Coming to grips with the National Water Initiative.

The question of who controls the Murray-Darling Basin has been thrust to the fore this year. The Federal Government has brokered a deal with most of the eastern states to take control of this vital system of gullies, streams and rivers, which stretches over 3,370km and supplies 70 per cent of the nation’s irrigation. The future of the Basin will be determined in a large part by the National Water Initiative, which was adopted in 2004 as way of balancing the needs of the environment with those of consumers, agriculture and industry. Dr Daniel Connell, a research fellow at the Crawford School of Economics and Government, spent nearly two decades working as a journalist and oral historian in the region, including eight years at the Murray-Darling Basin Commission. He’s also the author of Water politics in the Murray-Darling Basin, published by Federation Press. In this essay he explores some of the challenges involved in regulating hydrological systems.

During the protracted discussions that preceded agreement on the National Water Initiative (NWI), a senior Commonwealth Government cabinet minister described the experience as similar to wrestling with smoke. The NWI should be seen as a new episode in an old story, not a settled policy. It’s an ideological battlefield where the terrain has been rearranged, but upon which conflict between old foes convinced that the struggle to control Australian water management is still to be won will continue.

Water policy has long been a difficult policy area for Australian governments. Fuelling the water policy crisis is the fact that the predictive capacity of traditional science continues to be limited. Trends and general biophysical processes can be documented at the larger scale. Yet it’s often difficult to identify the links between particular actions and specific consequences with enough certainty to inspire confidence in managers, the courts and the people who will be affected by their decisions.

It’s hard to develop robust criteria for determining whether particular water policy issues should be treated as public or private. The economic system still has a low capacity to penalise those who are responsible for negative environmental impacts or to reward those who incur extra costs by adopting more sustainable management practices. Despite the growing interest in the so-called triple bottom line approach, accounting systems are ineffective in capturing the environmental and social costs and benefits involved. The legal system is frequently unable to penalise those responsible for negative environmental impacts, and the potential benefactors of remedial action often can’t be identified clearly enough to target the collection of costs.

It’s proved very difficult to properly take account of the nature of water as a multi-use resource. There’s strong pressure to treat water entitlements as a commodity that can be owned and managed like land, but this leads to great confusion. A comparison between the two reveals profound differences. Land stays in one place and its physical dimensions can be defined. Water, however, is like air, which is recycled from people to plants to other people and so on.

A specific water molecule could typically progress from the atmosphere to a stream where it provides an environment for plants and animals. At different moments the same water could support sports, sustain a crop, become groundwater seepage that carries salt onto the property of a neighbour, or be part of a return flow to the streams that drain the landscape. Eventually it could reach an estuary, where the level of flow into the sea has dramatic effects on fish breeding and the economic viability of coastal towns. One of the questions for contemporary society and water policy makers is to what degree is it appropriate to give some of the users involved in this progression, but not others, property rights to the water they so briefly control?

Implementation of major policies without consideration of their environmental implications is commonplace. Take the Commonwealth Government’s deregulation of the dairy industry in the late 1990s and early 2000s. That restructuring closed a large number of rain-fed dairies along the east seaboard and led to a substantial expansion of the industry in northern Victoria and southern New South Wales along the River Murray, where the main source of water is diversions for irrigation. This happened without any environmental assessment as to whether it was appropriate to increase the demand for irrigation water in a catchment that was already over-allocated.

One of the odd features of the debate about the future of Australian water management is that almost no one puts forward an explicit in-principle defence of unsustainable management – but so many take that approach in practice. When it’s presented, the case for unsustainable management is usually just a list of social and economic benefits that are threatened by efforts to achieve sustainability, with no acknowledgement that capacity to maintain them will be eroded by continued degradation. In practice there is widespread rejection of the proposition that environmental sustainability is a necessary foundation for economic activities in the long term. The release of the NWI highlights this disjunction and sets the scene for a divisive struggle about the fundamental assumptions underpinning water management in Australia.
The logic of long-term policy development creates strong pressure to conclude that, at some point, the process of degradation and depletion of the resource upon which so much is based should be halted. The requirement to achieve environmental sustainability first is central to the NWI, but much of the public discussion assumes that the primary question should be how much water currently used for production can be spared to achieve environmental sustainability? The controversy over the relatively small reductions proposed for the Living Murray Initiative, a program meant to supply environmental water to six icon sites along the River Murray, indicates that the usual answer is ‘not much’.

The NWI puts forward an ambitious plan to restructure water management and promote economic growth within a strong regulatory framework. The aim is to improve and protect the environmental condition of both surface and sub-surface hydrological systems. Approved in June 2004, the NWI is attempting to create rights within a public policy framework. This is occurring in a context where the relationship between governments, public water authorities and private water users, principally irrigators, is changing after more than a century of relative stability. For many decades the interests of governments and water users were very similar. Governments used water as a tool to promote the growth of communities. There was little concern about environmental issues. Even though water entitlements were vaguely defined from a legal perspective, the reliability of supply was relatively high in light of the biophysical circumstances. Variations were usually the result of administrative decisions made in response to droughts. The affected communities accepted such decisions as sensible and necessary. In more recent times this congruence of interests has broken down.

The growth in diversions in the second half of the 20th century has caused serious environmental problems and intensified competition between the increasing numbers of water users. The NWI attempts to resolve this conflict by requiring that all systems be, or be restored to, environmental sustainability before perpetual rights are allocated. The risk is that the process of establishing an environmentally sustainable regime will not be sufficiently rigorous to regain the volumes of water and flexibility needed to achieve that condition. Given the political strength of demands for greater legal recognition of a wide range of different types of water entitlements, and the unanswered questions that persist about who can represent and protect the environment, there is a real danger that water property rights will be locked in at too high a proportion of total flow. If that happens, riverine environments will continue to decline and resource security will be further eroded.

The treatment of climate variability and change in the NWI is an indication of the difficulties faced by policy makers when attempting to balance the competing demands for water entitlement certainty against what is needed for environmental sustainability. Paragraph 49 of the NWI provides for a two-stage process, which attempts to balance environmental sustainability against the diverters’ understandable desire for legally protected certainty. It stipulates that the level of water required in-stream to protect environmental sustainability is to be determined between 2004 and 2014. After that time further reductions will result in compensation if they are the product of policy changes and are larger than three percent over 10 years.

This arrangement might seem favourable to the environment, but it appears to abandon the capacity to adjust the size of the consumptive pool from year to year as a result of climate variability. To be able to decide if and when the three percent threshold is crossed, triggering the requirement for compensation, a stable volumetric definition of the size of the consumptive pool will be needed. Without a definable base line it will not be possible to calculate the three percent. Such a definition is also implied by the lack of discussion of the possibility that the size of the consumptive pool will vary from year to year in those sections of the NWI that deal with water plans and perpetual entitlements. This inflexibility is a particular concern in that it appears to reduce the capacity to deal with the shocks that will come from climate change.
On the other hand, paragraph 48 of the NWI states that:

Water access entitlements holders are to bear the risks of any reduction or less reliable water allocation, under their water access entitlement, arising from reductions to the consumptive pool as a result of
(1) seasonal or long term changes in climate: and
(2) periodic natural events such as bushfires and drought.

There are substantial unresolved tensions here. One of the main purposes of dams and river regulation has been to provide protection against climate variability. Supplying more water in drought years has always been part of the rationale for dam building. To apply paragraph 48 will involve a fundamental policy change. But if Australia is to have a viable irrigation industry in the future when there is predicted to be substantial reductions in inflows as a result of climate change, we will need to reduce water allocations at a rate that matches the rapidity of the shift in climatic conditions, and not merely at a pace that is socially acceptable.
The complexity of the water management issues in the NWI is also evident in the difficulties involved in defining environmental sustainability and the ways in which it will be protected. While there are some sections that indicate a broad conception of what is involved in environmental sustainability, other parts tend to suggest that balancing inflows and outflows will be enough to achieve that condition. Issues such as maintaining or restoring a more natural pattern of seasonal flow or protecting the interrelationship between streams and their flood plains are touched on only very lightly. Concern for water quality, including salinisation, is also more implied than stated in the NWI.

According to the NWI, comprehensive water plans will resolve all the tensions created by the conflicting demands on water managers. This focuses attention on the institutions that will prepare and enforce them. In most states the long-established state government water management agencies have largely been dismantled and replaced by regional catchment authorities. In many cases these authorities are new and untested. Yet the subject of institutional development is rarely mentioned in the NWI beyond the very limited matter of measures to facilitate water trading.

Then there is the skills shortage. Management of hydrological systems is much more complex than it was only a few decades ago. This will require new approaches to monitoring, research, decision-making and compliance that are far more sophisticated than those currently in place. But where will we get enough people with the skills needed to undertake these tasks? Lack of skilled personnel to manage Australia’s highly modified hydrological systems could well prove the greatest source of risk to the NWI and Australian water management in the medium term.


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ANU Reporter 
Autumn 2007