Business Environment Profiles - Australia
Published: 29 April 2025
Agriculture irrigation water use
4 Megalitres per hectare
2.1 %
This report analyses the usage of irrigation water in Australian agriculture, measured in megalitres of irrigation water used per hectare of agricultural land. This measure is known as the water application rate. The data for this report is sourced from the Australian Bureau of Statistics and is displayed in financial years.
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IBISWorld forecasts agriculture irrigation water use to rise by 5.1% in 2024-25, to an application rate of 4.1 megalitres per hectare. Major crops in Australia that are heavily reliant on irrigation water include cotton, grapes, rice, and almonds. Other crops like wheat and coarse grains are not reliant on irrigation water, but benefit from some use of irrigation, especially during periods of low rainfall. Rising planted areas of cotton and almonds is expected to boost irrigation water use. Furthermore, declining rainfall during the year is increasing reliance on irrigation water.
The use of irrigation water is heavily dictated by changes in the level of annual rainfall. When rainfall levels are low, farmers turn to irrigation water to fill this shortfall. However, below-average rainfall also tends to result in reduced river flows. As a result, low rainfall can also restrict irrigation water usage as farming enterprises have less water to draw upon. The Murray-Darling Basin Authority, which is responsible for managing water in the Murray-Darling Basin, can reduce the amount of water that farmers can take from rivers in the basin depending on rainfall levels. Consequently, the application rate reports high volatility from year-to-year.
Irrigation water use is also influenced by the price farmers are required to pay to extract water. Farmers in the Murray-Darling Basin can obtain water for irrigation purposes by purchasing water licences. These licences stipulate a water allowance in megalitres, with the annual extraction allowance being approved at the start of each financial year. This annual allowance is stated as a percentage of the licence volume, which is determined based on water availability. For instance, when water availability is low, farmers may only receive 25% of their licence volume. Water licence prices rise and fall inversely with water availability. Although irrigation water tends to grow as a share of total water applied on farms during times of drought, the application rate tends to increase during periods of above-average rainfall, via a combination of greater availability and lower prices.
In addition to annual rainfall levels influencing water extraction volumes, government departments have the ability to increase or reduce the amount of water that is extracted for irrigation purposes. For example, Murray-Darling Basin Authority, which is an independent statutory agency, introduced sustainable diversion limits (SDLs) in the Murray–Darling Basin as part of its Basin Plan in 2019. These SDLs limit the amount of water that is extracted from the Murray–Darling Basin, which is the major source of irrigation water, with the aim to keep rivers and the environment healthy. However, the effect of SDLs is expected to be more than offset by above-average rainfall over the two years through 2021-22. Overall, IBISWorld forecasts that agriculture irrigation water use will rise at a compound annual rate of 2.1% over the five years through 2024-25.
IBISWorld forecasts agriculture irrigation water use to fall by 2.4% in 2025-26, to an applicatio...
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