Once upon a time Australian adults didn’t drink milk. They thought it was for babies, and roamed the countryside for tens of thousands of years without bottles, cartons, or other reservoirs of the stuff.
Then the newchums sailed in, and took over management of the place. They made consumption of milk in high volumes mandatory. The continent’s nipples were squeezed dry to provide it.
Extra people were imported to provide more consumers for those marketing it. So there is a shortage of milk now? Not to worry – the market must remain predominant! So we must maintain the nation’s steady increase in consumers. We will pipe whatever is needed from the Netherlands, or Denmark – they are swimming in the stuff, we are told.
The cow might be dry, but the market rules, OK?

Rojo, you say that “If it was economically feasible to get the water from Agricultural areas to cities it would be done. It would be a much greater return to the farmer.”

This is only partly true. Firstly, water supply is a natural monopoly – we can’t have dozens of competing suppliers running pipes down each street, so in effect I have no choice but to buy from a single supplier. If the supplier makes duff investment decisions or is over-regulated, I suffer.

Second, water is hedged around with lots of regulations. In WA some SW irrigators are allowed to trade with each other but not sell water to the Water Corporation. A key aquifer, the Gnagarra mound, is tapped “free” by horticulturalists and at discount prices by a large pine plantation as well as supplying much of Perth’s water. It’s stressed and over-used, but there’s no market mechanism for the low-value users to trade their entitlements with high-value ones, so it’s exploited excessively and inefficiently.

Rhian,

You said
Second, water is hedged around with lots of regulations. In WA some SW irrigators are allowed to trade with each other but not sell water to the Water Corporation. A key aquifer, the Gnagarra mound, is tapped “free” by horticulturalists and at discount prices by a large pine plantation as well as supplying much of Perth’s water. It’s stressed and over-used, but there’s no market mechanism for the low-value users to trade their entitlements with high-value ones, so it’s exploited excessively and inefficiently.

Im not sure what point you were trying to make but your example illustrates the author's point beautifully. When governments interfere with markets they cause inefficiencies and create opportunities for exploitation.