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Abstract
The prolonged drought from 2006–07 to 2008–09 in south-eastern Australia presented
severe difficulties for dry-land and irrigation farmers in the southern Murray-Darling
basin. A dynamic multi-regional computable general equilibrium model (TERMH2O)
is used to estimate the economy-wide small region impacts during and after
drought. Drought reduces real GDP in some small regions by up to 20 per cent. Irrigation
water trading and farm factor movements alleviate losses. The drought results in
an estimated 6000 jobs being lost across the southern basin. Depressed farm investment
during drought results in farm capital not returning to baseline levels after
drought. Consequently, job numbers in 2017–18 remain 1500 below forecast in the
southern basin.