhighR2forthemodelssuggestsomeunderlyingproblemsthatcanbeidentifiedandcorrectedthroughdiagnostictesting.96Wooldridge,JM(2009)IntroductoryEconometrics:AModernApproach,4e,CengageLearning,Sydney.97KPMG.(2016).NorthernBasinCommunityModelling:EconomicAssessmentofWaterRecoveryScenarios,16August2016DraftReport.Sydney:KPMG;MDBA.(2016).NorthernBasinReview:TechnicalOverviewofSocioeconomicAnalysis,DraftInterimReport,10Oct2016.Canberra:MDBA.98Whileomittedvariablebiasislikelytoresultinanoverestimateofimpactsoflabour,thereisalsothepotentialforunder-estimationthroughthemodellingbecausenoteveryMLofwaterrecoveryhasthesameeffectonthelocaleconomy/community.Asmoreandmorewaterisrecovered,themarginalimpactmayvary.Furthermore,thewaywaterisrecoveredmayhaveasignificantimpactonemployment,e.g.buyingwateronadayfromthebiggestoroneofthebiggestirrigatorsinacommunity.99Forexample,seeinclusionofinvestmentintheempiricallabourmarketmodellingundertakenbyLichter,A,Piechl,A,&Siegloch,A.(2012).Micro-levellabourdemandestimationforGermanyNEUJOBSWorkingPapers,April4(WorkingPaperD10.3),1-49.http://www.neujobs.eu/sites/default/files/publication/2012/04/NEUJOBS_Working%20PaperD.10.3.pdf


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WearesatisfiedthatTheMDBAhasgonethroughaseriesofprocessesthattestforomittedvariablebiasasnotedintheirreportonpp.11-12.100OtherreviewercommentsWhilewehavereadthecommentsfromotherreviewersoftheLowerBalonnesocialandeconomicmodellingbytheMDBA,wehaveundertakenourreviewindependentlyoftheirconcernsinthefirstinstance,thatis,wehavereadtheseotherreviewconcernsafterdrawingourownopinions.Firstly,wehavereviewedthecommentsbyMrJimBinneyfortheQueenslandGovernmentprovidedbyPhilTownsendonFriday3June2016inmarked-upchangesonvariousearlierworkundertakenbyKPMG101andMDBAandhavenecessarilynodisagreementwithhisgeneralcomments–thoughsomeoftheseseemirrelevanttotheStGeorgeDirranbandi(Hebel)workgiventhegeneralapproachtakenbyKPMGsincethisreview(nofaultofMrBinney’s)appearstohavebeentosimplifythemodellingwithafocusonjobs.OnepointwedisagreewithisaroundtheassumedimmobilityofAboriginalandTorresStraitIslanderpeoples.CRCREPresearchsuggestsotherwiseandindeedrecentevidencesuggeststheyarerecognizedas‘highlymobile’–e.g.seeDockery102page4.Secondly,wehavereadthecommentsraisedbyDNRMoftheQueenslandGovernmentprovidedbyMsSophieRollsviaemailonFriday3June2016.Againwedonotnecessarilydisagreewiththematterstheyraise.Insteadwehavefocusedourreviewonthoseissuesthatinouropinionsareimportant.Thishowever,isnottosaythatDNRM’sconcernsareanylessimportantthanours,andshouldnotalsobegivendueconsideration.Inthisway,ourrecommendationscanbeseenascorroboratinginsomeinstances,whileoriginalandadditionalinotherinstances.WethereforebelievethattheconcernsofanyotherreviewersofthemodellingworkshouldbeaddressedbyMDBAinclearlyarticulatedterms.Theincorporationorotherwiseexplanationastowhyincorporationwouldnotbeappropriateorisimpracticalshouldbeprovidedtothesereviewersortheagenciesforwhichtheyact(Recommendation14-shortterm).Wehavenotcheckedforthisbecausethisisoutsidethescopeofourtermsofreference,butrequestthatMDBAaddresstheseconcernsseparately.

100MDBA.(2016).NorthernBasinReview:TechnicalOverviewofSocioeconomicAnalysis,DraftReport,2Sep2016.Canberra:MDBA.101KPMG(2016b)DevelopmentofcapabilitytoassesseffectsofwaterrecoveryfortheenvironmentatthecommunitylevelintheNorthernBasin:Modellingspecificationbrief,March,KPMG,Melbourne;KPMG(2016c)DevelopmentofcapabilitytoassesseffectsofwaterrecoveryfortheenvironmentatthecommunitylevelintheNorthernBasin:Modellingbrief,February,KPMG,Melbourne;Townsend,P(n.d.)‘ModellingirrigatedagricultureproductionintheLowerBalonne’,(LowerBalonneareayieldmodelling)Unpublished,MDBA,Canberra;Mainstream(2016)ReviewofdocumentsoutliningmodelstoassessimpactsofchangestoSustainableDiversionLimits,Mainstream,Brisbane.102Dockery, AM (2014) Reconceptualising mobility for Aboriginal and Torres Strait Islander Australians, CRC-REP Working Paper CW015, Ninti One Limited, Alice Springs. Accessed 8 June 2016: http://www.crc-rep.com.au/resource/CW015_ReconceptualisingMobility.pdf


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6. CommunityConsultationOverModellingIntroductionAsnotedintheintroduction,wereceivedareportoncommunityconsultationassummarizedinTable6.ThefullprocessforthisconsultationhasbeenoutlinedintheMDBAtechnicalsummaryreportforwhichwearenotcommenting–suchwouldbeoutsidethescopeofourreview–insteadwefocusonanycommunityconcernsoverthemodellingelements.BriefreviewOfthe13identified,fiveneedtobemoreexplicitlyaddressedbytheMDBAtohelpallaycommunityconcernsincluding:realestatevaluechanges,accountingorplanningforlagtimesfornewindustriestostart-up,costsbeinggreaterthanbenefits,significanceofimpactsontownsandbusinessesfrombuybacks,andthefactthatlocalirrigatorsdonotwanttoselltheirwater.Table6:IssuesraisedthroughCommunityConsultationPhase2103IssueNo.

Issue Detail MDBAresponse Ourresponse

DataandInformation

CCI1 Datapaucity MDBAaskedhowhandlingdatagapspost2011.

ConstrainedbyABScensusyears–2011mostrecent(2016inprogress,availablemid2017&willbeincludedinfuturereports)yetsupplementedthrough(i)annualABSagand(ii)ABARESfarmsurveysand(iii)AustralianCollaborativeLandUseandManagementProgramMay2016updateaswellasTownsend(iv)talkingwithlocalfarmers,businessesandpeopleinthecommunity.

✔MDBAresponsevalid,except(iv)whileprovidingcontextcannot,aspresented,bevalidatedasrepresentative✖

CCI2 Jobnumbers Preferenceforactualjobnumbersratherthanpercentagechange

Incorporatedintoanalysis ✔

CCI3 Full-timeequivalents(FTEs)versusemploymentlevels

EmploymenthaslowcorrelationwithFTEs:PeaksandtroughsnotcapturedbyFTEs.

Variabilitytakenintoaccountinanalysis

✔

CCI4 Realestatevaluechanges

Whynotincludedintheanalysis?

(Noresponseprovided) ✖ ShouldbeaddressedbyMDBA,similartoourcommentinregardstoaccountingforsubstitutionbetweenfactorsofproduction:Land,LabourandCapital.

Impactlagtime

CCI5 Impactsfrompreviousbuybacksstillflowingthroughcommunities

Dirranbandiusedasanexample

Seebelow Seebelow

CCI6 Lagtimefor Temporal Lagtimelikelytobe2-5years ✖ Theanalysisshouldincorporateatleastsome

103ThistableprovidesasummaryofMDBA.(2016).NorthernBasinReviewPhase2EngagementProgram:CommunityMeetings,July2016.Canberra:MDBA.


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IssueNo.


newindustriestostart-up

natureofimpactsandconsequencesforclosuresandstart-upsneedsgreaterconsideration

foradaptationoradjustmenttowaterrecoveryshock.Wheretownsarelookingtonewindustriesandinnovation,theyshoulddiscussbroadrangeofissuesincluding:credit,supply,andfarm-townconnections.

discussionoftemporalimpacts–atleastshorttermandintermediatetolongerterm.

ManagementofBusinessandCommunityDiversityandConnectivity

CCI7 Communityboundaries

WhydidtheyusethosedifferenttoABS?

BecauseboundarieswereestablishedbasedontakingaccountofthediverseeconomyandcommunitycontextforeachBrokenlinesindicateconnectivitybetweencommunitiesandmorebroadly–demarcationalwaysdifficult.

✔ butnotedifficultlyforthirdpartytoreproduceresultswithoutconversionofstandarddatatonewboundaries

CCI8 Noagandagbusinessrelationship

Arenotallindustriesconnectedanddependentonaginsmallagtowns?

Nonagincludes:hairdressers,retailandaccommodation.Appreciatethesearen’tunrelatedtoagesp.insmalltowns.KPMGmodellingdesignedtoaccountfortheserelationships.

✔ again,sometimesdemarcationdifficultbuthastobedone.

CCI9 StructuralchangesinStGeorge

Resultedinislessdiversityofbusinesses

(Noresponseprovided)

Buybacksversusadditionalinfrastructureinvestment

CCI10(i)

Buybacks–v-infrastructurehavedifferentimpacts

TheseneedtobeunderstoodbyMDBA

(Noresponsenecessary–seebelow.)

NA

(ii) Coststocommunitiesgreaterthanwhatpresented

Whynotafullcost-benefitanalysis?


(iii) Significantimpactsontownsandbusinessesfrombuybacks

HowisMDBArespondingtothis?


(iv) Localirrigatorsdonotwanttoselltheirwater

ReasonwhyAustralianGovernmentisprioritizinginfrastructurespendingoverbuybacks104

ImplicitreferencetoAustralianGovernmentWaterRecoveryStrategy?

✔ WhilestrategysetsoutGovernment’sapproachdoesthisaddresscommunityconcernsandideologicaldividebetweensavingwaterfortheenvironmentthroughbuy-backsandcreatingmorewaterforgrowersthroughinfrastructureinvestment?Thereisacaponwaterbuy-backsandplanforinvestment.✖

Climatevariabilityandchange

CCI11 Impactofdrought

Discussed Modellingthroughscenariostakesalong-termviewtotakeaccountofarangeofpressures,incl.drought,whichcommunitiesneedtomanage.MDBApresentedshiftsin

✔

104DepartmentofEnvironment.(2014).WaterRecoveryStrategyfortheMurray-DarlingBasin,June2014.Canberra:CommonwealthofAustralia.Retrievedfromhttp://www.environment.gov.au/system/files/resources/4ccb1c76-655b-4380-8e94-419185d5c777/files/water-recovery-strategy-mdb2.pdf


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IssueNo.


declineincasuallabour,changeinagestructure,impactsonbusinessresultingfromdroughtovertime

CCI12 Climatechangeimpactsoncommunity

Havethesebeenincluded?

Hydrologicalmodellingdoesnotincorporateclimatechangescenariosratherincorporatesarangeofhistoricalclimateconditions105thatmorethanadequatelycapturesaverageclimatechangeimpactsonwateravailability.ReferredtoMDBAsapproachtoclimatechange106

✔

Movingforward

CCI13 QldMurray-DarlingCommittee

ComplimentaryaboutworktodateandneedtoworkwithUniversitiesonimpactsforfishandbirds

(Noresponserequired) NA

105MDBA.(2012).HydrologicalModellingtoInformtheProposedBasinPlan,February2012.Canberra:MDBA.Retrievedfromhttp://www.mdba.gov.au/sites/default/files/pubs/Hydrologic_Modelling_Report.pdf106Neave,I,McLeod,A,Raisin,G,&Swirepik,J.(2015).ManagingwaterintheMurray-DarlingBasinunderavariableandchangingclimate.Water,42(2),102-107.Retrievedfromwww.mdba.gov.au/sites/default/files/pubs/Managing%20water%20in%20the%20murray-darling%20basin%20under%20variable%20and%20changing%20climate.pdr


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7. LowerBalonneFloodplainGrazierModellingIntroductionWhilewehavealreadyprovidedourindependentreviewreporttotheMDBAonthemodellingdonefortheStGeorgeandDirranbandi(includingHebel)communities107thisdidnotconsiderthemodellingwork(throughsimulation)donebytheMDBAontheimpactsfromincreasedenvironmentalflowsforthefloodplaingraziersoftheLowerBalonne(seeFigure9)asreportedbyWakerman-Powell108.Inthissectionofourreportweaddressthisasperourtermsofreference(seesection2Introduction).Figure9:LowerBalonneRiverFloodplain(Source:Wakerman-Powell109,p.3)

Figure10depictsaprofileofirrigationsystemsatplayintheBalonneRiverincludingtheLowerBalonneRiverFloodplain(greenshading).TheFigurekeyalsodenotesthatthisfloodplainiskeyenvironmentalassetsiteoftheBasin.UpstreamagriculturaldevelopmentontheCondamine-BalonneRivershasreducedthe‘sizeandscopeoflargeoverbankflows’and‘smallerflowswhichallowforin-channelenvironmental

107Blackwell,Boyd,McFarlane,Jim,&Stayner,Richard.(2016).IndependentReviewofMDBADirranbandi(&Hebel)andStGeorgeSocio-EconomicModellingfortheNorthernBasin:FinalReport23June2016.Armidale:UniversityofNewEngland108Wakerman-Powell,Kai.(2016).LowerBalonneFloodplainGrazingModelReport-Draft,September2016.Canberra:MDBA.109Wakerman-Powell,Kai.(2016).p.3.


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benefitsandstockanddomesticwater’.110ThesereducedflowshavethussignificantlyimpactedLowerBalonnegraziersandtheenvironmentoverthelast20years–somegraziershavelostasmuchasaquarterofstockandearningsfromlowerflows.111Thereforereturningflowstothefloodplainisexpectedtodeliverenvironmentalbenefitsandimprovedyieldstograziers,contributingtothebusinessesandeconomiesofGoodooga,Brewarrina(seeFigure9)andWeilmoringle.TheMDBAfloodplainreportinthisregardthereforeattemptstosimulatetheextentofbenefitsthataretransferredtograziersasaresultofthewaterscenariosforincreasedenvironmentalflowstotheLowerBalonneFloodplain,andthiswillhelprecommendarecoverytarget‘alongsideotherdetailedstudiesofenvironmental,socialandeconomicimpacts’.112Figure10:LongitudinalProfileofLowerBalonneRiverFloodplain(Source:http://www.mdba.gov.au/sites/default/files/pubs/Balonne_LP.pdf)

Thesimulationmodel,usingcomputationalandstatisticalestimationandconsultationwithgraziers,takesintoaccount‘overbankflows,rainfallandpropertyconditionstoestimategrazingproductivityonaseasonalbasis’asnotedinFigure11.113However,opportunitycroppingbenefits,orgeographicalimpactdistributionacrossthefloodplainisnottakenintoaccountandmore‘workisrequiredtotracetheimpactofspecificflowsonthefloodplain’.114Between25%and33%ofloststockproductivityandearningscanbereturnedacrossthefloodplainscenariosconsideredasmirroredbywithdrawalsofbetween278GLand390GLintheNorthernBasin.115Interestingly,greatervolumesofwaterrecoveryacrossthesescenariosmaynotnecessarilyhaveincreasingimpactsforgraziers,becauseofthevaryingdistributionofwaterrecoveryacrossvalleysandenvironmentalwaterholderuse;thereisanon-linearbenefitresponsefromincreasedenvironmentalflows.116Themodellingusesa100-yearbaselineuptoJune2009priortotheBasinPlanaswellastakingaccountofupstreamdevelopment.

110Wakerman-Powell,Kai.(2016).p.1.111Ibid.112Ibid.113Ibid.114Ibid.115Ibid.116Wakerman-Powell,Kai(2016),p.


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Figure11:LowerBalonneFloodplainGrazierModelStructure117Thestockinanyoneperiodisafunctionofthecurrentseason(4seasonsincluded),thestockinthepreviousperiod,andtheoverbankflowsandrainfallovertheprevioustwoyears,asderivedfromgrazierconsultations,whereoverbankflowsonthefloodplainhavelargelaggedeffectsandaresequencedependent.

ReviewItemsOverallthemodellingforfloodplainglazierimpactsappearsthoroughbeingcontextualizedbyconsultationanddiscussionwithgrazierstobetterinterprettheresults(e.g.Seegraziercommentp.8aboutevensmallflowsindryyearsfollowinganoverbankflowyearpresentsanidealsequence).Wealsobelievethemodellinghasbeenpreparedinasufficientlycomplexway(usingexcelsheets,simulations,MonteCarloresultsestimation,computationallyoptimizedmodelvariables,seasonality,conditionsasrulesbased,separateestimationofcarryingcapacityandearningswiththelatterestimatedseasonally)yetgroundedbyin-builtrulesthatmirrorgrazierpracticaldecisionmaking.ThefullsetofmodellingassumptionsandlimitationsareoutlinedintheAppendixB:ModelDesignofWakerman-Powell(2016).Forthisreason,wehavenomajorconcernswiththeLowerBalonneFloodplainGrazingModeloritsreportotherthanthoseoutlinedinTable4,andonlyoneofthesemaybeusefultoconsiderinfuturemodellingwork(seeGI3inTable4)undertakenbytheMDBA.

117UpateviaWakerman-Powell,K.(2016)Pers.Comms(Email),13Oct2016,Canberra:MDBAofWakerman-Powell(2016,p.25).


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Table7:SummaryofreviewitemsIssueNo.

Issue Detail MDBAresponse

GI1 Earningsmodelling–inclusionoffullcosts

Overheadorfixedcostscouldbeincludedintheearningestimatestoprovidenetearnings(toensuregrazierstakeaccountoflandtaxes,capitalassets,managerincome–notedonp.15–andforgoneincometothemselves),however,onlyconsideringthemarginalcostsisaneconomicallyvalidapproachandfixedcostandwealtheffectsareexplicitlynotedasnotincludedinthemodellinginAppendixB,p.43andasalimitation.

✔Floodplainmodelledasasingleunitratherthanforindividualbusiness–toogreatavariation(10-20timessizedifference,smallesttolargest)tomodelatypicalbusinessplusmodellingcomplexities(changesinbusinessstructure/processesfromwaterchanges)outsideproject’sscope.118

GI2 Earningsmodelling–inclusionofrelevantmarginalcosts

Establishingwhetherfloodplaingrazingisviableshouldincludeconsiderationofallrelevantmarginalcosts(asnotedabove)butalsoforgoneincometograziersthemselves–toensuretheyearnenoughtopaythemselvesfortheirefforts),otherwisetheseco-benefitsofenvironmentalflowsshouldbeseenasco-costs/non-benefitsofwaterfortheenvironment.

✔Labourcosts(variable)explicitlyincludedinmodelling,thoughnot‘forsell-offs’or‘agistmentwhichmostlyinvolveloadingandunloading’stock.119

GI3 Yearlyearningsestimates–incorporationoftimevalueofmoney

Asnotedbyauthoronp.32,theseneedtobesummedovertimebecausetheyaretypicallyearnedatpointsintime.Hastheauthorconsideredtimevalueofmoneyintheirearningsmodelsandifnot,itmaybebettertoconvertannualbenefitstonetpresentvaluestoaccountforthemismatchofcostsandbenefitflowsovertime.

✔Yeswasconsideredthoughresultstobeinterpretedaswhatisexpectednextyearunderthedifferentscenarios,NPVmayconfoundsomeoftheimportantmessagesaboutsequenceofflowsbecausevolumesnotrandomlydistributedthroughtime,itdoesnotincludecostsandbenefitsforcottonreducedupstreamandisonlyapartialanalysis,andresultsrelatetowholefloodplainandnotindividualbusinesses.Recommendtheinclusionofthesecomplexitiesinfuturemodelling.

GI4 Modeldrivenbywaterinputratherthancommodityprices

Otherfactorsmaydrivegrazierdecisionsmorethanenvironmentalflows,suchascommoditypricesandexchangerates.Wakerman-Powellspecificallynotesthisonp.43ofAppendix,particularlywhereafterdroughtrestockingisassignificanttodecisionmakingasreturnofwater.

Notnecessary

118Wakerman-Powell(2016)Pers.Comms(Email),16Sep2016,MDBA,Camberra.119Ibid.Wakerman-Powellprovidedspreadsheetmodelthatincludes‘workingcosts’assheepandpricingvariables.

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