Malcolm Turnbull (Wentworth, Liberal Party, Minister for the Environment and Water Resources) Share this | Hansard source

The honourable member knows that he is misrepresenting the situation, and it is disappointing that he would be so disingenuous. There was never an allocation of $200 million to the tender. In fact, when the tender was announced, I was very cautious about whether we would buy any water at all. The only reference to the figure 200 was that we said we would certainly not buy more than 200 gigalitres, because that was on the high side of the forecast shortfall of the 500-gigalitre target for the Living Murray Initiative. The tender was always stated to be experimental—and you can dig up my press releases and statements of the time—and we specifically did not set a target. I said many times that I did not know whether we would be buying a little water, a lot of water or no water at all. It was an experimental effort and, as much as anything else, was designed for us to understand a bit about the market and the preparedness of people to tender water in circumstances where they had to derive that water from efficiency measures. So the fundamental premise of the member for Grayndler’s question is completely wrong. He is misstating the facts.

Turning to the tender itself, with the way the Commonwealth procurement rules work, the maximum price that can be paid has to be set before the tenders come in. So it is not like a typical book-build where you are buying shares for a company or some sort of financial transaction. It has some unusual characteristics. The price was set at a level, based on advice, which was above but not significantly above market price. From the time that price was set in a process that was very much at arms-length from the government, obviously for probity reasons and so forth, a number of things happened: firstly, the drought drove water prices up, so water became much more valuable; and, secondly—and this really is what had the biggest impact on the tender—the Prime Minister announced the National Plan for Water Security about 10 days, as I recall, before the due date for the close of the tender.

The National Plan for Water Security overwhelmed this tender because the National Plan for Water Security involves irrigators being subsidised into saving water through efficiency measures, with the Commonwealth paying the bulk of the cost and the water savings being shared, whereas, under the tender, the irrigator would have to spend all the money—100 per cent of the money—on saving water and then sell that water, the product of his savings, to the Commonwealth. So, many irrigators would have looked at the National Plan for Water Security and said that that is a much better deal and accordingly been prepared only to tender for the water through efficiencies tender at a much higher price. So the fact that there were a small number of bids that came in under the threshold price was no surprise to us at all. It was entirely expected. In fact, in some respects, given the National Plan for Water Security and the fact that it presented to many people a significantly better deal, it was surprising that we had any offers at all.

As far as purchasing more water is concerned, the honourable member will be interested to learn that at the recent Murray-Darling Basin Ministerial Council meeting there was a resolution to buy a further 20 gigalitres of water on market by the commission which of course will be using Commonwealth government funds as part of the $500 million we contributed last year. They will be on-market purchases without any strings attached, not related to efficiency measures, and will be done through brokers. That will happen in the latter part of this year. So the purchase of water is certainly happening. The MDBC will be in the market. Indeed, water purchases are part of the National Plan for Water Security.

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