CoPS/IMPACT Working Paper Number G-232

Title: Accelerated water savings and demand growth for farm outputs: impacts on the economy of the southern Murray-Darling Basin

Author: Glyn Wittwer


It is possible that water efficiency in irrigation agriculture may improve substantially over the next decade or two. At the same time, worsening agricultural land and water scarcities worldwide may not be matched by agricultural productivity growth. This means that there may be strong growth in export demand for agricultural and food products in major agricultural nations. This study uses TERM-H2O, a dynamic CGE model with considerable detail in the southern Murray-Darling Basin, to examine the impacts of both fast water efficiency gains and strong export demand growth over time. Water efficiency gains will have relatively small impacts on the economy of the southern basin, but during drought years the gains are larger. The economic benefits on the southern basin of rapid export demand growth will be larger than those of water savings. Water efficiency gains and rapid export demand growth have differing impacts on the composition of crops and livestock production in the southern basin.

JEL classification: C68, Q25.

Keywords: Dynamic computable general equilibrium modelling, Water efficiency gains, TERM-H20

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