AUSTRALIA'S DROUGHT: News Weekly
COAG's free trade in water threatens farmers
, November 25, 2006
The claim made at the recent federal and state leaders' crisis meeting that unrestricted trade in farmers' water rights would solve the water crisis is false, argues Pat Byrne.Without rain, and at current rates of consumption, the Murray-Darling Basin (MDB) rivers will run dry in about 22 weeks. There will be no water to trade.
The federal and state meeting, under the Council of Australian Governments (COAG), was held on Melbourne Cup day.
Farmers in the basin now face two major threats. First, many face collapse owing to the drought, for which governments still have no serious emergency plan. Second, many are likely to face pressure, in part from the banks, to trade their secure water entitlement, mostly to towns and managed investment schemes, when water prices peak. This means they will have no water entitlement after the drought.Running dry
Adelaide and dozens of towns in the basin will run dry as the MDB runs dry.
Shortly before the COAG crisis meeting, members of the Murray-Darling Water Crisis Management Council (MDWCMC) warned federal politicians and advisors in Canberra that "immediate action was needed to build a weir at Wellington on the Murray to hold water for Adelaide upstream in deeper sections of the Murray".
If it continues to drain into the huge expansive Lake Alexandrina at the South Australian end of the river, 50 per cent of the lake's water will evaporate over summer.
"This will be a disaster for Adelaide, for the people of South Australia, and everyone else dependent on the Murray for water," said Ken Trewin, mayor of Wakool Shire and spokesman for the MDWCMC.
He said that the priority should be to secure the water supply for Adel-aide with an emergency weir at Wellington. Then water should be secured for towns in the basin, and for stock and domestic supplies to farmers adjacent to the river system by conserving water in the Hume and Dartmouth dams. Then water must be secured for permanent plantings, like vines and fruit trees that take up to seven years to mature and produce an income.
Open, free trade in farmers' water rights is being pursued as part of the National Water Initiative (NWI) and national competition policy.
Governments have argued that water will be traded from low-value to high-value agriculture, and from agriculture to high-value city uses.
These arguments have been refuted in a new book, High and Dry: how free trade in water will cripple Australian agriculture
, by Patrick J. Byrne, Neil Eagle, John O'Brien and Daryl McDonald (available from News Weekly Books for $15 + $4 postage).
Water-trading is unnecessary because, in the MDB, farmers shift to higher-valued production when they see the opportunity. They don't have to trade secure water entitlements to achieve this outcome.
Further, most trade in permanent water entitlements has gone to managed investment schemes (MIS), which benefit large corporate farms offering substantial up-front tax concessions to wealthy investors. This investment is not driven by market forces, but by government-subsidised corporate welfare.
About 15 per cent of wine grapes now come from MIS, which have contributed to grape prices collapsing from $600-$800 per tonne, to as little as $150-$200 per tonne.
Contrary to the theory of water being traded to high-value agriculture, it has been traded mostly to MIS, many of which are turning today's high-value industries into tomorrow's low-value industries!
Also, over-emphasis on high-value farming runs counter to Australia's need for abundant low-value agriculture, which provides low-cost food and fibre both for Australian families and for the export market.
Finally, open water-trading will inevitably see towns and cities that are running dry far outbidding farmers for water by paying $1,200 plus per megalitre. Farmers pay just $30-$50 per megalitre for secure water entitlement.
The loss of water to cities and MIS threatens to make it uneconomical for many irrigation regions to supply irrigation water to fewer and fewer farmers. This will create a snowballing effect, and whole irrigation regions will collapse in Australia's most productive food bowl.
Contrary to the COAG policy of achieving open, unrestricted water-trading by the end of December, governments must prohibit permanent water-trading and overhaul water-trading policy.
The Southern Oscillation Index shows that Australia has been in a prolonged dry period since the late 1970s. Meanwhile, both the Australian population and agriculture have grown. Both need more water in dry times.
Incredibly, the NWI, begun in 1994, contains no incentives or initiatives to provide new reservoirs or even for surveying state water resources.
Australia, per head of population, is the third most water-rich nation on earth; but, when it comes to water policy, the nation is about to suffer terribly from a complete lack of leadership.