Monday, May 27, 2024

2024-25 Budget analysis: Waterfind

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Waterfind, Media Release, 15 May 2024

On 14 May 2024, the Treasurer delivered the Federal Budget. The key themes of the Budget were addressing cost of living pressures and a ‘future made in Australia.’ The Budget was released in an inflationary macro-economic environment with the AU/US dollar at 0.66 cents, an RBA cash rate of 4.35 per cent and nominal GDP growth expected to slow to below 3 per cent.

From an agricultural and water perspective, the Budget was released in an environment in which:

  • the previously soured relationship with its major international trading partner – China – was improving and terms of trade were strengthening;
  • the long-run trend of a net positive Southern Oscillation Index (SOI) that commenced in July 2020, began to shift to net negatives;  
  • aggregated water storage in the Nation’s major dams were at the second highest levels in recorded history, at over 57,000,000 million litres, a factor of the unseasonal wet weather over the previous few seasons;
  • some areas in the Murray-Darling Basin and Northern Australia experienced above-average rainfall, while most of the Nation is experiencing a shift from unseasonal wet conditions to below-average rainfall conditions;
  • terms of international trade were strong;
  • commodity pricing for core agricultural products was patchy, with some products experiencing historically strong terms of trade, while others recorded far below average returns;
  • the mood of the agricultural sector could best be described as one shifting towards a drying cycle;
  • temporary water pricing in major markets was generally at an all-time low due to the quantity of water in active storage;
    • Waterfind’s National Permanent Water Value Index weakened from its all-time high in May 2023 due to commodity pricing, cost of finance, and increased uncertainty of government policy, but began to recover from that trend in March 2024.

Waterfind has analysed the May 2024 Budget, and has provided commentary from a ‘water’ perspective on the key initiatives, funding and changes from previous budgets. The key points of that commentary include:

  • Buy backs: While there is an expected draw down on the ‘Water for the Environment and Special Account’ forecast for the 2024-25 period, the major line item for water purchases was supressed once again, with the Budget including “not for publication” or “nfp” due “commercial sensitivities and ongoing state and territory negotiations”. For the first time, “nfp” was also represented in the 2025-26, 2026-27 and 2027-28 budget forecasts.
  • Socio economic impact funding: Funding for Basin states to minimise the socio-economic impacts of water purchases and continue implementing the Basin Plan reform activities was also not for publication (nfp) in the Budget. Also, due to “commercial sensitivities and ongoing state and territory negotiations” and again extended to the 2025-26, 2026-27 and 2027-28 budget forecasts.
  • Water market regulation: $5.7 million has been allocated over 2 years to support the regulatory functions in the water market by the Australian Competition and Consumer Commission (ACCC).
  • Basin Plan delivery: $217.3 million has been allocated to the Department of Climate Change, Environment and Water (DCCEW) to finalise the delivery of the Murray-Darling Basin Plan.
  • Water reliability: An unquantifiable contingent liability was allocated to the Federal Government for potential payments to entitlement holders that may experience reductions in water allocations, or changes in the reliability of water allocations, where the gap between the Baseline Diversion Limit and the Sustainable Diversion Limit identified in the 2012 Basin Plan has not been bridged.
  • Inspector-General of Water Compliance: The Budget includes $28.6 million over four years from 2024-25 to the Inspector-General of Water Compliance to undertake inquiry, oversight and public engagement functions.
  • Drought preparedness: $813.7 million is budgeted to enhance water security and help farmers and rural communities prepare for future droughts and reduce agricultural emissions.
  • Groundwater science: $556.1 million is allocated over ten years to map Australia’s critical minerals and groundwater resources.  
  • Water grid funding: The Government will provide $174.6 million over six years from 2024–25 to deliver new water infrastructure projects.

A full report of Waterfind’s 2024-25 Budget analysis, from a water point of view, is available by clicking here


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