Effective use of public funding in the Murray-Darling Basin: a comparison of buybacks and infrastructure upgrades

Policy instruments designed to increase environmental flows in the Murray-Darling Basin are compared using TERM-H2O, a detailed, dynamic regional CGE model. Voluntary and fully compensated buybacks are much less costly than infrastructure upgrades as a means of obtaining a target volume of environmental water, even during drought, when highly secure water created by infrastructure upgrades is more valuable. As an instrument of regional economic management, infrastructure upgrades are inferior to public spending on health, education and other services in the Basin. For each job created from upgrades, the money spent on services could create between three and four jobs in the Basin.