John Watson (Tasmania, Liberal Party) Share this | Hansard source

The national plan for water security announced by the Prime Minister in January and focusing on the Murray-Darling Basin is indeed a bold initiative. It will not only provide a foundation upon which future water policy can be constructed but also be a semaphore, as it were, for policy makers to know what is coming down the river. Australia really needs to prepare for the future, to protect our water and our land resources for future generations. Unfortunately, in the past there has been a monumental stuff-up on water management by the states. The states have neglected infrastructure and have allocated water entitlements. Something had to be done by way of a coordinated national approach.

The drought of recent times has been a testing one, but it has provided the opportunity for the Prime Minister to grasp the nettle. He does not underestimate the challenges that lie ahead. So far the states of Queensland, New South Wales and South Australia have agreed to the initiative, with Victoria still holding out. Premier Bracks is playing some gamesmanship on the basis that perhaps the state of Victoria has been a little bit more responsible in its water management than some of the other states have been. But, in the end, it will be in Victoria’s interests to join in. The problem we face today, as I said earlier, is because of the massive allocations of water rights, especially by the New South Wales government. Unused allocations have often been reallocated without cancellation or compensation. As for Queensland, further north—cowboy country—Rafferty’s rules seem to have been the order of the day for just too long.

The impact of the Prime Minister’s water initiative will have somewhat similar long-term outcomes to those of the Snowy River and Ord River schemes of the past. Generally, Australians welcome this initiative. The timing is critical, given the severity of the drought of the past 12 months. But farmers, especially older farmers, know that Australia has experienced such weather phenomena in the past. Our history is peppered with droughts. They have been part of the Australian farming scene since white settlement. In fact, a few scientists go further and provide evidence of drought conditions perhaps 200 years before 1788.

The delivery of the program will be tricky. There must be some sort of process for buying out unused entitlements and there must be some sort of evaluation of the future use of this precious resource. Some people have suggested that some towns may suffer if the rejigging is too great or severe. But I remind the Senate that the concept of country towns dying is already being faced across Australia as farms consolidate and managed investment schemes spread, squeezing out small family operations.

The key to the plan’s success will be the structure of the new management coordinating authority. Not only will the structure be important but, more particularly, the quality of the water experts who are going to be directing the operations will be important. The announcement that only water experts will be responsible for leading this challenging work is indeed welcome.

On the other hand, the government must, I believe, look wider than the Murray-Darling challenge and provide policies that deal with the broader issues of land management in Australia, of which the Murray-Darling Basin is but a part. Indeed, there is a lot of literature about the Murray-Darling and like problems. There is the excellent National Land and Water Resources Audit 1997-2002, which was established under the Natural Heritage Trust act. That audit was established ‘to provide a baseline for the purposes of carrying out assessments of the effectiveness of land and water degradation policies and programs’ and to ‘improve Australian government, state and regional decision making on natural resource management’. The reports of the audit have been compiled under seven themes: water resources, dryland salinity, vegetation, rangelands, agricultural productivity, capacity and opportunities for natural resource managers to implement change, and Australian catchment river and estuary assessment.

I will look at some of those sorts of issues to highlight the challenges before us. The uses to which water resources are put in agricultural areas provide a wide range of different returns and in some cases water costs are a major factor in the overall resource cost of production. The relative production efficiency of water used in food production makes interesting reading. For example, in the late 1990s and early 2000s, in terms of dollar value of crops per megalitre of water consumed in production, by far the best returns were obtained from vegetable and fruit crops, closely followed at that time by tobacco. Those crops that utilised their water with far lower returns in the value of production included pasture, sugarcane, rice and peanuts. The middle ground was held by cotton, tree nuts and grapes. In terms of overall water use, the dairy industry used 40 per cent of the total water used. The next biggest user was cotton, with 15 per cent of the total, and then rice, with 11 per cent. The most efficient users, vegetables and fruit crops, utilised only 4.4 per cent and 2.6 per cent respectively of the total water used—a small proportion of the overall water consumed by agricultural industries. In dollar figures, the value returned from a megalitre of water used varied from a high of $1,800 for vegetables to a low of only $189 for rice. The important point was that there was great variety in terms of returns that are provided to various crops.

I would like to draw the Senate’s attention to a recent book, published in 2006. While I have some disagreement with some of its issues and conclusions, it is nevertheless thought provoking in this environment. I draw the Senate’s attention to High and Dry: How a Free Trade in Water Will Cripple Australian Agriculture. In so doing, I remind the listeners that this book was produced before the announcement of the water initiative. Because water is a mixed good with different characteristics in different markets, at the end of the day I believe that only governments can decide primary water allocations and prices amongst these markets.

The final value of product to the economy also depends on the extent and value of downstream processing, not merely that at the farm gate. Also, what is a high-value product today can quickly become a low-value product, as is currently happening in the wine grape industry. Further, excessive emphasis on high-value farm gate prices conflicts with other economic and social objectives, like providing the Australian people with low-cost food and helping Australian farmers achieve a competitive advantage over their heavily subsidised foreign competitors. Sometimes governments really must recognise that it is better to shift agriculture to the available water than shift water to agriculture. At the end of the day I think the farmers will always agree that they are often in the best position to judge water use from low-value to high-value crops because they have a lot of experience.

To my mind, old theories and old thinking, concepts imagined in a time when water fell from heaven—and it still does—and the world’s population was still in the millions, cannot provide the framework for managing the complexity of storing, allocating, buying, selling and using water to maximum advantage. There is more to this 21st century equation than divining that water is now a private good in a single market instead of an externality, as we did in the past. (Time expired)