Rent-seeking behaviour and regulatory capture in the Murray-Darling Basin, Australia

ABSTRACT

We examine water governance in the Murray-Darling Basin using the frameworks of rent-seeking and regulatory capture. These frameworks are used to evaluate two government programmes intended to ensure an environmentally sustainable level of water diversions in the basin: targeted one-on-one purchases of water entitlements from designated sellers; and subsidies for irrigation infrastructure to increase irrigation efficiency. Deficiencies in delivering the stated environmental goals of both programmes, and questions about their ‘value for money’, are highlighted. Specific recommendations are provided about how to mitigate both rent-seeking and regulatory capture of water reform initiatives in large river basins.

KEYWORDS:

• Australia
• Murray-Darling Basin
• corruption
• governance
• transparency
• irrigation

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. The Council of Australian Governments (2007, Appendix C) states: ‘Decisions about the overall effectiveness of regulatory action should not be made on the basis only of its effect on particular groups in society. Public policy makers are expected to make judgments based on what is best for the community as a whole.’

2. The Australian Department of Agriculture (2019c) claims that ‘Australia is at the leading edge in its approach to water resource management’. This view is shared by politicians inside and outside of government – for example, ‘Australia is recognised as a world leader in water management’ (Australian Securities and Investments Commission, 2018, p. 141) – and also by the CEO of the Murray-Darling Basin Authority: ‘The Basin Plan is an achievement Australia should be proud of. Other countries look to our nation as having some of the best and most successful water management policies in the world’ (Glyde, 2017).

3. Rijsberman (2008, p. 70) observes, in relation to the irrigation sector: ‘Policy capture is difficult to prove, but the existence of powerful, politically well-connected large-scale farmers who manage to secure the bulk of irrigation subsidies in many countries makes policy capture a plausible premise.’

4. This is calculated by dividing the total Australian government subsidies for irrigation infrastructure to date, A$ 4 billion (Australian Department of Agriculture and Water Resources, 2019a), by the approximate number of irrigators in the MDB, 10,000 (Australian Bureau of Statistics, 2019), noting that not all irrigators have received such subsidies.

5. A summary of the connections across the various parties to the EAA sale of water entitlements is provided by West (2019), with further details given by Tee and Salt (2019). The federal minister for energy and emissions reduction has publicly stated that he ended all association with these companies before he entered parliament in 2013. He has also stated that neither he nor his family have received any benefits from the 2017 sale of water entitlements by EAA. The minister for water who approved the purchase of water entitlements from EAA in 2017 has also stated that he had no contact with any ministers in relation to this purchase.