June 2010

The Nation Reviewed

Water policy

By Mark Aarons
Illustration by Jeff Fisher.

When Malcolm Turnbull announced his retirement from politics in April, he trumpeted his achievement of “a truly revolutionary reform of the way water is managed in Australia”. He rightly referred to the decades of “state run mismanagement of the waters of the Murray–Darling Basin”, but falsely boasted of taking it “out of the too hard basket and placing it under federal jurisdiction where it should always have been”.

The prime minister would beg to differ. In March 2008, Kevin Rudd proclaimed that he had “for the first time” put in place “a co-operative and accountable governance arrangement, which will enable genuine whole of Basin water management to restore the environment and ensure sustainable agriculture in the future”.

As he temporarily left the stage, Turnbull savaged Rudd for not doing “enough to carry through and implement” his reform by failing “to invest enough in water saving infrastructure as opposed to simply buying back water entitlements”. This would have surprised the Productivity Commission, which in March had unequivocally concluded that spending on such infrastructure was considerably less cost-effective than purchasing water on the open market in order to restore sustainable flows. The Commission is supported by rigorous Treasury analysis.

Behind Turnbull’s egotism and Rudd’s spin lies a sad truth for the Basin’s rivers and the communities that depend on them for their livelihoods and everyday needs: neither man deserves the mantle of ‘saviour’ of our iconic rivers. However, both have made significant, if incremental, contributions towards fixing the problems bequeathed by successive state governments, which bled the system dry and brought it to the point of collapse.

Past mistakes are easy to identify: massive over-allocation of water to irrigation and agriculture, especially during the second half of the twentieth century, an abnormally ‘wet’ period that encouraged wildly unrealistic increases in consumption. Shockingly, much of this over-allocation went to entirely inappropriate, water-hungry industries, especially cotton, rice and ever-expanding grazing, well beyond the Basin’s sustainable yield. The state water and agriculture ministers who made these decisions and then refused to recognise their blunders have left an almost impossible task for today’s managers.

From his appointment in 2007 as John Howard’s water minister, Turnbull oversaw the National Water Initiative (which Rudd has largely implemented as his own). Though a significant step in rectifying mismanagement, it was a flawed blueprint. Turnbull’s criticism of Labor’s record is well made, but not for the reason he gives.

The Labor government’s plan, Water for the Future, depends on three linchpins: the states ceding their parochial (and destructive) management arrangements to national control; the diversion of water to natural systems through massive expenditure on infrastructure upgrades, supposedly to improve efficiency; and large-scale purchases of privately held water entitlements on the open market. The government has budgeted $12.9 billion, but there will be considerable waste unless the plan is substantially revised.

The scientific evidence is clear, as outlined by the Wentworth Group of Concerned Scientists: on average the Basin requires the return of some 4000 gigalitres of water to ensure system-wide environmental health. That is, 4000 billion litres need to be diverted from industry to the environment (or enough to fill around 1.6 million Olympic-sized swimming pools).

The government has commenced spending the $3.1 billion allocated for water purchases. The entitlements purchased so far will eventually return 545 gigalitres; 670 gigalitres had already been returned through previous initiatives, including the Living Murray program. That leaves a massive shortfall of almost 3000 gigalitres, clearly exposing the plan’s shortcomings.

At the March 2008 Council of Australian Governments meeting, Rudd convinced the states to transfer their powers to the Murray–Darling Basin Authority, retaining only advisory responsibilities. The authority is soon to release its draft Basin Plan; the final plan will be implemented in 2011, well into Rudd’s second term (assuming his re-election). This is hardly a rapid response to a catastrophe that has been apparent for at least a decade, especially as there are numerous pre-existing scientific studies available to inform the process. Indeed, we have known what needs to be done for years; all that has been lacking is the political will.

But whatever the final shape of the plan, the government is committed to spending that will inevitably distort the outcome. In short, the process has been stood on its head: instead of designing the budget to achieve the plan’s aims, spending has been committed in a manner that pre-empts the final course of action.

Assuming that the plan is largely based on the prevailing science, it must conclude that a significant industry restructure is required to assist inefficient industries, irrigators and farmers to permanently exit, while providing alternative employment for affected local communities. Yet the government has promised $5.8 billion for infrastructure upgrades to improve efficiency, a major carrot in enticing the states to sign up to the national approach (notably Victoria, which was bribed with an extra $1 billion to secure its participation).

Planning for this mammoth public subsidy to existing industries is well advanced, with the states currently developing bids allegedly to appease irrigators and farmers. But the plan should include the exit of many of the players this infrastructure spending looks likely to assist. If the government permits such projects to be funded before the final plan is in place, it will lock in inefficient players for decades to come.

It would therefore be prudent for the government to put infrastructure development on hold until the plan is finalised. Much of the money allocated should then be redirected to a structural adjustment fund and the rest spent on targeted infrastructure improvements for those sections of industry that will continue to produce vital resources, such as food and fibre. This approach is tried and tested; governments have successfully restructured many industries in recent decades. In the primary industry sector, this has included forestry and fishing. Much is known about the principles of how to conduct complex environmental and socio-economic adjustments. We know that spending public money in well-designed structural adjustment packages is an efficient means of assisting not merely industry and workers, but also of sustaining affected communities by creating ongoing employment, while ameliorating the environmental messes created by our forebears.

Rudd’s minister for climate change, energy efficiency and water, Penny Wong, quickly dismissed the Productivity Commission’s sober analysis of the most cost-effective way to spend the Murray–Darling Basin money. This is not encouraging. The government has only one opportunity to ensure the future health of this precious river system. The pressures are enormous: no one likes large-scale restructures of the kind needed, and many voices are declaring that the drought has finally broken and we can return to business as usual.

The prime minister needs to act boldly. Most importantly, he must unequivocally reject a return to past practices. The evidence suggests that, at best, the river system will return to the pre-1950 norms of water flows; more likely, it faces a fundamental re-adjustment as climate change impacts our dry continent. Kevin Rudd has too much invested, personally and politically, in the moral and economic imperatives of fighting global warming to persist with Turnbull’s flawed agenda.

Mark Aarons
Mark Aarons is the author of The Family File and War Criminals Welcome: Australia, a Sanctuary for War Criminals Since 1945. From 1996 to 2006 he was a senior adviser to the NSW Labor government.

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