An Economy Reborn

Australian Polity

Volume 5, Issue 3

By

Andrew Broad, Federal Member for Mallee

Water was once referred to as the ‘flowing gold’ and it is the essence of this reference that is at the heart of policy that harnesses the Murray Darling Basin for food production, sustainability and prosperity.

Over the last twenty years I’ve listened to many public lectures about how Australia needs to move from the past, into the future. I’ve listened as people said that Australia no longer rides on the sheep’s back; that Agriculture isn’t that important and that smarter, more sophisticated industries would soon replace the ‘old’ economy. Certainly the transition into services, high end manufacturing and mining have lifted Australia’s standard of living and allowed us to retain the reputation for being the land of opportunity.

However, as plentiful as the opportunities may be, they can only be turned into something tangible through effort. As Thomas Edison once said, “Opportunity is missed by most people because it is dressed in overalls and looks like work”.

Australians love to play but they also have the capacity for hard work and one of our challenges going forward is to ensure that the incentives that encourage hard work remain, so that the opportunities are seized upon, to the benefit of all.

The recent shift in wealth to the Asia Pacific region and the further openings of Free Trade Agreements with China, South Korea and Japan, afford us even greater opportunities and we need to harness the drive and initiative of Australians to turn those opportunities into reality.

Given the increasing demand for food, particularly protein in the Asian region, the ‘old’ economy now has the potential to be the new economy. As the wealth of these countries increases, the diets of their people change and they live longer. They are now seeking the food and importantly, the quality of food, that we have long taken for granted. The question for Australia is how to capitalise on this change.

Australia certainly has a competitive advantage in some areas, whilst it will never compete in others. Our labour costs prohibit us from competing in  non-seasonal and labour intensive food production commodities. However, exporters can maximise opportunities from production of protein, counter seasonal horticulture and mechanisation of large scale food production.

For example, cotton, rice, wheat, barley and canola are produced with first world mechanisation, reducing the exposure of labour costs. Fresh milk, UHT and powdered milk, sheep meat and beef are all dietary proteins which are increasingly being sought after and we have developed innovative production systems for maximum efficiency that also favour Australia.

Being in the southern hemisphere and therefore having a counter seasonal advantage over the northern hemisphere for the export market, Australia can also capitalise on the sale of products with a short shelf life, such as oranges, table grapes and stone fruit.

The one constant that all these production systems depend on, is Australia’s most scarce resource: water.

Whilst many people aspire to be the Prime Minister, without water Australia is nothing, so in many regards the most important portfolio in the Federal Parliament
is in fact the Minister for Water.

Australia has always been a land of ‘droughts and flooding rains’ and that alone is an argument for dams and better water infrastructure. Yet water (and seasonal) policy within Australia seems to suffer from perpetual short term thinking. When it’s raining, we think it will never stop, when it’s dry we think it will never rain again. Water presents many challenges for Australia. From the saline ground water through the Western Australian grain belt and the management of the Great Artesian Basin, to the drying of the Murray Darling Basin. Combine this with Northern Australia, which has much higher rainfall but has struggled to turn floods into large scale production and the frustration is laid bare; Australia often has plentiful water supplies, but rarely in
the right place, at the right time.

Efficient production and good environmental stewardship can coexist. The strongest advocates for river health often are the communities that live by the rivers. Lessons have been learnt and stories passed from one generation to another and recognising the knowledge that comes from experience and treating communities with the respect they deserve, is essential to achieving good water policy. The scepticism with which politics and policy is viewed, particularly in regional communities, is born from the feeling that the people who really understand the rivers, food production and sustainability, are largely ignored.

The three necessary ingredients for capturing the opportunities of agricultural exports are:

• good soil
• affordable water
• motivated people

Given that the Murray Darling Basin boasts all three, I intend to concentrate the majority of this discussion around the challenges within that basin. This is not to diminish the challenges and
opportunities that exist in other parts of Australia but those should be addressed as part of broader water discussion.

Under the Murray Darling Basin Plan (MDBP), the aim has been to return water to the river system, for improved river health and wetland management, whilst still maintaining the confidence of
irrigators to develop their business and produce food for Australians and for export markets. Confidence is the key word, for without a level of surety and affordability, no irrigator is going to spend the money required to install better and more efficient irrigation technology. Producing any agricultural goods carries significant risk and the key economic driver remains; an irrigator must be able to water their crops and make a profit doing so, or they won’t keep doing it.

There are multiple ways of managing water for river health but the MDBP discussions have tended to focus on a particular water quantity, which is simplistic given the complexities of ecosystems and variability of seasons. That said, the Government’s decision to place a 1500 GL cap on the amount of water that can be purchased for the environment, is essential for maintaining irrigator
confidence and encouraging ongoing investment in efficient water management technology in irrigated communities. The cap also demonstrates a commitment to using infrastructure and management principals to achieve a healthy river system that we can all be proud of.

Understanding the restrictions within a natural system is vital to grasping the complexities of the debate about river health based upon Giga litres (GL). In layman terms, one GL is one thousand million litres, or roughly one thousand Olympic sized swimming pools.

It is physically impossible to send the quantity of water being advocated for, by some, to the Lake Alexandrina and the Murray mouth, solely from the Murray River because of the natural restriction of the Murray River at Barmah. To do so, would in fact be contrary to the natural river flow and would result in significant flooding of towns and property. The water that moves through the Riverland of South Australia and the lower lakes should be a combination of both the Darling and Murray Rivers, given the natural flows from the junction at Wentworth. On all levels, it would be far wiser and practical to action engineering in the Menindee lakes, upstream of Wentworth, to allow improved water management and environmental outcomes for the lower catchment. The Menindee lakes are shallow and therefore are not the most efficient for water storage but they are the last effective storage before the water of the Darling River makes its way to the sea via the Murray.

Irrigators know that water is expensive. It’s expensive to purchase, to own and to pump. Every time they turn their pumps on, they first have to consider the economics. This has driven changes to high value crops and efficient management of water. Over a number of years the Australian Government, under the management of the Australian Commonwealth Environmental Water Holder (CHEW), has become the largest single water holder in the Murray Darling Basin. The accumulation of water licences has been purchased at a cost to the tax payer and should be seen as part of the Australian Government’s economic portfolio as well as its environmental portfolio. Assigning a deemed value per mega litre of water (MG) would allow financial rigor to be put around the administration and management of these particular assets. This would provide for disciplined determination of priorities and allow potential investment in infrastructure to be developed so as
to achieve measurable environmental outcomes. For example, a better use of environmental water may be to sell a portion of it onto the temporary open market and with the sale proceeds, build infrastructure that gives a measurable environmental outcome for less expense.

Currently the Murray Darling Basin Plan doesn’t allow the Commonwealth Environmental Water Holder the freedom to sell water onto the temporary water market and then reinvest in environmental infrastructure. A change to allow this would provide an improved basin over a number of years at little cost to the Australian taxpayer. It would also allow the Government to work with communities on project suggestions and implementation, restoring some of the trust between Government and water users.

A further significant allocation of funds from the Government will be essential for major water projects into the future. The Murray Darling Basin has enough dam capacity for two and a half years of inflows but to extend its serviceability via large scale environmental infrastructure and irrigation distribution will require additional resources.

An understanding by Treasury and Members of Parliament about the role of water and the export potential linked to its use will be important to securing additional taxpayer funds. Certainly, harnessing the opportunities that exist must be a partnership between irrigators and Government.

There is a strong argument, given the challenges of water policy within Australia, that speculative water licence traders should not be able to operate. If an owner of a water licence has a legitimate use for a specified amount of water, then they can use it or trade it but to allow trading firms to speculate and “play the market” with water licences, runs the real risk of undermining production, exports and the environment. In Australia, water is life, water is wealth and it shouldn’t simply be seen as another commodity. For instance, allowing the movement of water from irrigated dairy to table grapes (and vice versa) is the intention of trade. Speculative trading only serves to undermine that intention.

The facilitation of trade between buyer and seller also requires some legislative scrutiny. Currently water brokers are not required to hold funds in trust accounts and given the significant amounts of money involved in the transfer of water licences, a regulation and licencing model similar to real estate agents, would provide a compliance framework and require greater broker professionalism.

Restoring confidence is one of the immediate tasks of the Water Minister within irrigation communities and the disconnect between the Murray Darling Basin Authority and regional Australia is still very evident. Administering public assets is best done by a management team that can look out their window and see the assets they manage. River towns live and breathe river health. It’s
the topic of conversation at the local footy, it’s the talk at the newsagent and through this organic process of general conversation, good ideas are generated. It’s for this reason that one of the important reforms to ongoing river health is to move the Murray Darling Basin Authority into the heart of the basin and away from Canberra. If river health, profitable irrigation and vibrant communities truly are the focus of the Murray Darling Basin Plan, there are many vibrant communities in which the Authority could be relocated. Failure to do so continues to expose the plan and
the Authority to ongoing criticism.

Whilst the Federal Government plays a significant role within Water, the constitutional jurisdiction sits firmly with State governments. This outworking of Federalism has created division at times but generally it has worked. River communities need to be respected; they know a healthy river is essential for their survival and future. The ‘old’ economy has been reborn and with workable policy, market opportunities and good environmental management, the future is bright. The essential ingredient for this future is water.

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