Authors: John Walsh, Rhys Downham, Jordan Rose and Mihir Gupta
Data visualisation
Source: ABARES
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Summary
The purpose of this report is to provide forecasts for water allocation prices in the southern Murray–Darling Basin for the year ahead (2023–24). ABARES provides forecasts under four representative scenarios that are aligned with state water agency allocation outlooks and based on historical inflow and rainfall conditions: ‘wet’, ‘average’, ‘dry’ and ‘extreme dry’. ABARES considers the average scenario most likely for 2023–24.
Southern Murray–Darling Basin weighted allocation price scenarios for 2023–24 ($/ML)
| 2022–23 | Wet | Average | Dry | Extreme dry |
|---|---|---|---|---|
| $29 | $53 | $80 | $129 | $202 |
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Note: Prices in $2022-23 |
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Water allocation prices are forecast to remain low for a fourth consecutive year
Under the likely average scenario, the southern basin average allocation price is forecast to reach $80 per ML in 2023–24, up from $29 per ML in 2022–23. Despite a probable return to drier seasonal conditions, high carryover balances and favourable allocation forecasts will continue to support high water availability across the southern basin for the coming year. This means that even under an extreme dry scenario, prices are forecast to reach $202 per ML, compared to an average annual price of $218 per ML over the last 10 years.
High water storages to offset potential shift to drier conditions in 2023–24
The latest climate outlook from the Bureau of Meteorology indicates a potential shift towards drier conditions in 2023–24, with a 50% chance of an El Niño event developing later in the year. El Niño events are associated with below median rainfall for south–eastern Australia. However, the impact of a potential El Niño event on water availability is likely to be offset by high storage levels and unused water balances. Three consecutive La Niña events have refilled storages across the basin and current unused water balances indicate that carryover volumes into 2023–24 are likely to be very high at or near account limits.
Most major entitlements are forecast to receive full allocation in 2023–24
High storages and high unused water balances are reflected in state allocation outlooks, with all major high reliability entitlements in the southern basin forecast to hit 100% in 2023–24 in all but an extreme dry scenario. Under the average scenario, NSW Murray and Murrumbidgee general security entitlements are forecast to reach 110% and 64% respectively, both significantly higher than historical averages. The favourable conditions also mean that opening allocations are expected to be higher than average, providing irrigators with greater certainty earlier in the year.
Favourable conditions for cotton and rice
High water availability and relatively low water prices will continue to support annual irrigation activities such as cotton and rice in 2023–24. However, the transition to drier seasonal conditions and modest increases for water prices in key growing regions such as the Murrumbidgee will see the area planted to cotton come down from the highs of recent years (ABARES Agricultural Outlook – Natural Fibres, March 2023). Rice production is expected to recover in 2023–24, after excessively wet conditions disrupted planting in 2022–23 (ABARES Australian Crop Report: March edition, 2023).
Carryover into 2024–25 still expected to be above historical averages
With a transition to drier conditions, storages and unused water balances are likely to be drawn down throughout the coming year. Nevertheless, in the average scenario, carryover into 2024–25 is forecast to be higher than historical averages across the southern basin.
Previous reports
Water Market Outlook: July 2022
Water Market Outlook: April 2022
For access to other past Water Markets Outlook reports, visit the ABARES publications library.