CEDA have proposed a gradual extension of the age at which you qualify for the pension from 65 to 67. What with all that hard policy lifting that Peter Costello’s been doing on behalf of intergenerational equity (at the same time as lining the pockets of the country’s aged superannuation policy holders, it’s surprising he didn’t take that next bold step and increase the pension age. The ALP did it (I’m pretty sure – then again I think it was the ALP that lowered the pension age also – under Whitlam). I wonder if the Fraser Government increased it – I don’t think so.
And John Quiggin proposes something that seems very smart to me.
My proposal is the purchase of renewal or reversion rights. The idea is that holders of water rights would be offered a payment now, in return for which those rights would be returned to the public at some point in the future, say ten years from now.
Such a delay would have a number of advantages. Most obviously, farmers facing financial stress as a result of severe drought conditions would receive an immediate cash payment, which could be used to repay debt and finance new investments. By allowing farmers a substantial period of time to plan for reduced water allocations or a shift out of irrigated agriculture, purchase of reversion rights would reduce the adjustment costs. More significantly perhaps, the increased predictability of future demand would facilitate planning of investment in irrigation infrastructure and thereby mitigate the problem of stranded assets.
The same considerations imply that the delayed repurchase plan would be fairly cost-effective for the public. Comparison of prices for temporary and permanent trades of water suggests that the value attached by irrigators to rights is higher in the short run than some years in to the future (Quiggin 2006).
The main drawback with the proposal is the delay in resolving the problem of allocation, in restoring adequate environmental flows, and in allowing urban water users access to a relatively low cost source of water. This is, I believe, a manageable problem. While the need for additional environmental flows is acute in some locations, other problems such as increasing salinity levels are projected to develop over a longer period. Hence, under a policy that allowed for a gradual, predictable increase in the allocation available to the environment, acute needs could be addressed first, and other needs later.
Though he draws implicit attention to the high discount rates that irrigators would apply to the transaction in the second quoted para, he doesn’t draw attention to the other side of the ledger – which is the low discount rates that governments could apply- the ten year bond rate. So it’s a very efficient trade of a long term asset from one party that doesn’t value it much, to one that is in a position to value it very highly.
And remember – you read about it first on Troppo. Well perhaps second. But then the spell checker wanted me to change ‘irrigators’ to ‘alligators’ – which gives you some idea of how hard it is to get hired help around here.