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Abstract
This paper analyses the role of government failure in Victoria’s water sector between
1905 and 1984 as evidenced in the rise of in-stream salinity. It will be shown that high
levels of salinity can, in part, be attributed to regulatory failure for two reasons. First,
the method of water allocation, a compulsory minimum charge with the marginal cost
of water being zero, encouraged over watering, resulting in increased water tables via
groundwater recharge. Second, the government did not provide adequate finance for
construction of appropriate removal of saline drainage water, and thereby allowed
increasing in-stream salinity.