The Mildura Older Irrigation Areas (MOIA) cover almost 14,000 ha of horticultural land, comprised of the
three irrigation (or pump) districts of Mildura, Merbein and Red Cliffs. The MOIA's approximately
1,700 farm properties, which currently average around 8 hectares, are slowly consolidating into larger
land holdings. Nonetheless, they remain much smaller in size generally than horticultural properties
in the broader region, due to the original subdivision pattern.
The scale of business operations in the MOIA is oriented towards small and medium sized businesses,
with few large-scale (greater than 20ha) businesses. Nonetheless, the larger businesses manage up to 50%
of the land area and generate up to 65% of the gross value of production. The superior productivity of the
larger scale operations and the productivity constraints on smaller scale operations have been recognised
in research about the region.(1)
Grapevines are the MOIA's primary crop type and the grapes are primarily used for wine. Consequently,
the Horticulture & Fruit Growing industry (the largest employer in the local area), and the Beverage & Malt
Manufacturing and Fruit & Vegetable Processing industry are of vital importance to the local economy.
The MOIA's long term viability as a horticultural region has been under threat on a number of fronts, including
drought, commodity prices and encroaching residential development. Contrary to the general trends in
regional areas, Mildura is growing as it consolidates as a regional centre servicing a large, agricultural hinterland.
This growth has been accommodated in Mildura's expanding urban footprint: however the MOIA has also
featured prominently as people wish "to live amongst the vines".
Residential encroachment in the MOIA has contributed to significant amounts of horticultural land being
removed from cropping over the last decade, and continues to threaten the long term viability of horticulture.
The combined impact of residential encroachment and drought is evident in the loss of over 1,100 ha of
horticultural land between 1997 and 2006 in the MOIA, with permanent plantings being affected to a greater
extent than seasonal plantings.
The Broader Horticultural Region
The MOIA rests within a broader horticultural region which
extends from Boundary Bend, or Nyah depending on the
definition adopted, west to the South Australian border.
Horticultural activity north of the Murray River and extending
north up the Darling River from Wentworth to Pooncarie is
also an integral part of regional horticultural activities.
The region acts as the national centre for wine grape
production, wine manufacturing and packaging. It also
produces the bulk of Australia's dried vine fruit and table
grapes, and contributes significantly to domestic citrus
production.
The broader region includes about 2,500 farm properties with an average cropped area of 22 ha. It is heavily
oriented towards grapevines, two thirds of which are used for wine, with table and dried grapes making up
the remainder. Cropped area is expanding rapidly, with the vast bulk of new irrigation development occurring
in Boundary Bend, Wemen, Nangiloc and Colignan - while in the older irrigation or pump districts, significant
tracts of land are being removed from horticultural production. The broader region continues to become more
efficient in terms of irrigation methods and has also adjusted in that permanent and seasonal plantings are
now much more likely to be in low salinity impact zones, rather than the high impact zones.
Assessing the economic impact of future land use planning scenarios in the MOIA
In the past, land in the MOIA had tied with it a degree of ‘flexibility' regarding the potential for residential use,
resulting in housing and resident-serving infrastructure through the area, and inflated land values, (that is,
well beyond their horticultural use value). Both of these results have acted to constrain land consolidation
for horticultural purposes, and therefore limit the economies that can be derived from scale - a key prerequisite
for efficient horticultural production.
Recently, SGS examined the economic implications of potential changes to the rights to apply for further
subdivision, excision of lots, and new dwellings, in the MOIA. Two alternative planning assessment frameworks
were under consideration, both of which would result in a reduced potential for further development, but
impacting on different sized lots. The study was commissioned by the Mildura Rural City Council to inform
decisionmaking on future planning scheme amendments. The study was to pay particular attention to the
implications of future planning control scenarios on land values, and on overall activity levels within the MOIA
and the broader region.
The study
• Reviewed existing background information about the character of development, businesses and residents
within the MOIA and the wider area;
• Consulted with selected MOIA representatives and broader stakeholders/ experts to understand the dwelling
development scenarios that are likely to play out in future given Mildura's development context and
horticultural positioning;
• Formulated development scenarios for quantitative testing, reflecting the propensity of MOIA landowners for
horticultural or residential land uses in future;
• Used professional property valuation advice from valuers experienced in the local market, regarding the
impact of future planning regulations on dwelling development propensities and on the land values that
would result under alternative development scenarios; and finally,
• Constructed a regional econometric model enabling the estimation of the direct and indirect economic
impacts that are induced by each of the quantified development scenarios and experienced throughout
the broader horticultural region.
The study generated a variety of findings and conclusions, some of which are summarised below.
Drivers of economic impacts
Local consultations and feedback helped to establish key assumptions about future trends in the local
economy and land holding behaviour in the MOIA. These assumptions would govern the study's analysis
of impacts on land values and the economic impact analysis, identifying and scaling the economic impacts
attributable to the alternative planning assessment scenarios.
• There is likely to be continued development of horticultural activity in areas outside the MOIA, as these
areas are less constrained and therefore amenable to higher productivity. Nonetheless, irrigation water
availability is a key constraint to production, and any reduction in horticultural activity within the MOIA is
rightly regarded as a reduction in potential regional output.
• Within the MOIA itself, the larger and some medium scale operators will continue to seek to expand their
land holdings (preferably contiguous), though this may be hampered by physical barriers associated with
residential encroachment (e.g. houses), as well as higher land prices reflecting the implicit dwelling
development right that now is inferred.
• To the level that is permissible under regulation, small horticultural operators in the MOIA wishing to exit
the industry are likely to either sell their land and relocate, or sell their water rights and remain residents
at their current locations. In the latter case, exiting farmers will most likely wish to excise their dwellings
and sell a significant portion of their land. In both cases, the most likely buyers will be local farmers of
medium and large scale.
• The demand for rural living opportunities in the MOIA is limited. Moreover, this demand can be catered for
by the smaller land parcels in and on the periphery of the hamlets within the MOIA. As a result, any
constraint to dwelling development on rural land in the MOIA is unlikely to constrain regional construction
sector activity.
• While there are some amenity benefits associated with living in the rural lands within the MOIA, there are
also isolation disadvantages, i.e. distance from urban services. As a result, land primarily used for residential
purposes in the rural areas of the MOIA is priced, in relation to urban residential land, with an appropriate
discount for isolation and a negligible premium for larger lot size.
Land value impacts
The study examined how alternative future planning control scenarios would affect development opportunities
on lots of various sizes in different locations within the MOIA. The number of properties in lot size categories,
with and without dwellings and by locations, was estimated using a variety of GIS and other information sources.
Land value impacts (differences between values if a permit for development was available, versus not available)
were estimated for lots without dwellings, of various sizes and locations, drawing on relevant past sales
evidence from the local area. Conclusions on the total value impact within the MOIA could then be drawn.
Broader regional economic impacts
Economic impacts arise in two components - a direct impact and an indirect (or flow-on) impact, with total
impact being the sum of these two components. In essence, the direct impact arising from future planning
scenarios constraining development opportunities in the MOIA is an increase in horticultural production
brought on by enhanced farm consolidation rates. Indirect impacts to the economy also occur, as this
enhanced horticultural production induces farmers to buy more goods and services from regional suppliers
and as farm employees spend more of their profits/ wages regionally. In turn, the beneficiaries of this
increased regional spending consume more goods and services, and the money circulates around the
regional economy numerous times.
To measure the ‘indirect' or ‘flow-on' impact, an input-output table for Mildura was generated. This was
essentially a table which represents all the financial flows between industry sectors in the Mildura economy.
Outcomes in terms of regional production, regional Value Added, and horticultural employment, were
produced for each future planning control scenario.
Key findings
Studying the operation of land use and subdivision controls in this horticultural region has found that the
flexibility previously associated with the rights to apply for new dwelling, subdivision and existing dwelling
excision permits were acting as a strong disincentive for horticultural operators. The findings suggest that
by constraining residential development rights to apply and providing clear market signals about the
preference for horticultural use in the MOIA, a boost to regional horticultural production and improved
operator viability was likely. However, by conferring these benefits to horticulturalists there would be some
offsetting social equity considerations to consider.
Footnotes
1. RMCG, 2008. Mildura Older Irrigated Areas Rural Strategy, report prepared
for Mildura Rural City Council
2. In association with Regional Valuation Services (RVS)
3. ABARE (2007), Mildura-Wentworth: A case study of horticultural farm
performance, ABARE Research Report 07.6, Canberra.