July 31st 2004


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Articles from this issue:

COVER STORY: What the COAG Water Agreement means

EDITORIAL: Issues facing the Howard Government

CANBERRA OBSERVED: Kim Beazley's return masks Labor's divisions over US

AUSFTA: Will Green preferences sink trade agreement?

NATIONAL COMPETITION POLICY: SA Government heads towards dismantling single selling-desk for barley

DEREGULATION: Stock Journal survey rejects new SA Barley Export Bill

QUARANTINE BREACH: Inquiry needed on citrus canker

NATIONAL AFFAIRS: Boswell sees red over Senate marriage delay

EDUCATION: School vouchers - giving power back to parents

SOCIAL POLICY: Singapore's Provident Fund adapts to new realities

FILM: Appeals against degrading movies rejected

MEDIA: Victory on TV Code of Practice

HEALTH: Abortion causes uterine damage

VICTORIA: Are we facing a long dry spell?

STRAWS IN THE WIND : Peacock Throne / The Stasi never died / Supersized

CINEMA: Whatever happened to the family film?

Distributism defended (letter)

People without land (letter)

Ethanol industry viable (letter)

OBITUARY: Vale Brian Nash

OBITUARY: Vale Martin Klibbe

BOOKS: Nightmare of the Prophet, by Paul Gray

BOOKS: Memo for a Saner World, by Bob Brown

BOOKS: So Monstrous A Travesty, by Ross McMullin

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COVER STORY:
What the COAG Water Agreement means


by Neil Eagle

News Weekly, July 31, 2004
The Federal and State governments recently agreed, through the Council of Australian Governments (COAG), to a national water strategy. Neil Eagle, a long-time water activist and citrus-grower on the Murray River, evaluates the proposal.

The COAG agreement, which only Western Australia and Tasmania refused to sign, does provide a degree of security to the water entitlements of extractive users, but has fundamental flaws.

There will be some increase in water security as hundreds of millions of dollars will be spent buying back over-allocated water licences, particularly in NSW. This will reduce the number of farmers competing for available water, thereby increasing security of supply for remaining farmers.

Also, the Federal government has insisted that resumed water will be purchased at the commercial price. This sets a precedent whereby any government, Federal or State, that seeks to take further water from farmers in the future will have to pay full commercial compensation.

Given that NSW was looking to resume water licences over several decades without paying compensation to farmers, this is an important precedent demanded by Canberra.

COAG proposes that from now until 2014 there will be a 3 per cent reduction below the "cap", the fixed maximum amount of water that can be taken from the Murray-Darling system for irrigation. This involves taking 500 gigalitres (equivalent of 50,000 Olympic-sized swimming pools) as part of a plan to restore six icon sites in the Murray-Darling system to pristine health. This is an improvement on the original Living Murray plan, which was to take 1,500 GL from farmers for environmental flows.

However, where is the sound science to show that allocating 500GL will improve the environmental health of the icon sites? Without that science being done, there is the risk that this 500GL allocation will be the "foot in the door", the first step towards governments taking from farmers in the future.

After 2014 the following is proposed:
  • Irrigators will (rightly) bear the impact of water availability due to any climate fluctuations;

  • Governments will bear the cost of any new water policies that take water from farmers, compensating them at commercial rates;

  • Should new science demonstrate the need for increased river flows by reductions in farmers' irrigation entitlements, irrigators will be responsible for the first 3 per cent and governments will be responsible for any further reduction in any 10-year period.


Flow regimes vs river health

There is a fundamental problem with the COAG proposal. It is still focused on increasing environmental flow down the Basin's rivers as almost the only means of improving river health. This method of improving river health has been strongly questioned by a leading environmental scientist, Dr Lee Benson.

He analysed the Murray-Darling Basin Commission (MDBC)'s own scientific report on the Basin, and showed that the greatest likely benefits to river health may well come from a combination of 21 other non-flow environmental options - like infrastructure improvements and the better use of water - rather than from putting more water down the rivers.

As Dr Benson highlights, the avowed aim of the Living Murray initiative "is to secure sustainable environmental health, with minimal socio-economic impact". Hence, the priority should obviously be to explore all non-flow, non-volumetric options, that involve taking irrigation water from farmers and reducing economic activity in the Basin.

So why have the MDBC and COAG continued to blindly go down the path bigger environmental flows?

This may be good populist politics to win over green voters in the big cities, but it won't solve river health issues, and it will do enormous economic damage to agriculture.

Even the Federal House of Representatives parliamentary agriculture committee issued a report, just prior to the recent COAG meeting, seriously questioned the COAG proposal. The recent report had 10 of the 11 cross-party committee members seriously question the concentration of effort on flow regimes as the main solution to river health needs.

Now a La Trobe University report, commissioned by the Living Murray Local Government Alliance (LMLGA), has highlighted the impact of the removal of even 500GL of water from productive agricultural use. The main impacts would be a loss of over 3,000 jobs reducing economic output by over $100 million annually.

It must be emphasised that this monetary loss is annual, dwarfing any monetary contribution proposed by governments, like the one-off initial $500 million to the Living Murray process.

The Local Government Alliance was forced to commission its own report because of the refusal of the MDBC and governments to release their socio-economic report on the Living Murray initiative. This report was to have been released last October.

A fundamental undertaking by COAG had been that no action would be taken on the Living Murray initiative until their own social and economic reports had been released publicly for debate. The economic report has only just been released, but the social report has still not been released.

The negative findings of the La Trobe University report seems to explain whey COAG has been keen to keep its socio-economic reports under wraps.

South Australia

Of more concern, perhaps, is South Australia's continuing strident ambit claim for more and more flows to their State. This is occurring despite South Australia receiving its total water allocation during the continuing one-in-100-year drought, while New South Wales and Victoria are anticipating ongoing severe restrictions for the third year running.

Just prior to the COAG agreement, the South Australian Environment Minister, John Hill, has insisted that "a plan requiring individual States to pull vast quantities of water out of productive use must be endorsed this month." (Adelaide Advertiser, April 16, 2004).

He added: "Let them [NSW and Victoria] find 200GL themselves in the first two years and work out a more satisfactory way of finding the remaining water over subsequent years." His final insult to the intelligence of the upper States was when he stated that "South Australia could find about 10GL reasonably quickly", which is a mere 2 per cent contribution to the 500GL environmental flow to be found by Queensland, NSW, Victoria and South Australia.

This is from a State that utilises less than half its total allocated and guaranteed supply for farming, Adelaide and other towns, while the rest evaporates in the vast artificial freshwater lower lakes of Alexandrina and Albert. Prior to the man-made intervention with barrages, these were estuarine lakes.

Living Murray credibility

Thus, it is obvious that if this Living Murray process is to proceed with any credibility, there must be fundamental changes in thinking or there will continue to be massive resistance from rural communities, not just irrigators. The whole upper Murray communities of NSW and Victoria are aware of the implications if sound, rational, scientifically tested initiatives are not put in place for restoring the icon sites.

For the Basin communities to have confidence in the process, the following need to be implemented:

  • There must be scientists of the communities' choosing involved with the process so that the resultant science is sound and focused on river health needs, not blind "green" ideology.

  • Community representatives from NSW, Victoria and SA must be involved in the process of evaluating the needs of each icon site. This will eliminate State parochialism with all issues up for discussion, especially in evaluating the needs of the Chowilla floodplain, the Coorong and lower lakes, and barrages, and flows between the sea and the Coorong.

  • The icon site needs must be properly identified and prioritised as to urgency of remedial action.

  • Non-flow options, better utilisation of existing water, and water savings must be first priority options in addressing any river health needs, prior to any reduction of water from productive agricultural use.


If these principles can be adopted, we could have a template for properly dealing with river health issues nationwide into the future.

Water-trading

Governments of all political persuasions continue to be fixated with water trading, It is driven by the ideology of National Competition Policy and the myth that the freeing up of the movement of water from one area or State to another - from low-valued to high-valued farming - will benefit agriculture.

Certainly, "temporary trade" of water is eminently sensible and allows the balancing of availability with need in any given year. This frequently happens when one area has favourable seasonal conditions while another is in drought.

But permanent trade of water will have dangerous consequences. Currently, only about 10 per cent of total water used in the Basin is for the theoretical high-value crops, like horticulture. A small shift of water to these crops without corresponding development of export markets will lead to oversupply, turning today's "high valued" crops into tomorrow's "low-valued", or "no-valued", crops. In general, the domestic market is well supplied in these crops. Expanding export market access is a slow and tedious business.

What's more, any of these crops can be grown anywhere in the Basin as there are suitable soil and climate. In other words, there is no need to shift the water between regions.

What's more, water trading will be open to all comers, not just water users. This means that speculators, including financial institutions, will be able to buy permanent water rights from water users and sell temporary water to the highest bidder on a year-to-year basis. This will force up the price of water and threaten the viability of some industries.

A sensible policy should be to allow trade permanently between entitlement-holders (i.e. water users only) within a region, but not between regions and states.

However, the COAG agreement will allow 4 per cent of water to be permanently traded out of any region in the Basin in any one year. This policy to be assessed and reviewed in five years.

This means that up to 20 per cent of water could be traded out of a region over the next five years. "Reviewing" this policy cannot undo the economic damage this will do to a region, as once the water is sold off, it's gone for good.

The fact that the policy is to be reviewed is an admission that the policy could be damaging. It underscores the major flaws in the COAG agreement, such as:

  • The refusal to release the MDBC socio-economic report on taking water off farmers (and also, by implication, of allowing water to be traded out of a region);

  • The risk that allocating 500GL to river flow may be just the first step towards further cuts to farmers' allocations in the future; and

  • The uncertainty as to whether good science on river health will be subordinated to populist, green, city vote-winning policies.


Finally, it seems that Victoria and South Australia have not come to grips with the very real constraint of the shallow, narrow Barmah Choke, which limits the amount of water that can be supplied downstream in high summer. This is particularly a problem when the Menindee System is not in the supply equation.

It is incredible that government advisers and ministers seem unable to grasp these basic facts.




























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