Australia’s National 
Science Agency 
Water resource assessment for 
the Victoria catchment 

A report from the CSIRO Victoria River Water Resource 
Assessment for the National Water Grid 

Editors: Cuan Petheram, Seonaid Philip, Ian Watson, Caroline Bruce and Chris Chilcott 







ISBN 978-1-4863-2105-6 (print) 

ISBN 978-1-4863-2106-3 (online) 

Citation 

Petheram C, Philip S, Watson I, Bruce C and Chilcott C (eds) (2024) Water resource assessment for the Victoria catchment. A report from the CSIRO 
Victoria River Water Resource Assessment for the National Water Grid. CSIRO, Australia. 

Chapters should be cited in the format of the following example: Bruce C, Petheram C, Philip S and Watson I (2024) Chapter 1: Preamble. In: 
Petheram C, Philip S, Watson I, Bruce C and Chilcott C (eds) (2024) Water resource assessment for the Victoria catchment. A report from the CSIRO 
Victoria River Water Resource Assessment for the National Water Grid. CSIRO, Australia. 

Copyright 

© Commonwealth Scientific and Industrial Research Organisation 2024. To the extent permitted by law, all rights are reserved and no part of this 
publication covered by copyright may be reproduced or copied in any form or by any means except with the written permission of CSIRO. 

Important disclaimer 

CSIRO advises that the information contained in this publication comprises general statements based on scientific research. The reader is advised 
and needs to be aware that such information may be incomplete or unable to be used in any specific situation. No reliance or actions must 
therefore be made on that information without seeking prior expert professional, scientific and technical advice. To the extent permitted by law, 
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contact Email CSIRO Enquiries
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CSIRO Victoria River Water Resource Assessment acknowledgements 

This report was funded through the National Water Grid’s Science Program, which sits within the Australian Government’s Department of Climate 
Change, Energy, the Environment and Water. 

Aspects of the Assessment have been undertaken in conjunction with the Northern Territory (NT) Government. 

The Assessment was guided by two committees: 

i. The Assessment’s Governance Committee: CRC for Northern Australia/James Cook University; CSIRO; National Water Grid (Department 
of Climate Change, Energy, the Environment and Water); Northern Land Council; NT Department of Environment, Parks and Water 
Security; NT Department of Industry, Tourism and Trade; Office of Northern Australia; Queensland Department of Agriculture and 
Fisheries; Queensland Department of Regional Development, Manufacturing and Water 
ii. The Assessment’s joint Roper and Victoria River catchments Steering Committee: Amateur Fishermen’s Association of the NT; Austrade; 
Centrefarm; CSIRO; National Water Grid (Department of Climate Change, Energy, the Environment and Water); Northern Land Council; 
NT Cattlemen’s Association; NT Department of Environment, Parks and Water Security; NT Department of Industry, Tourism and Trade; 
NT Farmers; NT Seafood Council; Office of Northern Australia; Parks Australia; Regional Development Australia; Roper Gulf Regional 
Council Shire; Watertrust 


Responsibility for the Assessment’s content lies with CSIRO. The Assessment’s committees did not have an opportunity to review the Assessment 
results or outputs prior to their release. 

This report was reviewed by Dr Brian Keating (Independent consultant). Individual chapters were reviewed by Dr Rebecca Doble, CSIRO (Chapter 2); 
Dr Chris Pavey, CSIRO (Chapter 3); Dr Heather Pasley, CSIRO (Chapter 4); Mr Chris Turnadge, CSIRO (Chapter 5); Dr Nikki Dumbrell, CSIRO (Chapter 
6); Dr Adam Liedloff, CSIRO (Chapter 7). The material in this report draws largely from the companion technical reports, which were themselves 
internally and externally reviewed. 

For further acknowledgements, see page xxv. 

Acknowledgement of Country 

CSIRO acknowledges the Traditional Owners of the lands, seas and waters of the area that we live and work on across Australia. We acknowledge 
their continuing connection to their culture and pay our respects to their Elders past and present. 

Photo 

The Victoria River is the longest singularly named river in the NT with permanent water. Photo: CSIRO – Nathan Dyer


 

Part IV Economics of 
development and 
accompanying risks 

Chapters 6 and 7 describe economic opportunities for water development in the Victoria 
catchment, and the associated constraints and risks: 

• economic opportunities and constraints (Chapter 6) 
• a range of risks to development (Chapter 7). 



Young cattle being finished on feed before sale at the Victoria River Research Station. 

Photo: CSIRO – Nathan Dyer 



6 Overview of economic opportunities and 
constraints in the Victoria catchment 

Authors: Chris Stokes, Shokhrukh Jalilov, Diane Jarvis 

 
Chapter 6 examines the types of opportunities for the development of irrigated agriculture in the 
catchment of the Victoria River that are most likely to be financially viable. The chapter considers 
the costs of building the required infrastructure (both within the scheme and beyond), the 
financial viability of various types of schemes (including lessons learned from past large dam 
developments in Australia), and the regional economic impacts (the direct and flow-on effects for 
businesses across the catchment) (Figure 6-1). 

The chapter focuses on costs and benefits that are the subject of normal market transactions, but 
it does not provide a full economic analysis. Commercial factors are likely to be among the most 
important criteria in deciding between potential development opportunities. Options clearly 
identifiable at the pre-feasibility stage as not being commercially viable could be deprioritised. 
More-detailed and Assessment-specific agronomic, ecological, social, cultural and regulatory 
assessments could then focus on those opportunities identified as showing the most commercial 
promise. The non-market impacts and risks associated with any financially viable development 
opportunities, discussed in Chapter 7, must also be considered. 

 

Figure 6-1 Schematic diagram of key components affecting the commercial viability of a potential greenfield 
irrigation development 

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6.1 Summary 

6.1.1 Key findings 

Scheme-scale financial viability 

New investment in irrigation development in the Victoria catchment would depend on finding 
viable combinations of low-cost water sources, low-cost farming development opportunities, and 
high-productivity farms; finding opportunities for reducing cropping costs and attracting price 
premiums for produce; and managing a wide range of risks. 

Financial analyses have indicated that large dams in the Victoria catchment are unlikely to be 
viable if public investors target full cost recovery at a 7% internal rate of return (IRR) and do not 
provide assistance, which would make water from the most cost-effective dam sites too expensive 
for irrigators. However, large dams could be marginally viable if public investors accepted a 3% 
IRR. On-farm water sources provide better prospects than large dams: where sufficiently cheap 
water development opportunities can be found, they could support viable broadacre farms and 
horticulture with low development costs. Horticulture with high development costs (e.g. fruit 
orchards) in the Victoria catchment would be more challenging unless farm financial performance 
could be boosted by (i) finding niche opportunities for premium produce prices, (ii) making savings 
in production and marketing costs, and/or (iii) obtaining high yields. 

Farm performance can be affected by a number of risks, including water reliability, climate 
variability, price fluctuations, and the need to adapt farming practices to new locations. Setbacks 
that occur soon after an irrigation scheme has been established have the largest effect on scheme 
viability. There is a strong incentive for choosing well-proven crops and technologies when starting 
any new irrigation development, and for being thoroughly prepared for those agronomic risks of 
establishing new farmland that can be anticipated. Risks that cannot be avoided must be 
managed, mitigated where possible, and accounted for when determining the realistic returns 
that may be expected from a scheme and the capital buffers that would be required. 

Cost–benefit analysis of large public dams 

A review of recent large public dams built in Australia has highlighted some areas where cost–
benefit analyses (CBAs) for water infrastructure projects could be improved upon, particularly the 
need for more-realistic forecasting of the demand for water. This chapter provides information for 
benchmarking a number of the processes commonly used in such CBAs, including demand 
forecasting. These processes can then act as a check when proposals for new dams are being 
unrealistically optimistic (or pessimistic). 

Regional economic impacts 

Any new irrigated agriculture development and its supporting infrastructure will have knock-on 
benefits to the regional economy beyond direct economic growth from the new farms and 
construction. The initial construction phase of a new irrigation development in the Victoria 
catchment could provide an additional (approximately) $1.1 million of indirect regional benefits, 
over and above the direct benefits, for each million dollars spent on construction within the local 
region. The ongoing production phase of a new irrigation development could provide an additional 
(approximately) $0.46 to $1.82 million of indirect regional benefits for each million dollars of 


direct benefits from the increased agricultural activity (gross revenue), depending on the type of 
agricultural industry. The indirect regional benefits would be reduced if some of the extra 
expenditure generated by a new development was leaked to outside the catchment. Each 
$100 million increase in agricultural activity could create approximately 100 to 852 jobs. 

6.2 Introduction 





Large new infrastructure projects in Australia are expected to be increasingly more accountable 
and transparent. This trend extends to the planning and building of new water infrastructure, and 
the way water resources are managed and priced (e.g. Infrastructure Australia, 2021a, 2021b; 
NWGA, 2022, 2023), and includes greater scrutiny of the costs and benefits of potential large new 
public dams. The difficulty in accurately estimating costs and the chance of incurring unanticipated 
expenses during construction, or of not meeting the projected water demands or achieving 
revenue trajectories when completed, put the viability of developments at risk if they are not 
thoroughly planned and assessed. For example, in a global review of dam-based megaprojects, 
Ansar et al. (2014) found that the forecast costs were systematically biased downwards, with 
three-quarters of projects running over budget and the mean of the actual costs being almost 
double the initial estimates. This is typical for most types of large infrastructure projects, not just 
dams (see review in Section 6.4.1). 
Ultimately, economic factors are likely to be among the most important criteria in deciding the 
scale and types of potential development opportunities in the Victoria catchment. An assessment 
of 13 agricultural developments in northern Australia found that, while the natural environments 
were challenging for agriculture, the most important factors determining the viability of 
developments were management, planning and finances (Ash et al., 2014). At the pre-feasibility 
stage, options that can be clearly identified as not being financially viable could be deprioritised. 
The expensive, more-detailed and project-specific agronomic, ecological, social, cultural and 
regulatory assessments could then focus on the more promising opportunities. This chapter aims 
to assist future planning and evaluation of investments in new irrigated agriculture developments 
by highlighting the types of projects that are more likely to be viable, and quantifying the costs, 
benefits and risks involved. It provides a generic information resource that is broadly applicable to 
a variety of irrigated agriculture development opportunities but does not examine any specific 
options in detail. The results are presented in a way that allows readers to identify the costs, risks, 
and farm productivity values specific to the project opportunities in which they are interested, to 
evaluate their likely financial viability. The information also provides a set of benchmarks for 
establishing realistic assumptions and the thresholds of financial performance required for water 
and farm developments, individually and in combination, to be financially viable. 
This chapter builds on earlier material in Chapter 4 (assessing the viability of new irrigated 
agriculture opportunities in the Victoria catchment at the enterprise level) and in Chapter 5 
(assessing the opportunities for developing water sources to support those farms). Section 6.3 
provides information, within a financial analysis framework, for determining whether those 
farming options and water sources can be paired into viable developments. It presents the 
financial criteria that would have to be met for new farms to be able to cover the development 
costs. Section 6.3 highlights some key considerations for evaluating the costs and benefits of new 
publicly funded dams, including lessons learned from recent large dam projects in Australia. 








Section 6.4 also provides indicative costs for some of the additional enabling infrastructure 
required (typically additional to the costs included in project CBAs). Finally, Section 6.5 explores 
the knock-on effects of any new irrigated development in the Victoria catchment, quantifying the 
regional economic impacts using regional input–output (I–O) analysis. 
Rather than analysing the cost–benefit of specific irrigation scheme proposals, this chapter 
presents generic tables for evaluating multiple alternative development configurations, providing 
the threshold farm gross margins and water costs and pricing that would be required in order to 
cover infrastructure costs. These tables serve as tools that allow users to answer their own 
questions about agricultural land and water development. Examples of the questions that can be 
asked, and which tables provide the answers, are given in Table 6-1. 
Table 6-1 Types of questions that users can answer using the tools in this chapter 
For each question, the relevant table number is given, together with an example answer for a specific development 
scenario. More questions can be answered with each tool by swapping around the factors that are known and the 
factor being estimated. (All initial estimates assume farm performance is 100% in all years, i.e. before accounting for 
risks. See Table 6-3 for the supporting generalised assumptions.) 

QUESTION (WITH EXAMPLE ANSWER) 

RELEVANT TABLE 

1) How much can various types of farms afford to pay per ML of water they use? 

Table 6-4 

A broadacre farm with a gross margin (GM) of $4000/ha and water consumption of 8 ML/ha could afford to 
pay $135/ML while achieving a 10% internal rate of return (IRR). 



2) How much would the operator of a large off-farm dam have to charge for water? 

Table 6-6 

If off-farm water infrastructure had a capital cost of $5000 for each ML/y supply capacity (yield) at the dam 
wall, the (public) water supplier would have to charge $537 for each ML to cover its costs (at a 7% target 
IRR). 



3) For an on-farm dam with a known development cost, what is the equivalent $/ML price of water? 

Table 6-8 

If a farm dam had a capital development cost of $1500 for each ML/y supply capacity (yield), water could be 
purchasable at a cost of $190 for each ML (at a 10% target IRR). 



4) (a) What farm GM would be required to fully cover the costs of an off-farm dam? 

(b) What proportion of the costs of off-farm water infrastructure could farms cover? 



Table 6-5 

If off-farm infrastructure had a capital cost of $50,000/ha to build, broadacre farms would need to generate 
a GM of $5701/ha in order to fully cover the water supplier costs (while meeting a target 7% IRR for the 
water supplier (public investor) and a 10% IRR for the irrigator (private investor)). 

With the same target IRRs, a broadacre farm with a GM of $4000/ha could contribute the equivalent of 
$20,000 to $30,000 per ha towards the capital costs of building the same $50,000/ha dam (~50% of the full 
costs of building and operating that infrastructure). 



5) What GM would be required in order to cover the costs of developing a new farm, including a dam orbores?

Table 6-7 

A horticultural farm with low overheads ($1500/ha) that cost $40,000/ha to develop (e.g. $30,000/ha to 
establish the farm and $10,000/ha to build the on-farm water supply for irrigating it) would require a GM of 
$6702/ha to attain a 10% IRR. 



6) How would risks associated with water reliability affect the farm GMs above? 

Table 6-9 

If an on-farm dam could fully irrigate the farm in 70% of years and could irrigate 50% of the farm in the 
remaining years, all farm GMs in the answers above would need to be multiplied by 1.18 (i.e. would be 18% 
higher), and the price irrigators could afford to pay for water would need to be divided by 1.18. 

For example, in Q4, the GM required in order to cover the costs of the farm development would increase 
from $5825/ha to $6874/ha after accounting for the risks of water reliability. 






QUESTION (WITH EXAMPLE ANSWER) 

RELEVANT TABLE 

7) How would the risks associated with ‘learning’ (initial farm underperformance) affect estimates? 

Table 6-11 

If a farm with a 10% target IRR achieved a GM that was 50% of its full potential in the first year, and 
gradually improved to achieve its full potential over 10 years, then the GMs above would need to be 
multiplied by a factor of 1.26 (i.e. would be 26% higher). 

For example, in Q6, the required farm GM would increase to $8661/ha after accounting for the risks of both 
water reliability and learning (a combined 49% higher than the value before accounting for risks). 

 



6.3 Balancing scheme-scale costs and benefits 

Designing a new irrigation development in the Victoria catchment would require balancing three 
key determinants of irrigation scheme financial performance to find combinations that might 
collectively constitute a viable investment. The determinants are: 

• farm financial performance (relative to development costs and water use) (Chapter 4) 
• capital cost of development, for both water resources and farms (Chapter 5 and Section 6.3.1) 
• risks (and the associated required level of investment return) (Section 6.3.5). 


The determinants considered have been limited to those with greater certainty and/or lower 
sensitivity, so that the results can be applied to a wide range of potential developments. 

A key finding of the irrigation scheme financial analyses is that no single factor within the above 
list is likely to be able to provide a silver bullet for meeting the substantial challenge of designing a 
commercially viable new irrigation scheme. Balancing the benefits to meet costs in order to 
identify viable investments would likely require contributions from each of the above factors and 
careful selection to piece together a workable combination. This section provides background 
information on the analysis approach used, to help readers understand how these factors 
influence irrigation scheme financial performance. 

6.3.1 Approach and terminology 

Scheme financial evaluations use a discounted cashflow framework to evaluate the commercial 
viability of irrigation developments. The framework, detailed in the companion technical report on 
agricultural viability and socio-economics (Webster et al., 2024), is intended to provide a purely 
financial evaluation of the conditions required to produce an acceptable return from an investor’s 
perspective. It is not a full economic evaluation of the costs and benefits to other industries, nor 
does it consider ‘unpriced’ impacts that are not the subject of normal market transactions, or the 
equity of how costs and benefits are distributed. For the discussion that follows, the costs and 
benefits of an irrigation scheme were taken to include all those from the development of the land 
and water resources to the point of sale for farm produce. 

This section explains the terminology and standard assumptions used. 

A ‘discounted cashflow analysis’ considers the lifetime of costs and benefits following capital 
investment in a new project. Costs and benefits that occur at various times are expressed in 
constant real dollars (December 2023 Australian dollars), with a discount rate being applied to 
streams of costs and benefits. 


The ‘discount rate’ is the percentage by which future costs and benefits are discounted each year 
(compounded) to convert them to their equivalent present value. 

For an entire project, the ‘net present value’ (NPV) can be calculated by subtracting the present 
value of the stream of all costs from the present value of the stream of all benefits. The ‘benefit to 
cost ratio’ (BCR) of a project is the present value of all the benefits of a project divided by the 
present value of all the costs involved in achieving those benefits. To be commercially viable (at 
the nominated discount rate), a project would require an NPV that is greater than zero (in which 
case the BCR would be greater than one). 

The IRR is the discount rate at which the NPV is zero (and the BCR is one). For a project to be 
considered commercially viable, it needs to meet its target IRR, and the NPV has to be greater 
than zero at a discount rate appropriate to the risk profile of the development and alternative 
investment opportunities available to investors. A target IRR of 7% is typically used when 
evaluating large public investments (with the sensitivity analysis set at 3% and 10%) (Infrastructure 
Australia, 2021b). Private agricultural developers usually target an IRR of 10% or more (to 
compensate for the investment risks involved). A back-calculation approach is used in the tables 
below to present the threshold GMs and water prices that would be required in order for investors 
to achieve specified target IRRs (the NPV would be equivalent to zero at these discount rates). 

The ‘project evaluation periods’ used in this chapter matched the ‘life spans’ of the main 
infrastructure assets: 100 years for large off-farm dams and 40 years for on-farm developments. 
To simplify the tracking of asset replacements, four categories of life spans were used: 15 and 
40 years for farms and 25 and 100 years for off-farm infrastructure. It was assumed that the 
shorter-life-span assets would be replaced at the end of their life, and that costs would have been 
accounted for in full by the actual year of their replacement. At the end of the evaluation period, a 
‘residual value’ was calculated to account for any shorter-life-span assets that have not reached 
the end of their working life. Residual values were calculated as the proportional asset life 
remaining multiplied by the original asset price. 

The ‘capital costs’ of infrastructure were assumed to be the costs at completion (accounted for in 
full in the year of delivery), such that the assets commenced operations the following year. In 
some cases, the costs of developing the farmland and setting up the buildings and equipment 
were considered separately from the costs of the water source, so that various water source 
options could be compared on a like-for-like basis. Where an off-farm water source was used, the 
separate investor in that water source would receive payments for water at a price that the 
irrigator could afford to pay. 

The main ‘costs for operating’ a large dam and the associated water distribution infrastructure are 
(i) fixed costs for administering and maintaining the infrastructure, expressed here as percentage 
of the original capital cost, and (ii) variable costs associated with pumping water into distribution 
channels. 

At the farm scale, fixed overhead costs are incurred each year, whether or not a crop is planted in 
a particular field that year. ‘Fixed costs’ are dominated by the fixed component of labour costs, 
but also include maintenance, insurance, professional services, and registrations. An additional 
allowance is made for annual operation and maintenance (O&M), budgeted at 1% of the original 
capital value of all assets (with an additional variable component in maintenance costs when 
machinery is used for cropping operations). 


A ‘farm annual gross margin’ (GM) is the difference between the gross income from crop sales and 
variable costs of growing a crop each year. ‘Net farm revenue’ is calculated by subtracting the 
fixed overhead costs from the GM. ‘Variable costs’ vary in proportion to the area of land planted, 
the amount of crop harvested and/or the amount of water and other inputs applied. Farm GMs 
can vary substantially within and between locations, as described in Chapter 4. The GMs 
presented here are the values obtained before subtracting the variable costs of supplying water to 
farms; these water supply costs are, instead, accounted for in the capital costs of developing water 
resources. (The equivalent unit costs of supplying each ML of water are presented separately 
below.) 

The CBA analyses first considered the case of irrigation schemes built around public investment in 
a large off-farm dam in the Victoria catchment and then considered the case developments using 
on-farm dams and bores. 

Cost and benefit streams, totalled across the scheme, were tracked in separate components, 
allowing for both on-farm and off-farm sources of new water development. For farms, these 
streams were: (i) the capital costs of land development, farm buildings and equipment (including 
replacement costs and residual values), (ii) the fixed overhead costs, applied to the full area of 
developed farmland, and (iii) the total farm GM (across all farms in the scheme), applied to the 
mean proportion of land in production each year. If an ‘on-farm water source’ was being 
considered, then those costs were added to the farm costs. Farm developers were treated as 
private investors who would seek a commercial return. 

When an ‘off-farm water source’ (large dam >25 GL/year) was evaluated, its investor was treated 
as a separate public investor to whom payment was made by farmers for water supplied (which 
served as an additional stream of costs for farmers, and a stream of benefits for the water 
supplier, at their respective target IRRs). For the public off-farm developer, the streams of costs 
were: (i) the capital costs of developing the water and associated enabling infrastructure 
(including replacement costs and residual values), and (ii) the costs of maintaining and operating 
those assets. 

Threshold gross margins and water pricing to achieve target internal rate of return 

New irrigation schemes in the Victoria catchment would be costly to develop, so many technically 
feasible options are unlikely to be profitable at the returns and over the time periods expected by 
many investors. The results presented below suggest it would be difficult for any farming options 
to fully cover the costs of a large off-farm dam development. However, there is greater prospect 
of viable developments using on-farm sources of water for broadacre and cost-efficient 
horticulture. 

The costs of developing water and land resources for a new irrigation development vary widely, 
depending on a range of case-specific factors that are dealt with in other parts of this Assessment. 
These factors include the type and nature of the water source, the type of water storage, geology, 
topography, soil characteristics, water distribution system, type of irrigation system, type of crop 
to be grown, local climate, land preparation requirements, and level to which infrastructure is 
engineered. 

The financial analyses, therefore, have used a generic approach for exploring the consequences for 
the development costs of this variation, and other key factors that determine whether or not an 


irrigation scheme would be viable (e.g. farm performance and the level of returns sought by 
investors). The analyses used the discounted cashflow framework described above to back-
calculate and fit the water prices and farm GMs that would be required for respective public (off-
farm) and private investors (irrigators) to achieve their target IRRs. The results are summarised in 
tables showing the thresholds that must be met for a particular combination of water 
development and farm development options to meet the investor’s target returns. The tables 
allow viable pairings to be identified based on either threshold costs of water or required farm 
GMs. Financial viability for these threshold values was defined and calculated as investors 
achieving their target IRR (or, equivalently, that the investment would have an NPV of zero and a 
BCR of one at the target discount rate). 

Assumptions 

Analyses first considered the case of irrigation schemes built around public investment in a large 
off-farm dam in the Victoria catchment. The analyses then considered the case of developments 
using on-farm dams and bores. To keep the results as relevant as possible to a wide range of 
different development options and configurations, the analyses here do not assume the scale at 
which a water development would be undertaken. Instead, all costs are expressed per hectare of 
irrigated farmland and per ML per year of water supply capacity, facilitating comparisons between 
scenarios (which can differ substantially in size). To illustrate how this slightly abstract generic 
approach can be applied to specific development projects, a worked example shows the indicative 
off-farm infrastructure costs that would be involved in development of a representative dam site 
in the Victoria catchment (Table 6-2). 

Table 6-2 Indicative capital costs for developing a representative irrigation scheme in the Victoria catchment 

The dam costings already allow for a road; an indicative allowance has been added for a bitumen road to the irrigation 
development from the Victoria Highway, a transmission line from Kununurra, and electricity distribution lines to which 
farms can connect. 

For more information on this figure or table please contact CSIRO on enquiries@csiro.au
Source: Dam and weir costings are based on data from the companion technical report on surface water storage for the Victoria catchment (Yang et 
al., 2024), and reticulation costings based on a per hectare rate from Devlin (2024) and include contingencies; see those reports for full details of 
cost breakdowns and assumptions 

To enhance like-for-like comparisons across the various development scenarios, a set of standard 
assumptions have been made about the breakdown of development costs (by life span) and 
associated ongoing operating costs (Table 6-3). Three indicative types of farming enterprise 


represent different levels of capital investment, associated with the intensity of production and 
the extent to which farming operations are performed on-farm or outsourced (

Table 6-3 Assumed indicative capital and operating costs for new off- and on-farm irrigation infrastructure 

Three types of farming enterprise represent a range of increasing intensity, value and cost of production. Indicative 
base capital costs for establishing new farms (excluding water costs) allow on- and off-farm water sources to be added 
and compared on an equal basis. Annual operation and maintenance (O&M) costs are expressed as a percentage of 
the capital costs of assets. The Horticulture-H farm, with higher development costs, includes on-farm packing facilities, 
cold storage, and accommodation for seasonal workers. The Horticulture-L farm, with lower development costs, does 
not include these assets and would have to outsource these services if required (reducing the farm gross margin). 
IRR = internal rate of return. 

SCHEME 
COMPONENT 

ITEM 

 

 

VALUE 

 

 

UNIT 

O&M COST 
(% capital cost/y) 

Off-farm infrastructure development capital and operating costs (large dam and enabling infrastructure) 

Capital costs 

Total capital costs 
(split by life span below) 

Indicative >50,000 
(analysed range: 20,000–150,000) 

$/ha 

 

 

Longer-life-span infrastructure 
(100 y) 

 

85 

 

% 

0.4 

 

Shorter-life-span infrastructure 
(40 y) 

 

15 

 

% 

1.6 

Operating 


O&M (by life-span categories) 

 

% capital cost 

 

$/ha/y 

 

 

Off-farm water source pumping costs 

~2 (additional) 

$/ML/ 


 

Target IRR 

Base (with sensitivity range) 

7 

 

% 

 

Farm development capital and operating costs 

Broadacre 

Horticulture-L 
(low capital) 

Horticulture-H 
(high capital) 

 

 

Capital costs 

Base (excluding water source) 

9000 

25,000 

70,000 

$/ha 

 

 

Water source (on- or off-farm) 

Indicative >4000 
(analysed range: 3000 to 15,000) 

$/ha 

 

 

Longer-life-span infrastructure 
(40 y) 

50 

50 

50 

% 

1.0 

 

Shorter-life-span infrastructure 
(15 y) 

50 

50 

50 

% 

1.0 

Operating 


O&M (by life-span categories) 

% capital cost 

$/ha/y 

 

 

Farm water source pumping costs 

~2 (additional) 

$/ML/ 


 

 

Fixed costs 

 

600 

1,500 

6,500 

$/ha/y 

 

Water use 

Crop water use (before losses) 

6 

6 

6 

ML/ha 


 

 

On-farm water use efficiency 

70 

90 

90 

% 

 

Gross margin 

Indicative gross margin 

4,000 

7,000 

11,000 

$/ha/y 

 

Target IRR 

Base (with sensitivity range) 

10 

10 

10 

% 

 




For consistency, all costs of delivering water to the farm at the level of the soil surface are treated 
as the costs of the water source (so the costs of the various water source options can be compared 
on a like-for-like basis). Subsequent farm pumping costs of distributing and applying the supplied 
water to crops are treated as part of the variable costs of growing crops and are already accounted 
for in the crop GMs presented in Chapter 4. The pumping costs for the water supplier are highly 
situation-specific for the various water sources. In particular, these pumping costs are affected by 
the elevation of the water source relative to the point of distribution to the farm: for example, the 
height water needs to be pumped from a weir to a distribution channel, or from a farm dam to a 
field; or the dynamic head required to lift bore water to the field surface. For this reason, water 
source pumping costs have not been included in the summary tables of water pricing, but should 
be added separately as required at a cost of approximately $2 per ML per m dynamic head. This is 
mainly a consideration for groundwater bores, but also applies when water needs to be lifted from 
rivers or irrigation channels. For more information on water infrastructure costs, see Chapter 5 
(and the companion technical reports referenced there). For more information on crop GMs, see 
Chapter 4 (and the companion technical reports referenced there). 

The analyses presented below consider (i) the case of irrigation schemes built around a large dam 
and its associated supporting off-farm infrastructure (Section 6.3.3); (ii) the case of self-contained, 
modular farm developments with their own on-farm source of water (Section 6.3.4). For both 
cases, the water price that irrigators can afford to pay provides a useful common point of 
reference for identifying suitable water sources for various types of farm developments 
(Section 6.3.2). The initial analyses assumed that all farmland was in full production and 
performed at 100% of its potential (and assumed 100% reliable water supplies) from the start of 
the development. Section 6.3.5 provides a set of adjustment factors that quantify the risks of 
various sources of underperformance that can be anticipated. 

6.3.2 Price irrigators can afford to pay for a new water source 

Table 6-4 shows the price that the three different types of farms could afford to pay for water, 
while meeting a target 10% IRR, for different levels of farm water use and productivity. For prices 
to be sustained at this level throughout the life of the water source, the associated farm GM (in 
the first column of Table 6-4) would also need to be maintained over this period. The table is 
therefore most useful when assessing the long-term price that can be sustained to pay off long-
lived water infrastructure (rather than temporary spikes in farm GMs during runs of favourable 
years). 

The lowest GM in the first column of Table 6-4 for each farm is the value below which the farm 
would not be viable, even if water was free. This does not necessarily mean that such GMs could 
readily be achieved in practice: for the capital-intensive Horticulture-H farm, in particular, it would 
be challenging in the Victoria catchment to reach the $17,000 per ha per year GM to cover the 
farm’s other costs, even before considering the costs of water. 

These water prices are likely to be most useful for public investors in large dams, because the 
sequencing of development creates asymmetric risks between the water supplier and the 
irrigators. Irrespective of the planned water pricing for a dam project, once the dam is built, 
irrigators have the choice of whether to develop new farms; they are unlikely to act to their own 
detriment by making an investment if they cannot do so at a water price that will allow them to 


obtain a commercial rate of return. These water prices, together with estimates of likely attainable 
farm GMs (available in Chapter 4), provide a useful benchmark for checking assumptions about 
any potential public dam developments in the Victoria catchment. 

For on-farm water sources, these water prices can assist in planning water development options 
that cropping operations could reasonably be expected to afford. The tables in the next sections 
allow comparisons of water development options by converting capital costs of developing on- 
and off-farm water sources to volumetric costs ($ per ML supplied). All water prices are based on 
volumes supplied to the farm gate or surface (after losses in transit) per metered ML supplied. 

Table 6-4 Price irrigators can afford to pay for water, based on the type of farm, the farm water use and the farm 
annual gross margin (GM), while meeting a target 10% internal rate of return (IRR) 

Analyses assume water volumes are measured on delivery to the farm gate or surface: pumping costs involved in 
getting water to the farmland surface would be an additional cost of supplying the water (indicatively $2 per ML per m 
dynamic head), while pumping costs in distributing and applying the water to the crop are considered part of the 
variable costs included in the GM. Indicative GMs that the three types of farms could attain in the Victoria catchment 
are $4000 and $7000 per ha per year for Broadacre and Horticulture-L farms, respectively (blue-shaded rows), and 
$11,000 per ha per year for Horticulture-H (Table 6-3, Chapter 4). Note that the Horticulture-H farm cannot pay 
anything for water until it achieves a GM above $17,000 per ha per year. 

GROSS MARGIN 

PRICE IRRIGATORS CAN AFFORD TO PAY 

($/ha/y) 

($/ML at farm gate/surface) 

 

Farm water use (ML/ha including on-farm distribution and application losses) 

 

4 

5 

6 

7 

8 

9 

10 

12 

 

Broadacre ($9,000/ha development costs, $600/ha/y fixed costs, 70% on-farm efficiency) 

2,000 

25 

20 

17 

14 

12 

11 

10 

8 

2,500 

86 

69 

57 

49 

43 

38 

34 

29 

3,000 

147 

118 

98 

84 

74 

65 

59 

49 

3,500 

209 

167 

139 

119 

104 

93 

83 

70 

4,000 

270 

216 

180 

154 

135 

120 

108 

90 

5,000 

392 

314 

262 

224 

196 

174 

157 

131 

 

Horticulture-L ($25,000/ha development costs, $1,500/ha/y fixed costs, 90% on-farm efficiency) 

5,000 

39 

31 

26 

22 

19 

17 

16 

13 

6,000 

241 

193 

161 

138 

121 

107 

97 

80 

7,000 

444 

355 

296 

254 

222 

197 

178 

148 

8,000 

646 

517 

431 

369 

323 

287 

259 

215 

10,000 

1051 

841 

701 

601 

526 

467 

421 

350 

12,000 

1456 

1165 

971 

832 

728 

647 

583 

485 

 

Horticulture-H ($70,000/ha development costs, $6,500/ha/y fixed costs, 90% on-farm efficiency) 

17,000 

203 

162 

135 

116 

101 

90 

81 

68 

20,000 

810 

648 

540 

463 

405 

360 

324 

270 

25,000 

1823 

1458 

1215 

1042 

911 

810 

729 

608 

30,000 

2835 

2268 

1890 

1620 

1418 

1260 

1134 

945 

40,000 

4860 

3888 

3240 

2777 

2430 

2160 

1944 

1620 

50,000 

6885 

5508 

4590 

3934 

3443 

3060 

 

 

 

 

2754 

2295 




6.3.3 Financial targets required to cover full costs of large, off-farm dams 

The first generic assessment considered the case of public investment in a large dam in the 
Victoria catchment and whether the costs of that development could be covered by water 
payments from irrigators (priced at their capacity to pay). The public costs of development include 
the cost of the dam and water distribution, and of any other supporting infrastructure required. 
Costs are standardised per unit of farmland developed, noting that a smaller area could be 
developed for a crop with a higher water use (so the water development costs per hectare would 
be higher). 

Target farm gross margins for off-farm public water infrastructure 

shows what farm annual GM would be required for various costs of water infrastructure 
development at the public investors’ target IRR. As expected, higher farm GMs are required in 
order to cover higher capital costs and attain a higher target IRR. The tables in this section can be 
used to assess whether water development opportunities and farming opportunities in the 
Victoria catchment are likely to combine in financially viable ways. Indicative farm GMs that could 
be achieved in the Victoria catchment are approximately $4000, $7000 and $11,000 per ha per 
year for Broadacre, less-capital-intensive Horticulture-L (including penalising GMs if outsourcing 
occurs) and capital-intensive Horticulture-H, respectively (Table 6-3). A dam and supporting 
infrastructure would likely require at least $50,000/ha of capital investment (Table 6-2). None of 
the three farming types is likely to be viable at these farm GMs and water development costs (at a 
7% target IRR for the public investor). However, Broadacre and Horticulture-L farming might be 
marginally viable at a 3% target IRR for the public investor. Broadacre and lower-cost Horticulture-
L could both achieve a target 10% IRR for the farm investments while contributing $20,000 to 
$30,000 per ha (25%–38%) towards the cost of a dam (including enabling infrastructure and 
ongoing O&M costs) that cost $80,000/ha to build. That is a higher proportion of costs than 
irrigators have historically contributed towards irrigation schemes in some other parts of Australia 
(approximately a quarter of capital costs (Vanderbyl, 2021)), and would involve a decision for the 
Australian and NT governments in accordance with their expectations, priorities and investment 
criteria. 

 


Table 6-5 Farm gross margins (GMs) required in order to cover the costs of off-farm water infrastructure (at the 
supplier’s target internal rate of return (IRR)) 

Assumes 100% farm performance on all farmland in all years, once construction is complete. Costs of supplying water 
to farms are consistently treated as costs of water source development (and not part of the farm GM calculation). Risk 
adjustment multipliers are provided in Section 6.3.5. Blue-shaded cells indicate the capital costs that could be 
afforded by farms with GMs of $4000 (Broadacre), $7000 (Horticulture-L) and $11,000 (Horticulture-H) per ha per 
year. Blue-shaded column headers indicate the most cost-effective dam development options in the Victoria 
catchment (Table 6-2). 

TARGET IRR 

FARM GROSS MARGIN REQUIRED IN ORDER TO PAY FOR OFF-FARM WATER INFRASTRUCTURE 

(%) 

($/ha/y) 

 

Total capital costs of off-farm water infrastructure ($/ha) 

 

20,000 

30,000 

40,000 

50,000 

70,000 

100,000 

125,000 

150,000 

 

Broadacre ($9,000/ha development costs, $600/ha/y fixed costs, 70% on-farm efficiency) 

3 

2,604 

3,016 

3,428 

3,840 

4,664 

5,900 

6,930 

7,960 

5 

2,977 

3,569 

4,160 

4,751 

5,933 

7,707 

9,185 

10,663 

7 

3,359 

4,139 

4,920 

5,701 

7,263 

9,605 

11,558 

13,510 

10 

3,941 

5,013 

6,085 

7,157 

9,301 

12,516 

15,196 

17,876 

12 

4,333 

5,601 

6,869 

8,137 

10,673 

14,478 

17,648 

20,818 

 

Horticulture-L ($25,000/ha development costs, $1,500/ha/y fixed costs, 90% on-farm efficiency) 

3 

5,584 

5,996 

6,408 

6,820 

7,645 

8,881 

9,911 

10,941 

5 

5,985 

6,576 

7,167 

7,759 

8,941 

10,715 

12,193 

13,671 

7 

6,370 

7,150 

7,931 

8,712 

10,274 

12,616 

14,569 

16,521 

10 

6,952 

8,024 

9,096 

10,168 

12,312 

15,528 

18,208 

20,887 

12 

7,345 

8,613 

9,881 

11,149 

13,685 

17,489 

20,659 

23,829 

 

Horticulture-H ($70,000/ha development costs, $6,500/ha/y fixed costs, 90% on-farm efficiency) 

3 

16,618 

17,068 

17,518 

17,967 

18,867 

20,217 

21,342 

22,467 

5 

17,164 

17,789 

18,413 

19,038 

20,288 

22,162 

23,724 

25,286 

7 

17,610 

18,416 

19,222 

20,027 

21,638 

24,055 

26,070 

28,084 

10 

18,215 

19,301 

20,387 

21,472 

23,644 

26,901 

29,615 

32,330 

12 

18,607 

19,884 

21,161 

22,438 

24,992 

28,823 

32,015 

35,207 



 


Target water pricing for off-farm public water infrastructure 

Table 6-6 shows the price that a public investor in off-farm water infrastructure would have to 
charge to fully cover the costs of development of off-farm water infrastructure, expressed per unit 
of supply capacity at the dam wall. Pricing assumes that the full supply of water (i.e. reservoir 
yield) would be used and paid for every year over the entire lifetime of the dam, after accounting 
for water losses between the dam and the farm. It can be challenging for farms to sustain the high 
levels of revenue over such long periods (100 years) to justify the costs of building expensive 
dams. For these base analyses, the water supply is assumed to be 100% reliable; risk adjustment 
multipliers to account for reliability of supply are provided in Section 6.3.5. 

For example, in the Victoria catchment, one of the most cost-effective dam opportunities would 
cost approximately $9,000 per ML per year of supply capacity at the dam wall after including the 
required supporting off-farm water infrastructure (Table 6-2). This would require farms to pay 
$966 per ML extracted to fully cover the costs of the public investment at the base 7% target IRR 
for public investments (read from value between 8,000 and 10,000 in Table 6-6). Comparisons 
with what irrigators can afford to pay (Table 6-4) show that it is unlikely any farming options could 
cover the costs of a dam in the Victoria catchment at the GMs farms are likely to be able to 
achieve (Table 6-3, Chapter 4). When a scheme is not viable (BCR < 1), the water cost and pricing 
tables can be used as a quick way of estimating the BCR and the likely proportion of public 
development costs that farms would be able to cover. For example, a Broadacre farm that uses 
8 ML/ha (measured at delivery to the farm) with a GM of $4000 per ha per year could afford to 
pay $135/ML extracted (Table 6-4), which would cover 13% ($135/$966) of the $966/ML price 
(Table 6-6) required to cover the full costs of the public development. The BCR would, therefore, 
be 0.13 (the ratio of the amount the net farm benefits can cover to the full costs of the scheme). 
As for the example in Table 6-5, it would be a decision for the public investor as to what 
proportion of the capital costs of infrastructure projects they would realistically expect to recover 
from users. 

Table 6-6 Water pricing required in order to cover costs of off-farm irrigation scheme development (dam, water 
distribution, and supporting infrastructure) at the investors target internal rate of return (IRR) 

Assumes the conveyance efficiency from dam to farm is 70% and that supply is 100% reliable. Risk adjustment 
multipliers for water supply reliability are provided in Table 6-9. Pumping costs between the dam and the farm would 
need to be added (e.g. ~$30/ML extra to lift water ~15 m from the weir pool to distribution channels). ‘$ CapEx per 
ML/y at dam’ is the capital expenditure on developing the dam and supporting off-farm infrastructure per ML per year 
of the dam’s supply capacity measured at the dam wall. Blue-shaded cells indicate $/ML cost of water. Blue-shaded 
column headers are indicative of the most cost-effective large dam options available in the Victoria catchment 
(Table 6-2). 

TARGET IRR 

WATER PRICE THAT WOULD NEED TO BE CHARGED IN ORDER TO COVER OFF-FARM INFRASTRUCTURE COSTS 

(%) 

($/ML charged at farm gate) 

 

Capital costs of off-farm infrastructure ($ CapEx per ML/y at dam) 

 

3,000 

4,000 

5,000 

6,000 

8,000 

10,000 

12,000 

14,000 

16,000 

3 

162 

215 

269 

323 

431 

538 

646 

754 

861 

5 

239 

319 

399 

479 

638 

798 

958 

1117 

1277 

7 

322 

429 

537 

644 

859 

1073 

1288 

1502 

1717 

10 

448 

598 

747 

897 

1196 

1495 

1794 

2093 

2392 




6.3.4 Financial targets required in order to cover costs of on-farm dams and bores 

The second generic assessments considered the case of on-farm sources of water. Indicative costs 
for on-farm water sources, including supporting on-farm distribution infrastructure, vary between 
$4,000 and $15,000 per ha of farmland. Costs depend on the type of water source, how 
favourable the local conditions are for its development, and the irrigation requirement of the 
farming system. Since the farm and water source would be developed by a single investor, the first 
analyses considered the combined cost of all farm development together (without separating out 
the water component). 

Target farm gross margins required in order to cover full costs of greenfield farm development 
with water source 

Table 6-7 shows the farm GMs that would be required in order to cover different costs of farm 
development at the investor’s target IRR. Note that private on-farm water sources are typically 
engineered to a lower standard than public water infrastructure and have lower upfront capital 
costs, higher recurrent costs (higher O&M and asset replacement rates) and lower reliability. 
Based on the indicative farm GMs provided earlier (Table 6-3) and a 10% target IRR, a Broadacre 
farm with a $4000 per ha per year GM could cover total on-farm development capital costs of 
approximately $20,000/ha. A lower capital cost Horticulture-L farm with a GM of $7000 per ha per 
year could afford approximately $40,000/ha of initial capital costs, and a capital-intensive 
Horticulture-H farm with a GM of $11,000 per ha per year could pay approximately $30,000/ha for 
farm development (Table 6-7). This indicates that on-farm water sources may have better 
prospects of being viable than large public dams in the Victoria catchment, particularly for 
broadacre farms and horticulture with lower development costs, if good sites can be identified for 
developing sufficient on-farm water resources at a low-enough cost. 

Table 6-7 Farm gross margins (GMs) required in order to achieve target internal rates of return (IRR), given various 
capital costs of farm development (including an on-farm water source) 

Assumes 100% farm performance on all farmland in all years, once construction is complete. Risk adjustment 
multipliers are provided in Section 6.3.5. Blue-shaded cells indicate the capital costs that could be afforded by farms 
with GMs of $4000 (Broadacre), $7000 (Horticulture-L) and $11,000 (Horticulture-H) per ha per year. 

TARGET IRR 

FARM GROSS MARGIN REQUIRED IN ORDER TO ACHIEVE THE FARMER'S TARGET IRR 

(%) 

($/ha/y) 

 

Total capital costs of farm development, including water source ($ CapEx/ha) 

 

10,000 

15,000 

20,000 

30,000 

40,000 

50,000 

70,000 

100,000 

 

Broadacre ($600/ha/y fixed costs, 70% on-farm efficiency) 

5 

1,516 

1,957 

2,398 

3,279 

4,160 

5,042 

6,804 

9,449 

7 

1,669 

2,181 

2,694 

3,718 

4,742 

5,767 

7,815 

10,888 

10 

1,923 

2,554 

3,185 

4,447 

5,709 

6,972 

9,496 

13,282 

12 

2,105 

2,821 

3,537 

4,968 

6,400 

7,832 

10,696 

14,991 

15 

2,389 

3,238 

4,087 

5,785 

7,483 

9,181 

12,578 

17,672 

20 

2,882 

3,963 

5,044 

7,206 

9,368 

11,530 

15,854 

22,340 




TARGET IRR 

FARM GROSS MARGIN REQUIRED IN ORDER TO ACHIEVE THE FARMER'S TARGET IRR 

(%) 

($/ha/y) 

 

Total capital costs of farm development, including water source ($ CapEx/ha) 

 

10,000 

15,000 

20,000 

30,000 

40,000 

50,000 

70,000 

100,000 

 

Horticulture-L ($1,500/ha/y fixed costs, 90% on-farm efficiency) 

5 

2,469 

2,909 

3,350 

4,231 

5,113 

5,994 

7,757 

10,401 

7 

2,637 

3,149 

3,661 

4,685 

5,710 

6,734 

8,783 

11,856 

10 

2,915 

3,546 

4,177 

5,439 

6,702 

7,964 

10,488 

14,274 

12 

3,114 

3,830 

4,546 

5,978 

7,409 

8,841 

11,705 

16,001 

15 

3,424 

4,273 

5,122 

6,820 

8,519 

10,217 

13,613 

18,708 

20 

3,962 

5,043 

6,124 

8,286 

10,448 

12,610 

16,934 

23,420 

 

Horticulture-H ($6,500/ha/y fixed costs, 90% on-farm efficiency) 

5 

7,760 

8,201 

8,642 

9,523 

10,404 

11,286 

13,048 

15,692 

7 

8,012 

8,524 

9,036 

10,060 

11,085 

12,109 

14,158 

17,231 

10 

8,427 

9,058 

9,689 

10,951 

12,213 

13,475 

15,999 

19,785 

12 

8,720 

9,436 

10,152 

11,584 

13,016 

14,448 

17,312 

21,607 

15 

9,177 

10,026 

10,875 

12,573 

14,271 

15,970 

19,366 

24,461 

20 

9,963 

11,044 

12,125 

14,287 

16,449 

18,611 

22,935 

29,421 



Volumetric water cost equivalent for on-farm water source 

Table 6-8 converts the capital cost of developing an on-farm water source (per ML of annual 
supply capacity) into an equivalent cost for each individual megalitre of water supplied by the 
water source. The table can be used to estimate how much a farm could spend on developing 
required water resources by comparing the costs per ML with what farms can afford to pay for 
water (Table 6-4). For example, a Broadacre farm with a GM of $4000 per ha per year, an annual 
farm water use of 8 ML/ha and a target 10% IRR could afford to pay $135/ML for its water supply 
(Table 6-4), which would allow capital costs of up to $1000 for each ML/year supply capacity for 
developing an on-farm supply (Table 6-8). Approximate indicative costs for developing on-farm 
water sources range from $500/ML to $2000/ML (based on the range of per hectare costs above), 
which confirms, by this alternative approach, that there are likely to be viable farming 
opportunities using on-farm water development in the Victoria catchment. 


Table 6-8 Equivalent costs of water per ML for on-farm water sources with various capital costs of development, at 
the internal rate of return (IRR) targeted by the investor 

Assumes the water supply is 100% reliable. Risk adjustment multipliers for water supply reliability are provided in 
Table 6-9. Pumping costs to the field surface would be extra (e.g. ~$2 per ML per m dynamic head for bore pumping). 
Blue-shaded cells indicate $/ML cost of water. 

TARGET IRR 

WATER VOLUMETRIC COST EQUIVALENT UNIT FOR VARIOUS CAPITAL COSTS OF WATER SOURCE 

(%) 

($/ML) 

 

Capital costs for on-farm water infrastructure ($ CapEx per ML per y at farmland surface) 

 

300 

400 

500 

700 

1000 

1250 

1500 

1750 

2000 

3 

22 

29 

37 

51 

74 

92 

110 

129 

147 

5 

26 

35 

44 

61 

87 

109 

131 

153 

175 

7 

31 

41 

51 

72 

102 

128 

154 

179 

205 

10 

38 

51 

63 

89 

127 

159 

190 

222 

254 

12 

43 

58 

72 

101 

144 

180 

216 

252 

288 

15 

51 

68 

85 

120 

171 

213 

256 

299 

342 

20 

65 

87 

109 

152 

217 

271 

326 

380 

434 



6.3.5 Risks associated with variability in farm performance 

This section assessed the impacts of two types of risks on scheme financial performance: those 
that reduce farm performance through the early establishment and learning years, and those 
occurring periodically throughout the life of the development. The effect of these risks is to reduce 
the expected revenue and expected GM. 

Setbacks that occur soon after a scheme is established were found to have the largest effect on 
scheme viability, particularly at higher target IRRs. There is a strong incentive to start any new 
irrigation development with well-established crops and technologies, and to be thoroughly 
prepared for those agronomic risks of establishing new farmland that can be anticipated. Analyses 
showed that delaying full development for longer periods than the learning time had only a slight 
negative effect on IRRs, whereas proceeding to full development before learning was complete 
had a much larger impact. This implies that it is prudent to err on the side of delaying full 
development (particularly given that, in practice, it is only possible to know when full performance 
has been achieved in retrospect). An added benefit of staging is the limiting of losses when small-
scale testing proves initial assumptions of benefits to be overoptimistic and that full-scale 
development could never be profitable (even after attempts to overcome unanticipated 
challenges). 

For an investment to be viable, farm GMs must be sustained at high levels over long periods. Thus, 
variability in farm performance poses risks that must be considered and managed. GMs can vary 
between years because of either short-term initial underperformance or periodic shocks. Initial 
underperformance is likely to be associated with learning as farming practices are adapted to local 
conditions, overcoming initial challenges to reach their long-term potential. Further unavoidable 
periodic risks are associated with water reliability, climate variability, flooding, outbreaks of pests 
and diseases, periodic technical or equipment failures, and fluctuations in commodity prices and 
market access. Unreliability of water supply is less easy to avoid than other periodic risks. Risks 


that cannot be avoided must be managed, mitigated where possible and accounted for in 
determining the realistic returns that can be expected from an irrigation development. This would 
include having adequate capital buffers for survival through challenging periods. Another 
perceived risk for investors is the potential future policy changes and delays in regulatory 
approvals. Reducing this, or any other sources of risk, in the Victoria catchment would help make 
marginal investment opportunities more attractive. 

The results of the analyses of both the periodic and the learning risks are shown below. The right 
to farm and other sovereignty risks, especially with regard to access to water, may become key 
factors in future years, based on experience from elsewhere, but these are not the subject of the 
risk discussion presented here. 

Throughout this section, farm performance in a given year is quantified as the proportion of the 
long-term mean GM that a farm attains; 100% performance is when this level is reached and 
zero % equates to a performance in which revenues only balance variable costs (GM = zero). 

Risks from periodic underperformance 

The analyses considered periodic risks generically, without assuming any of the particular causes 
listed above. To quantify their effects on scheme financial performance, periodic risks were 
characterised by three components: 

• reliability – the proportion of ‘good’ years, in which the ‘full’ 100% farm performance was 
achieved, with the remainder of years being termed ‘failed’ years, in which some negative 
impact was experienced 
• severity – the farm performance in a ‘failed’ year, in which some type of setback occurred 
• timing – in ‘early’ timing (in relation to a 10-year cycle), the ‘failed’ years came early in each 10-
year cycle (e.g. 80% reliability meant that ‘failed’ years occurred in the first 2 years of the 
scheme and in the first 2 years of each 10-year cycle after that). In ‘late’ timing, the ‘failed’ years 
came at the end of each 10-year cycle. In ‘random’ timing, each year was allocated the long-
term mean farm performance of ‘good’ and ‘failed’ years (frequency weighted). 


Table 6-9 summarises the effects of a range of reliabilities and severities for periodic risks on 
scheme viability. Periodic risks had a consistent proportional effect on target GMs, irrespective of 
development options or costs, so the results were simplified as a set of risk adjustment multipliers. 
The multipliers can, therefore, be applied to the target farm GMs in Section 6.3.2 (the GMs 
required in order to cover capital costs of development at the investor’s target IRRs at 100% farm 
performance) to account for the effects of various risks. These same adjustment factors can be 
applied to the water prices that irrigators can afford to pay (Table 6-4), but would be used as 
divisors to reduce the price that irrigators could pay for water. 

As expected, the greater the frequency and severity of ‘failed’ years, the greater the impact on the 
scheme viability and the greater the increase in farm GMs required in order to offset these 
impacts. As an example, the reliability of water supply is one of the more important sources of 
unavoidable variability in the productivity of irrigated farms. Water reliability (proportion of ‘good’ 
years, in which the full supply of water is available) is shown as ‘reliability’ in Table 6-9, and the 
mean percentage of water available in a ‘failed’ year (in which less than the full supply of water is 
available) is shown as the ‘failed year performance’ in Table 6-9 (assuming the area of farmland 


planted is reduced in proportion to the amount of water available). For example, if a water supply 
was 85% reliable and provided a mean of 75% of its full supply in ‘failed’ years, a risk adjustment 
factor of 1.04 (

For crops for which the quality of the produce is more important than the quantity, such as 
horticulture, the approach of reducing planted land area in proportion to available water in ‘failed’ 
years would be reasonable. However, for perennial horticulture or tree crops, it may be difficult to 
reduce (or increase) areas on an annual basis. Farmers of these crops would, therefore, tend to 
opt for systems with a high degree of reliability of water supply (e.g. 95%). For many broadacre 
crops, deficit irrigation could partially mitigate impacts on farm performance in years with reduced 
water availability, as could carryover effects from inputs (such as fertiliser) in a ‘failed’ year that 
reduce input costs the following year (see Section 4.3.4). 

Table 6-9 Risk adjustment factors for target farm gross margins (GMs), accounting for the effects of the reliability 
and severity (level of farm performance in ‘failed’ years) of the periodic risk of water reliability 

Results are not affected by discount rates. ‘Good’ years = 100% farm performance; ‘failed’ years = <100% 
performance. ‘Failed year performance’ is the mean farm GM in years in which some type of setback is experienced 
relative to the mean GM when the farm is running at ‘full’ performance. 

FAILED YEAR 
PERFORMANCE (%) 

RISK ADJUSTMENT MULTIPLIER FOR TARGET FARM GROSS MARGINS 
(VS BASE 100% RELIABILITY TABLES) (unitless ratio) 

 

Reliability (proportion of ‘good’ years) 

 

1.00 

0.90 

0.85 

0.80 

0.70 

0.60 

0.50 

0.40 

0.30 

0.20 

85 

1.00 

1.02 

1.02 

1.03 

1.05 

1.06 

1.08 

1.10 

1.12 

1.14 

75 

1.00 

1.03 

1.04 

1.05 

1.08 

1.11 

1.14 

1.18 

1.21 

1.25 

50 

1.00 

1.05 

1.08 

1.11 

1.18 

1.25 

1.33 

1.43 

1.54 

1.67 

25 

1.00 

1.08 

1.13 

1.18 

1.29 

1.43 

1.60 

1.82 

2.11 

2.50 

0 

1.00 

1.11 

1.18 

1.25 

1.43 

1.67 

2.00 

2.50 

3.33 

5.00 



 
Table 6-10 shows how the timing of periodic impacts affects scheme viability, providing risk 
adjustment factors for a range of reliabilities for an impact that had 50% severity, with late timing, 
early timing and random (long-term frequency, weighted mean performance) timing. 

These results indicate that any negative disturbances that reduce farm performance will have a 
larger effect if they occur soon after the scheme is established, and that this effect is greater at 
higher target IRRs. For example, at a 7% target IRR and 70% reliability with ‘late’ timing (in which 
setbacks occur in the last 3 of every 10 years), the GM multiplier is 1.13, meaning the annual farm 
GM would need to be 13% higher than if farm performance were 100% reliable. In contrast, for 
the same settings with ‘early’ timing, the GM multiplier is 1.23, meaning the farm GM would need 
to be 23% higher than if farm performance were 100% reliable. The impacts of early setbacks are 
more severe than the impacts of late setbacks. 


Table 6-10 Risk adjustment factors for target farm gross margins (GMs) accounting for the effects of reliability and 
the timing of periodic risks 

Assumes 50% farm performance during ‘failed’ years, in which 50% farm performance means 50% of the GM at ‘full’ 
potential production. IRR = internal rate of return. 

TARGET 
IRR (%) 

TIMING OF FAILED 
YEARS 

RISK ADJUSTMENT MULTIPLIER FOR TARGET FARM GROSS MARGINS 
(VS BASE 100% RELIABILITY TABLES) (unitless ratio) 

 

 

Reliability (proportion of ‘good’ years) 

 

 

1.00 

0.90 

0.80 

0.70 

0.60 

0.50 

0.40 

0.30 

0.20 

3 

Late 

1.00 

1.05 

1.10 

1.16 

1.22 

1.30 

1.39 

1.50 

1.63 

Random – no bias 

1.00 

1.05 

1.11 

1.18 

1.25 

1.33 

1.43 

1.54 

1.67 

Early 

1.00 

1.06 

1.13 

1.20 

1.28 

1.37 

1.47 

1.58 

1.70 

7 

Late 

1.00 

1.04 

1.08 

1.13 

1.19 

1.26 

1.35 

1.46 

1.59 

Random – no bias 

1.00 

1.05 

1.11 

1.18 

1.25 

1.33 

1.43 

1.54 

1.67 

Early 

1.00 

1.07 

1.15 

1.23 

1.32 

1.41 

1.51 

1.62 

1.74 

10 

Late 

1.00 

1.03 

1.07 

1.12 

1.17 

1.24 

1.32 

1.42 

1.56 

Random – no bias 

1.00 

1.05 

1.11 

1.18 

1.25 

1.33 

1.43 

1.54 

1.67 

Early 

1.00 

1.08 

1.16 

1.25 

1.35 

1.45 

1.55 

1.66 

1.77 



Risks from initial ‘learning’ period 

Another form of risk arises from the initial challenges in establishing new agricultural industries in 
the Victoria catchment; it includes setbacks from delays, such as gaining regulatory approvals, and 
adapting farming practices to conditions in the Victoria catchment. Some of these risks are 
avoidable if investors and farmers learn from past experiences of development in northern 
Australia (e.g. Ash et al., 2014), avoid previous mistakes and select farming options that are 
already well proven in analogous northern Australian locations. However, even well-prepared 
developers are likely to face initial challenges in adapting to the unique circumstances of a new 
location. Newly developed farmland can take some time to reach its productive potential as soil 
nutrient pools are established, soil limitations are ameliorated, suckers and weeds are controlled, 
and pest and disease management systems are established. 

‘Learning’ (used here to broadly represent all aspects of overcoming initial sources of farm 
underperformance) was assessed in terms of two simplified generic characteristics: 

• initial level of performance – the proportion of the long-term mean GM that the farm achieves 
in its first year 
• time to learn – the number of years taken to reach the long-term mean farm performance. 


Performance was represented as increasing linearly over the learning period from the starting 
level to the long-term mean performance level (100%). 

The effect of learning on scheme financial viability was considered for a range of initial levels of 
farm performance and learning times. As described above, learning had consistent proportional 
effects on target GMs, so the results were simplified as a set of risk adjustment factors (Table 6-
11). As expected, the impacts on scheme viability are greater the lower the starting level of farm 
performance and the longer it takes to reach the long-term performance level. Since these 
impacts, by their nature, are weighted to the early years of a new development, they have more 


impact at higher target IRRs. To minimise the risks of learning impacts, there is a strong incentive 
to start any new irrigation development with well-established crops and technologies, and to be 
thoroughly prepared for those agronomic risks of establishing new farmland that can be 
anticipated. Higher-risk options (e.g. novel crops, equipment or practices that are not currently in 
profitable commercial use in analogous environments) could be tested and refined on a small 
scale until locally proven. 

As indicated in the examples above, the influence of each risk individually can be quite modest. 
However, the combined influence of all foreseeable risks must be accounted for in planning, and 
the cumulative effect of these risks can be substantial. For example, the last question in Table 6-1 
shows that the combined effect of just two risks requires farm GMs to be approximately 50% 
higher than they would be without the risks. See Stokes and Jarvis (2021) for the effects of a 
common suite of risks on the financial performance of a Bradfield-style irrigation scheme. 

Table 6-11 Risk adjustment factors for target farm gross margins (GMs), accounting for the effects of learning risks 

Learning risks were expressed as the level of initial farm underperformance and time taken to reach full performance 
levels. Initial farm performance is the initial GM as a percentage of the GM at ‘full’ performance. IRR = internal rate of 
return. 

TARGET IRR 
(%) 

INITIAL FARM 
PERFORMANCE (%) 

RISK ADJUSTMENT MULTIPLIER FOR TARGET FARM GROSS MARGINS 
(VS BASE 100% RELIABILITY TABLES) (unitless ratio) 

 

 

Learning time (years to 100% performance) 

 

 

2 

4 

6 

8 

10 

15 

3 

85 

1.01 

1.02 

1.03 

1.03 

1.04 

1.05 

75 

1.02 

1.03 

1.04 

1.05 

1.07 

1.10 

50 

1.04 

1.06 

1.09 

1.12 

1.14 

1.21 

25 

1.06 

1.10 

1.14 

1.19 

1.23 

1.35 

0 

1.08 

1.14 

1.20 

1.26 

1.33 

1.53 

7 

85 

1.02 

1.03 

1.04 

1.05 

1.05 

1.07 

75 

1.03 

1.05 

1.06 

1.08 

1.09 

1.13 

50 

1.06 

1.10 

1.13 

1.17 

1.21 

1.29 

25 

1.09 

1.15 

1.22 

1.28 

1.35 

1.51 

0 

1.12 

1.21 

1.31 

1.41 

1.52 

1.83 

10 

85 

1.02 

1.03 

1.05 

1.06 

1.07 

1.09 

75 

1.04 

1.06 

1.08 

1.10 

1.11 

1.15 

50 

1.08 

1.12 

1.17 

1.21 

1.26 

1.35 

25 

1.12 

1.20 

1.28 

1.36 

1.44 

1.65 

0 

1.16 

1.28 

1.41 

1.55 

1.69 

2.10 



 


6.4 Cost–benefit considerations for water infrastructure viability 

6.4.1 Lessons from recent Australian dams 

CBA is widely used to help decision makers evaluate the net benefits likely to arise from 
implementing a proposed project, particularly for investments in large-scale public infrastructure. 
Despite this wide usage of CBAs, there are few examples for which the estimated costs and 
benefits used to justify the project have been revisited at a later date. Such ex-post evaluations 
allow the outcomes of completed projects to improve planning, management and risk mitigation 
in future projects (Infrastructure Australia, 2021a). 

The few examples in which water infrastructure CBAs have been evaluated have focused on 
exploring the accuracy of the forecast capital costs. An international study of large water 
infrastructure projects showed that actual construction costs exceeded contracted costs by a 
mean of 96% (Ansar et al., 2014). Similarly, an Australian-focused study found mean cost overruns 
of 120% (Petheram and McMahon, 2019). There is evidence of a systematic tendency across a 
range of large infrastructure projects for proponents to substantially under estimate development 
costs (Ansar et al., 2014; Flyvbjerg et al., 2002; Odeck and Skjeseth, 1995; Wachs, 1990; Western 
Australian Auditor General, 2016). 

Ex-post evaluations of project benefits are even scarcer. One international study found that large 
dam developments frequently underperformed, whereby ‘irrigation services have typically fallen 
short of physical targets, did not recover their costs and have been less profitable in economic 
terms than expected’ (World Commission on Dams, 2000). In particular, this study highlighted 
inaccurate and overestimated forecasting of future irrigation demand for water from dam 
developments. 

Review of recent Australian dams 

The Roper River Water Resource Assessment technical report on agricultural viability and socio-
economics (Stokes et al., 2023) conducted a systematic review of the five most recently built dams 
in Australia (Figure 6-2, Table 6-12) to address the gap in the ex-post evaluations. The goal was to 
assess how well Australian dam projects have achieved their anticipated benefits and to make the 
learnings available for future planning. These lessons provide context for interpreting CBAs from 
project proponents, independent analysts, and the financial analyses provided in the previous 
section. The key lessons from that review are summarised below, and the full details are reported 
in Webster et al. (2024). 


 

Locations of five dams used in costing review map
\\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\2_Victoria\1_GIS\1_Map_docs\Se-V-503_Map_Australia_and_river_basins_new dams_V1.mxd
For more information on this figure please contact CSIRO on enquiries@csiro.au
Figure 6-2 Locations of the five dams used in this review 

The dams are numbered in blue as 1: New Harvey Dam, 2: Paradise Dam, 3: Meander Dam, 4: Wyaralong Dam and 
5: Enlarged Cotter Dam. 

Table 6-12 Summary characteristics of the five dams used in this review 

Documents reviewed for each dam are cited in the companion technical report on agricultural viability and socio-
economics (Webster et al., 2024). CBA = cost–benefit analysis. 

 

NEW HARVEY DAM 

PARADISE DAM 

MEANDER DAM 

WYARALONG DAM 

ENLARGED COTTER DAM 

State/territory 

WA 

Qld 

Tas 

Qld 

ACT 

Date completed 

2002 

2005 

2008 

2011 

2012 

Capacity (GL) 

59 

300 

43 

103 

78 

New dam or 
redevelopment of 
existing dam? 

Replaces Harvey 
weir (built 1916, 
extended 1931), 
capacity of ~10 GL 

New 

New 

New 

Replaces original 
Cotter Dam (built 
1915, extended 1951), 
capacity of ~4 GL 

Primary use(s) 
proposed for 
water from dam 

Irrigated 
agriculture 

Irrigated 
agriculture, 
water supply 

Irrigated 
agriculture, 
environmental 
flows, hydro-
electric power 

Water supply to 
south-east 
Queensland 

Water supply for 
Canberra 

Type of key 
project 
documents used 
for this review 

Proposed water 
allocation plans 
(no CBA available) 

CBA and 
economic 
impact 
assessment 

CBA 

Environmental 
Impact Statement 
(EIS) 

(no CBA available) 

EIS (which included 
CBA information, but 
the actual CBA report 
was unavailable) 



 


Summary of key issues identified 

This review highlighted a number of issues with the historical use of CBAs for recently built dams 
in Australia together with ways they could be more rigorously addressed (Table 6-13). These issues 
arise because of the complexity of the forecasts and estimates required to plan large 
infrastructure projects and because of pressures on proponents that can introduce systematic 
biases. However, this report acknowledges that flaws with the use of CBAs in large public 
infrastructure investment decisions are not unique to regional Australia or to water infrastructure 
– they are systemic and occur in many different types of infrastructure globally. Under such 
circumstances it would be inequitable to apply more rigor to CBAs only for some select 
investments, geographic regions and infrastructure classes before the same standards are 
routinely applied in all cases. And there is no incentive for individual proponents to apply more 
rigor to CBAs if those proposals would suffer from unfavourable comparisons to alternative or 
competing investments with exaggerated cost–benefit ratios (CBRs). 

Table 6-13 Summary of key issues and potential improvements arising from a review of recent dam developments 

 

KEY ISSUE 

POTENTIAL IMPROVEMENTS 

1 

There is a lack of clear documentary evidence regarding 
the actual outcome of dam developments compared 
with the assumptions made in ex-ante proposals, 
Environmental Impact Statements (EISs) and cost–
benefit analyses (CBAs). Ex-post evaluations or post-
completion reviews have either not been prepared or 
not been made publicly available. 

Conducting ex-post evaluations of developments and making 
these publicly available (as recommended by 2021 guidance from 
Infrastructure Australia (Infrastructure Australia, 2021a, 2021b) 
and in the 2022 National Water Grid Investment Framework 
(NWGA 2022)) would enable lessons learned to be shared and 
benefit future developments. 

2 

Predicted increases in water demand from specific 
developments generally do not appear to arise at the 
scale and/or within the time frame forecast. While the 
reasons for this are varied and context-dependent, there 
does appear to be a systematic bias towards 
overestimation of the magnitude and rate at which new 
benefit would flow. 

Recognising the tendency towards a systematic bias of 
overstating benefits and understating costs, CBAs in project 
proposals could be improved by: (i) further efforts to present 
unbiased financial analysis (e.g. independent review) and ensuring 
appropriate sensitivity analysis is included in all proposals, (ii) 
developing broadly applicable and realistically achievable 
benchmarks for evaluating proponents’ assumptions and financial 
performance claims, (iii) using past experiences and lessons 
learned from previous projects with a similar context to inform the 
analysis presented in the proposals (building on Issue 1 above), and 
(iv) presenting a like-for-like comparison of cost-to-benefit ratios 
(CBRs) for the proposed case vs standard alternatives (such as 
water buybacks or a smaller dam, possibly better matched to 
realistic future demand). 

3 

The systematic bias towards optimism in proposals is 
exacerbated by mismatches between forecast demand 
and the full supporting infrastructure required to 
enable this demand to be realised, resulting in additional 
capital investment (pipelines, treatment plants, etc.) 
being required that was not costed in the original 
proposal. 

The same improvements as for Issue 2 (recognising and addressing 
inherent bias) apply here. 

4 

Developments are justified based on a complex mix of 
multiple market and non-market benefits, many of 
which are hard to monetise and capture in a single net 
present value (NPV) figure. 

CBAs could be improved by presenting clear information on the full 
portfolio of benefits (and costs and disbenefits) anticipated to arise 
from a project. While the quantitative part of the CBA would 
analyse the easily monetised costs and benefits (with metrics such 
as CBR and NPV), benefits that are hard to monetise could also be 
formally presented in whatever form is most appropriate to the 
magnitude and nature of that particular benefit. This presentation 
would enable the relative importance of each element of the mix 
to be weighed and given appropriate consideration, rather than 
attention being focused on a single NPV figure, which may have 
omitted key elements of the project. 




 

KEY ISSUE 

POTENTIAL IMPROVEMENTS 

5 

Improved water security and reliability of supply is 
often the most important benefit offered by dam 
developments, while also being the hardest to monetise. 
Dams provide a form of insurance against the risk that 
water may not be available when needed in the future. 
Assessing the value of this insurance requires 
consideration of the cost of lack of water supply when 
needed and the likelihood that this could occur. 

CBAs could be improved by providing clear information on exactly 
how the development will serve to improve water security, the 
likelihood that such insurance will be required (i.e. an estimate of 
the risk), and the estimated social and economic impacts if the 
insurance was not there when required. Such information could be 
presented alongside, and given equal prominence with, other 
information regarding the proposal, including the estimated NPV. 
This is preferable to attempting to ‘force’ the benefit into an NPV 
calculation that is ill equipped to deal with such a benefit. 



 
In the short term, the main value of the information provided here is to enable more critically 
interpretation and evaluation of CBAs so that more-informed decisions can be made about the 
likely viability (and relative ranking) of projects in practice. In particular, it highlights several 
aspects of CBAs regarding which the claims of proponents warrant critical scrutiny. The longer 
term value of this analysis is that it has identified many issues similar to those raised in past review 
cycles of Infrastructure Australia’s CBA best-practice guidelines and the recommendations that are 
being progressively added to those guidelines to improve how large public investments are 
evaluated (Infrastructure Australia, 2021a, 2021b). 

6.4.2 Demand trajectories for high-value water uses 

For irrigated agriculture to expand in the Victoria catchment, additional water will be required. 
Forecasting that growth in demand is essential, both for planning new water infrastructure and for 
evaluating individual water infrastructure proposals. This will ensure assumed demand trajectories 
for water, and the associated value that can be generated from irrigated agriculture to justify the 
costs of that infrastructure, are reasonable. Australian Bureau of Statistics data series on historical 
agricultural production and water use were analysed to derive trends and relationships for 
benchmarking realistic growth trajectories in the NT (Figure 6-3). 

(a) Australia 

 

(b) Northern Territory 

 



Trend in value of Aust ag
\\fs1-cbr.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\2_Victoria\4_Data\3_Economic\ViWRA-Charts_Economic.xlsx
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010,00020,00030,0001981–901991–002001–102011–21GVAP ($M)
DecadeCrops (horticulture)Crop (other)Livestock
Trend in value of NT ag
\\fs1-cbr.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\2_Victoria\4_Data\3_Economic\ViWRA-Charts_Economic.xlsx
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02004006001981–901991–002001–102011–21GVAP ($M)
DecadeCrops (horticulture)Crop (other)Livestock
Figure 6-3 Trends in gross value of agricultural production (GVAP) in (a) Australia and (b) the NT over 40 years 
(1981–2021) 

Data points are decade averages of annual values. The ‘Crop (other)’ category is predominantly broadacre farming. 

Source: (ABS, 2022) 

 


Horticultural produce is typically perishable and expensive to store and transport, and must meet 
stringent phytosanitary (plant health) standards for export, so most Australian horticultural 
produce (~70%) is sold domestically for consumption shortly after harvest. Growth in horticultural 
industries is, therefore, constrained by growth in demand from local consumers. The current rate 
of growth in the value of Australian horticulture is $2.7 billion per decade, and for the NT it is 
$35 million per decade (step changes in gross value of agricultural production (GVAP) from 1981–
90 to 2011–21 are shown in Figure 6-3). Any new irrigated development would compete for some 
share of that growth, providing a benchmark guide for the scale of new horticulture that could 
realistically be included in any new irrigation scheme. It also provides a benchmark for the 
trajectory at which high-value horticulture (and the associated demand for high-priority water) 
could grow towards the ultimate scheme potential. 

In addition, the scale of new horticultural expansion for any single crop is limited by seasonal gaps 
in supply, so horticulture in any single location is typically a mix of products that fill the niche 
market gaps that the location can supply (usually dictated by climate, but sometimes a result of 
other factors such as backloading opportunities; see Chapter 4), rather than being a monoculture 
of the most valuable crop alone. Data on how the value of irrigated agriculture has increased with 
increasing irrigation water availability over time provide an indicative benchmark of how much 
gross value such a mix of new agricultural activities could generate for each new GL of irrigation 
water that becomes available (Figure 6-4). Based on the trendlines in Figure 6-4, each extra new 
GL of water use could produce either: 

• an extra $2.9 million of gross value from mixed fruit industries 
• an extra $7.9 million of gross value from mixed vegetable industries 
• an extra $3.8 million of gross value from mixed horticulture (combined), or 
• an extra $1.2 million of gross value from a typical mix of agriculture overall. 


Growth trends in the value of broadacre crops are stronger than those for horticulture (Figure 6-
3); they are a combination of increases in both product volumes and the value per unit product. 
Unlike horticultural crops, bulk broadacre commodities are stored and traded on large global 
markets (with multiple competing international buyers), which could easily absorb the scale of 
increases in production that would be possible from the Victoria catchment. However, supply 
chains, rather than markets, pose a challenge for new broadacre production. Despite northern 
Australia being geographically closer than southern Australia to many key markets, the supply 
chains for northern Australian produce are longer, because most agricultural exports leave 
through southern ports. For example, Darwin Port currently does not handle bulk food-grade 
containers (for either import or export). The challenge is to develop transport and handling 
capacity for exports and balance that with compatible imports to avoid the added cost of dead 
freighting empty containers (CRCNA, 2020). 


(a) Fruits 

 

(c) Fruits and vegetables combined 

 

(b) Vegetables 

 

(d) Total agriculture 

 



Trend in fruit GVIAP to available water
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Trend in fruit and vegetable GVIAP to available water
\\fs1-cbr.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\2_Victoria\4_Data\3_Economic\ViWRA-Charts_Economic.xlsx
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Trend in vegetable GVIAP to available water
\\fs1-cbr.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\2_Victoria\4_Data\3_Economic\ViWRA-Charts_Economic.xlsx
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Trend in total agriculture GVIAP to available water
\\fs1-cbr.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\2_Victoria\4_Data\3_Economic\ViWRA-Charts_Economic.xlsx
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Figure 6-4 National trends for increasing gross value of irrigated agricultural production (GVIAP) as available water 
supplies have increased for (a) fruits, (b) vegetables, (c) fruits and vegetables combined, and (d) total agriculture 

Source: (ABS, 2022) 

6.4.3 Costs of enabling infrastructure 

A range of infrastructure would be required to support the development of a new irrigation 
scheme in the Victoria catchment, both within the scheme itself and beyond. Any infrastructure 
that is not included in the initial water development contract but is required to enable the new 
water resources to be used effectively (and to achieve their anticipated benefits) will require 
construction after the contracted project is complete, often at public expense. The types of 
infrastructure addressed here are those that would not typically be included in a formal CBA or be 
built by the water infrastructure developer or farmers. Within the context of a large irrigation 
development, such enabling infrastructure can be considered ‘hard’ or ‘soft’, which can be broadly 
defined as follows: 

• Hard infrastructure refers to the physical assets necessary for a development to function. It can 
include water storage, roads, irrigation supply channels, energy, and processing infrastructure, 
such as sugar mills, cotton gins, abattoirs and feedlots. 
• Soft infrastructure refers to the specialised services required for maintaining the economic, 
health, cultural and social standards of a population. These are indirect costs of a development 
and are usually less obvious than hard infrastructure costs. They can include expenses that 
continue after the construction of a development has been completed. Soft infrastructure can 
include: 



– physical assets, such as community infrastructure (e.g. schools, hospitals, housing) 
– non-physical assets, such as institutions, supporting rules and regulations, compensation 
packages, and law enforcement and emergency services. 





New processing infrastructure and community infrastructure are particularly pertinent to large, 
remote, greenfield developments, and these costs to other providers of infrastructure can be 
substantial, even after a new irrigation scheme has been developed. For example, a review of the 
Ord-East Kimberley Development Plan (for expansion of the Ord irrigation system by ~15,000 ha) 
found additional costs of $114 million to the WA Government beyond the planned $220 million 
state investment in infrastructure already provided to directly support the expansion (Western 
Australian Auditor General, 2016). 

This section provides an indication of the additional public and private infrastructure required to 
support a new irrigation development (once the main water infrastructure and farms are built) 
and the costs of the additional investments required. The intention is to highlight potentially 
overlooked costs of infrastructure that is required to realise the benefits of development and 
population growth in a region, rather than to diminish the potential benefits. 

Costs of hard infrastructure 

Establishing new irrigated agriculture in the Victoria catchment would involve the initial costs of 
land development, water infrastructure (which could include distribution and re-regulation or 
balancing of storages), and farm set-up (for equipment and facilities on each new farm). It may 
also involve costs associated with constructing processing facilities, extending electricity networks, 
and upgrading road transport. 

The costs of water storage and conveyance are provided in Chapter 5. Indicative costs for 
processing facilities are provided in Table 6-14, and indicative costs for roads and electricity 
infrastructure are provided in Table 6-15. Indicative costs for transporting goods to key markets 
are listed in Table 6-16. All tables are summarises of information provided in the companion 
technical report on agricultural viability and socio-economics (Webster et al., 2024). 

Table 6-14 Indicative costs of agricultural processing facilities 

ITEM 

CAPITAL COST 

OPERATING COST 

COMMENT 

Meatworks 

$33 to 
$100 million 

$330/head 

Operational capacity 100,000 head/y 

Cotton gin 

$34 to 
$37 million 

$1.1 million/y plus 
$24 to $35 per 
bale 

Operational capacity of 80,000 to 95,000 bales/yr 
Operating costs depend on the scale of the gin, and the source of 
energy 

Sugar mill 

$469 million 

$39 million/y 

Operational capacity of 1000 t cane/h, 6-month crushing season 
Basic mill producing sugar only (no electricity or ethanol) 



 


Table 6-15 Indicative costs of road and electricity infrastructure 

ITEM 

CAPITAL COST 

COMMENT 

Roads 

 

 

Seal dirt road 

$0.31 to $2.4 million per km 

Upgrade and widen dirt road to sealed road 

New bridges and 
floodway 

$27.4 million 

Costs of bridges and floodways vary widely 

Electricity 

 

New generation capacity may also be required 

Transmission lines 

$0.34 to $1.57 million per 
km 

High-voltage lines deliver bulk flow of electricity from 
generators over long distances 

Distribution lines 

$0.22 to $0.49 million per 
km 

Lower-voltage lines distribute power from substations over 
shorter distances to end users 

Substation 

$1.3 to $12.2 million 

Transformers and switchgear connect transmission and 
distribution networks 



 

Table 6-16 Indicative road transport costs between the Victoria catchment and key markets and ports 

The top section of the table gives trip costs from the Victoria River Roadhouse to key destinations. The bottom section 
gives distance-based costs of getting goods from within the catchment to the Victoria River Roadhouse (on unsealed 
roads) and approximate distance-based costs of getting goods from the Victoria River Roadhouse on sealed roads to 
other destinations (not specifically listed). 

DESTINATION 

TRANSPORT COST 

 

Unrefrigerated 

Refrigerated 

Cattle 

 

Transport costs from Victoria River Roadhouse ($/t) 

Adelaide 

 440 

 515 

 396 

Brisbane 

 515 

 604 

 463 

Cairns 

 393 

 487 

 354 

Darwin 

 78 

 92 

 70 

Fremantle 

 536 

 639 

 482 

Karumba 

 306 

 368 

 275 

Melbourne 

 584 

 654 

 526 

Port Hedland 

 285 

 344 

 257 

Sydney 

 616 

 692 

 555 

Townsville 

 354 

 426 

 319 

Wyndham 

 65 

 77 

 59 

 

Transport costs by distance ($/t/km) 

Properties to Victoria 
River Roadhouse 

0.32 

0.38 

0.29 

Victoria River 
Roadhouse to key 
markets/ports 

 0.15 

 0.18 

 0.14 



 


Costs of soft infrastructure 

The availability of community services and facilities would play an important role in attracting 
people to (or deterring them from) living in a new development in the Victoria catchment. If local 
populations increase as a result of new irrigated developments, then the demand for public 
services would increase, and provision of those services would need to be anticipated and planned 
for. Indicative costs for constructing a variety of facilities that may be required for supporting 
population growth are listed in 

Table 6-17. Each 1000 people in Australia require 2.3 (in ‘Major cities’) to 4.0 (in ‘Remote and Very 
remote areas’) hospital beds, served by 16 full-time equivalent (FTE) hospital staff and 
$3.5 million/year funding to maintain current mean national levels of hospital service (AIHW, 
2023). Health care services in remote locations generally focus on providing primary care and 
some secondary care. More specialised tertiary services tend to be concentrated in referral 
hospitals, which are generally located in large cities but also serve the surrounding area. Primary 
schools tend to be smaller and more widespread than secondary schools, which are larger and 
more centralised. 

Table 6-17 Indicative costs of community facilities 

Costs are quoted for Darwin as a reference capital city for northern Australia. Costs in remote parts of northern 
Australia, including the Victoria catchment, are estimated to be approximately 30% to 60% higher than those quoted 
for Darwin. School costs were estimated separately based on a number of locations across northern Australia. See the 
companion technical report on agricultural viability and socio-economics (Webster et al., 2024) for details. 

ITEM 

CAPITAL COST 

COMMENT 

Hospital 

$0.2 to $0.5 million per 
bed 

Higher end costs include a major operating theatre and a larger hospital 
area per bed 

School 

$27,000 to $35,000 per 
student 

Secondary schools tend to be larger and more centralised than primary 
schools 

House (each) 

$585,000 to $850,000 

Single- or double-storey house, 325 m2 

Unit (each) 

$230,000 to $395,000 

Residential unit (townhouse), 90 to 120 m2 

Offices 

$2400 to $3450 per m2 

1 to 3 storeys, outside central businesses district 



 
The demand for community services is growing, both from population increases in Australia and 
rising community expectations. New infrastructure would be built to service that demand, 
irrespective of any development in the Victoria catchment. However, if new irrigation projects 
encourage people to live in the Victoria catchment, this could then shift the locations at which 
some services would be delivered and the associated infrastructure built. The costs of delivering 
services and building infrastructure are generally higher in very remote locations like the Victoria 
catchment. The net cost of any new infrastructure built to support development in the Victoria 
catchment is the difference in the cost of shifting some infrastructure to this very remote location 
(rather than the full cost of the facilities (Table 6-17), which would otherwise have been built 
elsewhere). 


6.5 Regional-scale economic impact of irrigated development 

New irrigated development in the Victoria catchment could provide economic benefits to the 
region in terms of both increased economic activity and jobs. The size of the total economic 
benefit experienced would depend on the scale of the development, the type of agriculture that 
was established, and how much spending from the increased economic activities occurred within 
the region. Regional economic impacts are an important consideration for evaluating potential 
new water development projects. 

It was estimated that each million dollars spent on construction within the Victoria catchment 
would generate an additional $1.06 to $1.09 million of indirect benefits ($2.06 to $2.18 million 
total regional benefits, including the direct benefit of each million dollars spent on construction). It 
was estimated that each million dollars of direct benefit from new agricultural activity would 
generate an additional $0.46 to $1.82 million in regional economic activity (depending on the 
particular agricultural industry). 

The full, catchment-wide impact of the economic stimulus provided by an irrigated agriculture or 
aquaculture development project extends far beyond the impact on those businesses and workers 
directly involved in either the short term (construction phase) or the longer term (operational 
phase). Businesses directly benefiting from the project would need to increase their purchases of 
the raw materials and intermediate products used by their growing outputs. Should any of these 
purchases be made within the surrounding region, this would provide a stimulus to those 
businesses from which they purchase, contributing to further economic growth within the region. 
Furthermore, household incomes would increase as a result of the employment of local residents 
as a consequence of the direct and/or production-induced business stimuli. As a proportion of this 
additional household income would be spent in the region, economic activity within the region 
would be further stimulated. Accordingly, the larger the initial amount of money spent within the 
region, and the larger the proportion of that money re-spent locally, the greater the overall 
benefits that would accrue to the region. 

The size of the impact on the local regional economy can be quantified by regional economic 
multipliers (derived from I–O tables that summarise expenditure flows between industry sectors 
and households within the region): a larger multiplier indicates larger regional benefits. These 
multipliers can be used to estimate the value of increased regional economic activity likely to flow 
from a stimulus to particular industries, focusing on construction in the short term and various 
types of agriculture in the longer term. 

It is also possible to estimate the increase in household incomes in the region, and then estimate 
the approximate number of jobs represented by the increased economic activity, including both 
those directly related to the increase in agriculture and those generated indirectly within other 
industries in the region. 

Not all expenditure generated by a large-scale development will occur within the local region. The 
greater the leakage (i.e. the amount of direct and indirect expenditure occurring outside the 
region), the smaller the resulting economic benefit enjoyed by the region. Conversely, the greater 
the retention of the initial expenditure and subsequent indirect expenditure within the region, the 
greater the economic benefit and the number of jobs created within the local region. However, a 
booming local economy can also bring with it a number of issues that can place upward pressure 


on prices (including materials, houses and wages) in the region, negating some of the positive 
impacts of the development. If some of the unemployed or underemployed people within the 
Victoria catchment could be engaged as workers during the construction or operational phases of 
the development, this could reduce pressure on local wages and reduce the leakage resulting from 
the use of fly-in fly-out (FIFO) or drive-in drive-out (DIDO) workers, retaining more of the benefit 
from the project within the local region. However, the current low unemployment rate within the 
Victoria catchment (Chapter 3) suggests there may be difficulties in sourcing local workers from 
within the region. 

The overall regional benefit created by a particular development depends on both the one-off 
benefits from the construction phase and the ongoing annual benefits from the operational phase. 
The benefits from the operational phase may take a number of years to reach the expected level, 
as new and existing agricultural enterprises learn and adapt to make full use of the new 
opportunities presented by the development. It is important to note that the results presented 
here are based on illustrative scenarios incorporating broad assumptions, are derived from an I–O 
model developed for an I–O region that is much larger than the Victoria catchment study area, and 
are subject to the limitations of the method. 

6.5.1 Estimating the size of regional economic benefits 

To develop regional multipliers for the Victoria catchment, it was necessary to use the available 
information and models for the Victoria catchment I–O region. Two I–O models were used, one 
covering the whole of the NT (Murti and NT Office of Resource Development, 2001) and one based 
on the adjacent catchment of the Daly River (Stoeckl et al., 2011) (Figure 6-5). For more details, 
see the companion technical report on agricultural viability and socio-economics (Webster et al., 
2024). 

Additional data are presented to show how the economic circumstances of the Victoria catchment 
compare with those of the two I–O regions (Table 6-18). The Daly I–O region is more similar in 
some characteristics to the larger NT I–O region than to the Victoria catchment. However, any 
benefits of development in the Victoria catchment are likely to spill over into the NT’s capital, 
Darwin, and would be captured in the larger NT I–O model. Typically, smaller and more remote 
geographic areas have smaller I–O multipliers, as inter-industry linkages tend to be shallow and 
the area’s capacity to produce a wide variety of goods is low, meaning that inputs and final 
household consumption are less likely to be locally sourced than in regions with larger urban 
centres (Stoeckl and Stanley, 2009; Jarvis et al., 2018). 


 

Extent of regional input models map
\\FS1-CBR.nexus.csiro.au\{lw-rowra}\work\5_Agriculture_economics\2_Victoria\1_GIS\1_Map_docs\Se-V-506_Map_Australia_and_economic_regions_v1.mxd
For more information on this figure please contact CSIRO on enquiries@csiro.au
Figure 6-5 Regions used in the input–output (I–O) analyses relative to the Victoria catchment Assessment area 

 

Table 6-18 Key 2021 data comparing the Victoria catchment with the related I–O analysis regions 

 

VICTORIA CATCHMENT† 

DALY CATCHMENT I–O REGION† 

NT I–O REGION‡ 

Land area (km2) 

82,232.0 

53,088.5 

1,348,094.3 

Population 

1,600 

11,233 

232,605 

Percentage male 

50.35% 

51.56% 

50.53% 

Percentage Indigenous 

74.68% 

32.29% 

26.27% 

Median age 

25 

32 

33 

Median household income 

$57,026 

$104,505 

$107,172 

Contribution of agriculture, 
forestry and fishing to 
employment in the region 

29.2% 

6.6% 

2.3% 

Major industries of employment – top three industries in region (by % of employment 2021) 

Largest employer in region 

Agriculture, forestry and 
fishing 

Public administration and 
safety 

Public administration and 
safety 

2nd largest employer in 
region 

Public administration and 
safety 

Health care and social 
assistance 

Health care and social 
assistance 

3rd largest employer in 
region 

Education and training 

Education and training 

Education and training 

Gross value of total 


$110 million 

$93 million 

$746 million 



† Statistics for Victoria catchment (ABS, 2021) and Daly catchment (ABS, 2021) regions have been estimated using the weighted mean of ABS 2021 
census data obtained by SA2 statistical region, with weighting based on the proportion of relevant ABS SA2 statistical regions falling within each 
catchment region. 
‡ ABS 2021 census data (ABS, 2021). 
§ ABS Value of agricultural commodities produced 2020–21 by region, report VACPDCASGS202021 (ABS, 2022). 


There are wide variations in the size of the multipliers for various industries within the NT and 
Daly I–O regions. Industries with larger local regional multipliers would be expected to benefit 
more from development within the I–O region. For example, agricultural industries generated 
smaller multipliers than construction for both I–O models. However, a simple comparison of I–O 
multipliers can be misleading when considering the different benefits from regional investment, 
because some impacts provide a short-term, one-off benefit (e.g. the construction phase of a new 
irrigation development) while others provide a sustained stream of benefits over the longer term 
(e.g. the production phase of a new irrigation scheme). A rigorous comparison between specific 
regional investment options would require NPVs of the full cost and benefit streams to be 
calculated. 

6.5.2 Indirect benefits during the construction phase of a development 

Initially, building new infrastructure (on-farm and off-farm development, including construction of 
related supporting infrastructure, such as roads, schools and hospitals) comes at a cost. But the 
additional expenditure within a region (which puts additional cash into people’s and businesses’ 
pockets) would increase regional economic activity. This creates a fairly short-term economic 
benefit to the region during the construction phase, provided that at least some of the 
expenditure occurs within the region and is not all lost from the region due to leakage. 

The regional impacts of the construction phase of potential developments were estimated using a 
scenario approach for the scales of development. The analyses modelled regional impacts for five 
different indicative sizes of developments in the Victoria catchment. Total capital costs, including 
costs of labour and materials required by the project, ranged from $250 million to $2 billion. The 
smallest scale of development in Table 6-19, with a capital cost of $250 million, broadly represents 
approximately 20 new farm developments with their own on-farm water sources enabling 
approximately 10,000 ha of irrigation for horticulture and broadacre farming (based on costing 
information from the companion technical report on agricultural viability and socio-economics 
(Webster et al., 2024)). The second-smallest scenario, with a $500 million capital cost, could 
represent a similar development to the first but with 20,000 ha of new irrigated farmland; this 
level of investment could also include a new processing facility (such as a cotton gin) required by 
(and supported by) this scale of agricultural development. Alternatively, the $500 million 
development could represent a large off-farm water infrastructure development (e.g. see Table 6-
2) and related farm establishment costs. The larger scales of development, at $1 billion or 
$2 billion, shown in Table 6-19, indicate outcomes from combining potential developments in 
various ways (such as one large off-farm dam and multiple on-farm water sources). They also 
include investment in indirect supporting infrastructure across the region, such as roads, 
electricity and community infrastructure (see indicative costs in Section 6.4.3). 

The proportion of expenditure during the construction phase that would be spent within the 
region depends on the types of costs, including labour, materials and equipment. It is likely that 
wages would be paid to workers sourced both from within the region and from elsewhere. The 
likely proportion of labour costs for each source of workers would depend on the availability of 
appropriately skilled labour within the region. For example, a highly populated region (more than 
100,000 people) with a high unemployment rate (more than 10%) and skilled labour force is likely 
to be able to supply a large proportion of the workers required from within the region. However, a 










sparsely populated region like the Victoria catchment is more likely to need to attract many 
workers from outside the region, either on a FIFO or DIDO basis or by encouraging migration to 
the region. Similarly, some regions may be better able to supply a large proportion of the required 
materials and equipment from within the region, whereas construction projects in other locations 
may not be able to source what they need locally and instead need to import a significant 
proportion into the region from elsewhere. The low representation of the required supplying 
industries in the Victoria catchment means that most construction supplies would be likely to be 
sourced from other parts of Australia (and internationally). 
A review of five large dam projects across the country showed that the proportions of local 
construction expenditure sourced within a region (as opposed to being imported, with no impact 
on the local regional economy) varied significantly. Thus, the analyses considered three levels for 
the proportion spent locally: 65% (i.e. low leakage), 50%, and 35% spent locally (i.e. high leakage). 
However, note that leakage might be higher (i.e. <35% spent locally) for a very remote region like 
the Victoria catchment. In cases of high leakage, the knock-on benefits would instead occur in the 
regions supplying the goods and services (such as in the wider NT I–O region). 
Table 6-19 shows estimates of the regional economic benefit for the construction phase of a new 
development for four scales of scheme capital cost ($0.25 billion to $2 billion) and the three levels 
of leakage described above. These results show that the size of the regional economic benefit 
experienced increases substantially as the proportion of scheme construction costs spent within 
the region increases. Given the low urban development within the Victoria catchment and its 
proximity to Darwin, leakage may be towards the high end of the range examined for the Victoria 
catchment (but to the middle of the range for the NT I–O region, which includes Darwin). For 
example, if $500 million was spent on construction for a new dam project and 35% of that was 
spent within the Victoria catchment (and 50% with the wider NT I–O region), the construction 
multiplier would only apply to the portion spent locally. This would give an overall regional 
economic benefit of $380 million within the Victoria catchment based on the Daly I–O model 
estimate (or $520 million for the wider NT region based on the NT I–O model estimate). Additional 
benefits would flow to other regions receiving the remaining funds. 
Table 6-19 Regional economic impact estimated for the total construction phase of a new irrigated agricultural 
development (based on two independent I–O models) 
Estimates represent an upper bound, because some assumptions of I–O analysis are violated in the case of such a 
large public investment in a region where existing irrigated agricultural activity is so low. Leakage to other regions and 
other countries is accounted for by reducing the proportion of expenditure (and benefits) within the I–O region. 
I–O = input–output. 

DEVELOPMENT CAPITAL 
COST ($ billion) 

TOTAL REGIONAL ECONOMIC ACTIVITY WITHIN I–O REGION AS A RESULT OF THE CAPITAL COST OF THE 
DEVELOPMENT ($ billion) 



Victoria catchment based on NT 
IO dl

Victoria catchment based on Daly catchment 
IO dl



Proportion of total scheme-scale capital cost made locally within the I–O region 



65% 

50% 

35% 

65% 

50% 

35% 

0.250 

0.33 

0.26 

0.18 

0.35 

0.27 

0.19 

0.500 

0.67 

0.52 

0.36 

0.71 

0.55 

0.38 

1.000 

1.34 

1.03 

0.72 

1.42 

1.09 

0.76 

2.000 

2.68 

2.06 

1.44 

2.83 

2.18 

1.53 




6.5.3 Indirect benefits during the operational phase of a development 

Regional impacts of irrigation development on the two I–O regions are presented for scenarios 
using four indicative scales of increase in GVAP ($25, $50, $100 and $200 million per year, 
indicative of potential outcomes). At the low end ($25 million/year), this could represent 
10,000 ha of new plantation timber, while the high end ($200 million/year) could represent 
10,000 ha of mixed broadacre cropping and horticulture (based on farm financial estimates for the 
various crops presented in Chapter 4), with other crop options falling in between. Estimated 
regional impacts are shown as the total increased economic activity (Table 6-20) in the NT and 
Daly I–O regions and the associated estimated increases in incomes and employment (Table 6-21) 
for each category of agricultural activity (beef cattle, agriculture excluding beef cattle, and 
aquaculture, forestry and fishing for the NT I–O model; and agriculture of all types for the Daly I–O 
model). 

As can be seen from the economic impacts (Table 6-20), an irrigation scheme that promotes 
aquaculture, forestry and fishing could have a larger regional impact in the NT I–O region than a 
scheme promoting beef cattle or agriculture excluding beef cattle. These differences result from 
the various industry multipliers estimated for the NT I–O. 

Table 6-20 Estimated regional economic impact per year in the Victoria catchment resulting from four scales of 
direct increase in agricultural output (rows) for the different categories of agricultural activity (columns) from two 
I–O models 

Increases in agricultural output are net of the annualised value of contribution towards the construction costs. 
Estimates represent an upper bound because some assumptions of I–O analysis are violated in the case of such a large 
public investment in a region where existing agricultural activity is so low. Leakage to other regions and other 
countries is accounted for by reducing the proportion of expenditure (and benefits) within the I–O region. 

DIRECT INCREASE IN 
AGRICULTURAL OUTPUT PER 
YEAR NET OF CONTRIBUTION 
TO CONSTRUCTION COSTS 

($ million) 

TOTAL ANNUAL VALUE OF INCREASED ECONOMIC ACTIVITY IN I–O REGION– DIRECT, PRODUCTION-INDUCED AND 
CONSUMPTION-INDUCED 

($ million) 



Victoria catchment based on NT I–O model 

Victoria catchment 
based on Daly 
catchment I–O 
model 



Type of agricultural development 



Beef cattle 

Agriculture excluding 
beef cattle 

Aquaculture, forestry 
and fishing 

Agriculture of all 
types 

25 

51 

37 

70 

51 

50 

103 

73 

141 

102 

100 

205 

146 

282 

203 

200 

411 

292 

563 

406 






Table 6-21 Estimated impact on annual household incomes and full-time equivalent (FTE) jobs within the Victoria 
catchment resulting from four scales of direct increase in agricultural output (rows) for the various categories of 
agricultural activity (columns) 

Increases in agricultural output are assumed to be net of the annualised value of contributions towards the 
construction costs. Estimates are based on Type ll multipliers determined from two independent I–O models for each 
year of agricultural production. Estimates represent an upper bound, because some assumptions of I–O analysis are 
violated in the case of such a large public investment in a region where existing agricultural activity is so low. Leakage 
to other regions and other countries is accounted for by reducing the proportion of expenditure (and benefits) within 
the I–O region. 

DIRECT INCREASE IN 
AGRICULTURAL OUTPUT PER 
YEAR NET OF ANY 
CONTRIBUTION TO 
CONSTRUCTION COSTS 
($ million) 

TOTAL ANNUAL VALUE OF INCREASED ECONOMIC ACTIVITY IN I–O REGION 
– DIRECT, PRODUCTION-INDUCED AND CONSUMPTION-INDUCED 
($ million or FTE) 



Victoria catchment based on NT I–O model 

Victoria catchment based on Daly 
catchment I–O model 



Type of agricultural development 



Beef cattle 

Agriculture 
excluding beef 
cattle 

Aquaculture, forestry 
and fishing 

Agriculture of all types 



Additional incomes expected to flow to Indigenous households from development ($ million) 

25 

0.8 

0.1 

0.9 

0.5 

50 

1.6 

0.2 

1.7 

1.0 

100 

3.3 

0.4 

3.4 

2.0 

200 

6.5 

0.8 

6.8 

4.0 



Additional incomes expected to flow to non-Indigenous households from development ($ million) 

25 

7.1 

1.7 

14.3 

6.75 

50 

14.2 

3.3 

28.7 

13.5 

100 

28.4 

6.7 

57.4 

27.0 

200 

56.8 

13.4 

114.7 

54.0 



Additional jobs estimated to be created (FTE) 

25 

108 

24 

206 

98 

50 

215 

48 

413 

197 

100 

430 

97 

825 

394 

200 

860 

193 

1,650 

788 



The results for employment (Table 6-21) are closely related to those for impacts on regional 
economic activity, but the two measures do reveal some differences. Additional FTE jobs arising in 
the region may require additional community infrastructure (e.g. schools, health services) if 
workers move to fill these jobs from other parts of the country, resulting in population growth. 
However, additional infrastructure would not be necessary should these additional jobs be filled 
by currently unemployed or underemployed local people. Estimates of the expected increases in 
incomes were divided between Indigenous and non-Indigenous households, using methods 
outlined in Jarvis et al. (2018), with most increases expected to flow to non-Indigenous households 
(Table 6-21). 


For example, if new irrigation development in the Victoria catchment directly enabled an extra 
$100 million of cropping output per year, the region could benefit from an extra $146 million (NT 
I–O estimate) to $203 million (Daly I–O estimate) of economic activity recurring annually (Table 6-
20) and generate approximately 100 to 852 new FTE ongoing jobs, depending on the type of 
agriculture (Table 6-21). 

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ABS (2022) Value of agricultural commodities produced, Australia 2021–22. Australian Bureau of 
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AIHW (2023) Australia’s hospitals at a glance: web report. Australian Institute of Health and 
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Devlin K (2024) Conceptual arrangements and costings of hypothetical irrigation developments in 
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Jarvis D, Stoeckl N, Hill R and Pert P (2018) Indigenous land and sea management programs: can 
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NWGA (National Water Grid Authority) (2022) National Water Grid investment framework. 
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