Labor to raise water prices

Water, an increasingly more scarce resource in Australia, has been placed under government control in order to conserve as much as possible. The government has limited hours in which consumers can use water for activities that are non-essential, such as washing cars or watering the garden. In addition to this control, governments have now begun to place higher prices on water to reflect its scarcity and thus forcing farmers to allocate water to higher efficiency crops as apposed to lower efficiency crops.
Farmers in Australia will now have to charge higher prices for their goods because the decrease in water is now being viewed as an externality and farmers have to pay for it by producing only high efficiency crops or paying higher prices for the creating this externality. This negative externality has been created by an overallocation of resources and in order to address this problem, the government is attempting to reduce this overallocation. Farmers are likely to make less profit, particularly if their prices become higher in comparison to imported goods. Farmers supply curve will shift outward to the social optimum and removing the social cost of using water as seen in the diagram below.
Although food prices may increase due to the increased price and limitation of the crop farmers can grow, this change is longer overdue, and will correct the problem efficiently. This resolve is more in favor of society because water is preserved, and farmers, overall make a loss or significantly decreased profits because of the increased cost of factors of production of their goods and the limitation of what goods they can actually produce.