2016, Volume 19, Paper 112
ISSN: 1442-6951

Ord Scheme Economics

Seth Molinari

Introduction

The Australian federal government released its ‘Our North, Our Future: White Paper on Developing Northern Australia’ on June 17, 2015. Although the first White Paper of its kind for the region, past prime ministers have declared northern Australian development to be “of immense strategic importance” (Stanley Bruce, 1926), “essential to future security” (John Curtin, 1944) and “necessary and urgent” (Gough Whitlam, 1969) [Bell et al., 2014].

With regard to the Ord River in northeast Western Australia, the White Paper envisages an expansion in the size of the existing irrigation area (the Ord Scheme). This could create the potential to achieve scale to enhance both the profitability and economic resilience of the region [Australian Government, 2015]. This optimism is in spite of the Ord Scheme having had a repeated history of failures while receiving government subsidies totalling well over $1 billion since the 1950s [Dent et al., 2015].

The latest discussion regarding the future of the Ord Scheme stems from perceived opportunities arising from global increases in demand for foods and energy. In particular, these are:

• Access to markets within the growing economies of Southeast Asia, as well as the world’s second and third largest economies, China and Japan respectively;
• Asia-Pacific’s rapidly growing middle class and evolving food tastes; and
• The demand for Australia’s high quality produce as a consequence of food safety concerns in the region.

However, according to an analysis by the ANZ bank, Australia needs to invest $600 billion into agriculture by 2050 (primarily infrastructure) if it is to realise these opportunities [D’Occhio et al., 2014].

This paper will examine the economic viability of the continued interest in developing irrigated agriculture in the Ord area against the lessons of past performance. It will also consider the impact of increased expectation that externalities be included in assessing project success, as well as the potential effects of climate change.

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