Irrigator preferences for water recovery budget expenditure in the Murray-Darling Basin, Australia

•Different policies are used in the Murray-Darling Basin to recover environmental water.•We examine irrigator preferences for those policies to compare with existing approaches.•Preferences for capital works are lower, and targeted trade higher, than perceived.•Increasing capital work cost may be explained by diminishing marginal returns.•Reallocation of recovery budget may increase social welfare and water recovery. This study presents results from a survey of southern Murray-Darling Basin irrigators about the percentage of funds they would allocate towards a variety of current and hypothetical trade-off choices for recovering environmental water. The findings, allowing for state-based differentials, suggest irrigators marginally prefer infrastructure expenditure above the sum of a set of market-based options (namely water entitlement purchasing, temporary water market products and exit-based packages). However, their infrastructure preference weighting is less than current budget expenditure, and use of market-based options has higher support from irrigators than current policy recognises. Further, analysis of past and current infrastructure and market-based water recovery expenditures reveals large price-per-megalitre disparities, which may be explained by diminishing marginal returns. Targeting expenditure in line with preferences of irrigators may result in increases in economic efficiency.