Murray-Darling plan: a disastrous process, a sliver of hope

That’s the headline on my Crikey article on the revised Proposed Basin Plan for the Murray Darling Basin. It’s over the fold.

The release of the revised proposed basin plan for the Murray-Darling brings us one step closer to the end of one of the most disastrously misconceived and mismanaged policy processes in Australian history. The process began in 2007 with John Howard’s decision to assert Commonwealth control over the waters of the Murray-Darling Basin, through the Water Act and the National Water Action Plan.

To be sure, the previous system of co-operative federalism, enshrined in the constitution as a result of South Australian concerns about maintaining navigation for paddle steamers, did not have a glorious track record. But a careful examination of that record suggests that this was not entirely the fault of recalcitrant state governments. The Commonwealth government had long been divided between advocates of a market-based policy, such as then water resources minister Malcolm Turnbull and opponents like parliamentary secretary to the PM, Gary Nairn.

To overcome the resistance of state governments, Howard relied on two expedients: the first a traditional tool of Commonwealth governments of both parties, and the second one that had previously been viewed with distaste by conservatives. The traditional expedient was a big bucket of money?—?$10 billion to spent on the basin with the majority being allocated for infrastructure upgrades. Much less traditional was reliance on the Commonwealth’s treaty power to legislate without the consent of the states. In this case, Howard relied on the RAMSAR convention, under which Australia promised to protect high-value wetlands.

This produced an absurd outcome where, as far as the law was concerned, environmental preservation trumped all other objectives. But this was a mere legal device: it did not reflect the political reality, or the actual position of the Commonwealth government. Certainly, Howard was far from being a committed environmentalist. The succeeding Labor government, while placing more weight on the environment, was keen to keep rural and regional voters onside, and was unlikely to treat their concerns as a matter of secondary importance.

Howard’s plan did little to convince voters, and when Labor came to power at the end of 2007 there was a shift in focus. Under the Water for the Future policy, the government began buying water rights from irrigators. This approach had obvious benefits for both parties. Water was restored to the environment at a much lower cost than would be achieved with infrastructure projects: around $2000 a megalitre for high security entitlements, delivered in all but the worst droughts, and around $1000/ML for less reliable general security entitlements. Irrigators got more for their water entitlements than they could have made if the government were not in the market, and the money they received could be invested as they chose, rather than being restricted to irrigation infrastructure.

The success of the buyback scheme and the routine cost blowouts associated with infrastructure boondoggles like Victoria’s Food Bowl Modernisation Project made it clear that there was no real need for a Basin plan or for any further irrigation infrastructure. The funds available under the plan were more than sufficient to restore 30% of the natural flows. Experience elsewhere, notably in the case of the Snowy, suggested that, regardless of the scientific evidence, the balance of political forces would eventually produce a settlement somewhere near 30%.

Meanwhile, however, the process of producing a plan under Howard’s Act rolled on. In substance, the reduction of 3000-4000 GL in the Sustainable Diversion Limit recommended by the Murray-Darling Basin Authority was not much different from the policy outcome that was already on the cards.

In preparing the plan, however, the MDBA took the view that its job, under the Water Act, was to say how much water had to go back to the environment , not how it should be obtained. As a result, even though the Gillard government had already committed itself to a policy of “no compulsory acquisitions”, the MDBA allowed the debate to be framed in terms of “cuts” to individual allocations, necessitated by the requirement to give top priority to the environment.

The resulting firestorm of protest forced the government into damage control mode, and led to the resignation of MDBA chairman Mike Taylor (chief executive Rob Freeman departed soon afterwards). From this point on, the basin planning process was almost entirely political, with the primary objective of assuaging basin communities.

The “revised draft” is the result. The target reduction in Sustainable Diversion Limit has been reduced to 2750 GL, and there is finally a clear statement that there will be no compulsory acquisitions, although the reliability of allocations may be reduced in the future. The lower volume of water restored to the environment is a disappointing outcome, but at this point, the real issues are not about volumes but about how water can best be managed.

The real disaster in the revised plan is the recommendation to focus on irrigation infrastructure rather than buybacks as a way of securing additional water. Politically, this makes perfect sense, at least if you regard the $6 billion of public money allocated by Howard as a sunk cost. Unfortunately, infrastructure works aren’t just a costly and inefficient way of saving water. In many cases, the environmental benefits are illusory. The water “saved” through measures to reduce leakage from irrigation channels would, in many cases, have flowed back to the rivers. The groundwater and river water systems, treated separately in this report, are, in reality, interconnected.

Finally, a note of hope. Twenty years ago, when extractions of water from the basin were finally capped, a return of 2750 GL to natural flows would have seemed a utopian hope. The process of getting there has been messy and a lot of money is likely to be wasted. But with careful management, the Murray-Darling Basin can be saved from the disaster that seemed inevitable in the late 20th century.

18 thoughts on “Murray-Darling plan: a disastrous process, a sliver of hope

  1. Very good article and spot on. Not sure how you can accept the 2750 figure though when as you point out it is the outcome from an Act that put’s the environment above all other objectives.

    You are exactly right though that the management of the water is much more important than the volume of the water extracted.

  2. Really though, any management scheme that doesn’t get 4000Gl back into the Murray Darling has to be rated a failure. At a olitical level, I can’t imagine why the Feds are giving the irrigators the time of day. These are Howard’s voters (inherited by Abbott) and always would be. No cheme that the Feds could have devised was going to make them not vote Nat/Libs and these are all coalition held seats. They have any number of other reasons for voting against the ALP.

    SO the ALP might as well have looked after people who would be impressed and ensured that 4Gl or maybe 8Gl even went back into environmental flows. In terms of actual votes won per dollar, I suspect the CBA would look pretty good.

    After those horrible scenes in late 2010, these wailing banshees should have got zip, even without concerns over the environment.

  3. Um, Fran, I am an irrigator and as you know, not one of Howard’s mob, nor one of the upstream wailers. But I know what you mean.

    Rehabilitation of irrigation systems or buy backs. I think there is not enough information from quality study to determine which is the way to go where.

    Cutting back on buybacks now is like shutting down a mine just as you get to the ore body. A large percentage of buybacks have been of sleeper licenses, like mine. I sold off 40% of my water allocation for on farm redevelopment because it has never really been used, except during the drought when we were allowed a percentage of our total allocation.

    In normal years that water continued down the river as environmental flows because the price for leasing it out was too low.

    In some areas, rehabilitation of irrigation infrastructure could be an investment for the future, the immediate benefits not clear at this time.

    A modern water delivery system could allow irrigators to switch from crops which return low $/ML to higher value crops if their historical crops are unable to meet the extra costs of sytem upgrades.

    Then again, until some action is taken against unfair trade, there is probably going to remain an oversupply of the higher value/ML crops such as vegetables and fruit.

  4. @Salient Green

    Well SG perhaps I was a little sweeping, but you would be the rational and luckless minority being defined by … well let’s preserve decorum and just say “people one would sooner not be defined by”.

    IMO, the state would be better off buying up marginal farms in coherent parcels at market value or outstanding debt (whichever was larger) and eventually aggregating them as one kind or another of wilderness/national park. They could even allow the folks there to live on their ex-land in a caretaker capacity, paying them a suitable wage, giving them resources and training and rehabilitating the place. Far better.

  5. No probs Fran. The worry about buying up marginal farms is in the white-anting of irrigation communities to the point where it is marginal to keep them as a going concern.

    The perverse outcome of free market ideology is that the growing of high $/ML crops has been the death of a thousand cuts for most while crops which have access to huge amounts of cheap water and use it inefficiently seem to be more viable as exporters.

    When you say “coherent parcels”, I agree providing much more work is done to determine if such buying up is good for the nation and good for the community involved taking into account compensation as well as environmental concerns.

  6. @Salient Green
    ‘switch from crops which return low $/ML to higher value crops if their historical crops are unable to meet the extra costs of sytem upgrades’

    Surely, SG, taxpayers should only be asked to make good the losses suffered by irrigator licence holders. Upgrading to high efficiency irrigation represents a subsidy if it is an investment to improve the capital of irrigators at taxpayer expense.

    Now, there may be good reasons for doing this – a food surplus may be a public benefit worth the expense. Such policy goals should however be made explicit. To do otherwise is to encourage the public perception that seemingly vast amounts of public funds are being misspent for dubious environmental outcomes – in contrast for example with spending on national parks.

  7. @6, in my experience, irrigators have always paid a proportion of rehabilitation cost.

    Does not improving capital of irrigators also improve the capital of the state?

    There’s nothing dubious about the environmental outcomes of rehabilitation when done properly (pipelined) and the saved water returned to the river.
    The Victorian boondoggle saw wildly inflated savings as open channels were merely lined. As stated by John Q, most of the channel leakage would have ended up back in the river while evaporation losses continued.
    Large on farm savings could have been made by a pressurised system allowing irrigators to move to efficient irrigation systems.
    Wildly inflated savings were then split between the irrigators, Melbourne and the environment. The entire scheme was contemptible IMOH.

  8. sg, so nice of you to offer up a wealth tax on your property – that’s the only way capital (as against income) is captured by the state.

    I can’ help feeling your approach is, if you’ll pardon my directness, a classic “capitalise the losses, socialise the gains” approach. I don’t see why my kids should have to have substandard schools, my local hospital to be overworked, my local public transport system to be unuseable in order to divert revenues to maintain the value of your property.

    Also, whatever else you can say about deregulatory capitalism, that it has delivered very low fruit and vege prices to the poor is NOT a drawback in my book. That’s doubly so as it does not seem to have lowered the incomes of fruit and vege growers since I were a lad – indeed as I’ve argued elsewhere with you, quite the reverse.

  9. Excuse my ignorance about water infrastructure issues, but can anyone tell me if the ‘Victorian boondoggle’ includes the Wimmera Mallee pipeline project or what is called the Northern Victoria Irrigation Renewal Project?

  10. @9, I think your’e being unecessarily combative. My understanding of capital is that it is used to produce an income and that enhancing the capital of some irrigators will help them produce an income with less water, and possibly produce a higher income which benefits everyone.

    Your second para then is nonsense.

    Your third para is also nonsense. Just ask all the horticulturalists who have gone out of business and the many more who are struggling. I would suggest that you don’t know too many fruit or vegie growers.
    You also want to ask why, under your hallowed deregulatory capitalism, are there so many poor, so many unemployed and underemployed, so many jobs gone offshore which could have relieved the number of our poor significantly.

  11. Kevin @#10, no. That is mainly domestic and stock water in a different part of Victoria.

  12. Does Australia need a
    national policy to preserve agricultural land?

    An Australian Farm Institute study provides a comprehensive review of what is
    currently known about the amount and location of Australian agricultural land,
    the rate of land use change occurring, and how governments make decisions both
    in Australia and internationally. Whether or not there will be sufficient good
    quality land available for agriculture in the future has not been a high
    priority issue for most of the past two hundred years.

    Writer sees Bob Hawke as guilty of treason and treachery

    On June 1st, 2012 AustraliaForAustralians (not verified) says:

    Who would have thought Bob Hawke could descend to the low level of betrayal? He
    is negotiating the sale of 30,000 ha of irrigation land and our biggest man-made
    water storage at Argyle river in the Northern Territory and Western Australia. A
    Chinese investment company is interested to secure their food security.

    The land will be irrigated by Lake Argyle, which is three times the capacity of
    Lake Eildon and 18 times the size of Sydney Harbour. This is in Australia, the
    world’s driest continent made up of over 90% desert!

    Lease land, don’t sell it

    On June 1st, 2012 Sheila says:

    There is no excuse for this. The land could have been leased instead of sold. We
    need laws to protect our land from going beyond our democratic control.

  13. @13, well I saw Bob Hawke as guilty of treason and treachery long ago for opening up Australia to the free – read unfair – market without warning or compensation to most of those who would be adversely affected.

    Howard just turbocharged the process.

    Nick Xenophon said this week that the Eurozone regards Australia as the “Taliban” of free markets. In other words, the “fundamentalists” of free markets.

    Thanks for the link. It’s very informative.

  14. Thanks for your interest, Salient Green.

    I trust you will approve of my having copied your comment onto our site.

    I remember how, in 1983, Paul Keating, like a bolt out of the blue, with no
    electoral mandate whatsoever, announced that he would ‘float’ the Australian
    Dollar. Although few ordinary Australians realised it, this was the first step
    towards an extreme of neo-liberal fundamentalism formalised in Professor Fred
    Hilmer’s rigged National
    Competition Policy inquiry
    which commenced in 1993.

    The description of Australia as the “Taliban” of free markets is most apt.

    If the market was truly ‘free’ then sovereign communities (a.k.a. ‘government’
    at the local, state and federal levels) would also be free to own and operate
    enterprises which create enterprises which produce wealth and provide services.

    The fact they are forbidden from doing so shows that the very term ‘free
    market’, often used as synonym for economic neo-liberalism, to be lie.

    Why shouldn’t governments be allowed to operate banks, insurance companies,
    manage our retirement income, mine our minerals, build houses, own land and
    buildings, manufacture cars and other goods or operate funeral services?

    Naomi Klein should could have included a chapter on Australia in The Shock
    of 2007.

  15. The dubious prospects for irrigation development in northern Australia, and foreign investment therein, have nothing to do with John Quiggin’s interesting comments on the proposed Basin Plan, except insofar as his remarks on the the foolishness of government investment in irrigation infrastructure in southern Australia, now likely to be repeated in the north, demonstrate that is it is more or less impossible to put a bad idea out of its misery in Australia.

  16. Pr Q said:

    The real disaster in the revised plan is the recommendation to focus on irrigation infrastructure rather than buybacks as a way of securing additional water.

    Talk about burying the lede! Pr Q’s basic point seems to be that market-based water allocation buy-backs by the government represent the best value for the money solution to conserve usable water in the MDB, as opposed to infrastructure investment to plug leaks in the system. Just as market-based auctioning of rights to traffic pollutants in the atmosphere represent the best value for money to conserve valuable gases, as opposed to far-fetched plans to sequester carbon or geo-engineer the earth’s atmosphere.

    The common flaw in the L/NP’s approach to ecological sustainability, in the atmosphere and the hydrosphere, seems to be the “direct action” infrastructure investment approach. As opposed to indirect action of the government, putting a realistic market price on scarce natural resources and then letting firms and households conduct their economic activities accordingly.

    Which is odd when you think of it, since the L/NP at least notionally remains committed to a free-enterprise market-based policy solution to most social problems. But of course the L/NP is politically committed to promoting the interests of actual and existing businesses, farms and voters in rural and regional AUS, rather than abstract principles.

    Doubtless this is the way that policy principles and political practice interacts at all levels of human society, personal and political. I hope they manage to do things better in the PRC.

  17. Salient Green @14

    Also, check out on in the rural journal, Weekly Times of 2 May, how “A HUGE chunk of Victorian farmland – about 11 times the size of Melbourne’s CBD – has controversially fallen into foreign hands.”

    The 10 properties at Telopea Downs land has been sold to the Qatar-owned[1] Hassad Australia.

    Who doesn’t consider these sales of vital agricultural and water resources on this arid continent to powerful overseas interests to be treason?


    [1] The Qatar monarchy, BTW is one of the Arab dictatorships, which, together with the US, Israel and NATO, is arming the terrorists who murdered more than 100 people, mostly supporters of Bashar al-Assad, at Houla in Syria on 25 May.

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