Jeannie Ferris (SA, Liberal Party) Share this | Link to this | Hansard source

My question is to Senator Minchin, the Minister representing the Prime Minister. The drought is having a terrible impact on the Murray-Darling Basin in particular. What role can the Commonwealth and state governments play in dealing with this dreadful drought?

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

I thank Senator Ferris for that timely question. Of course, like me and others in this chamber from South Australia—the driest of all the states—Senator Ferris has a very good understanding of the impact of this drought. Senators such as Senator Bill Heffernan are experiencing firsthand this drought’s effects on rural Australia. It is not the first time Australia has had a serious drought, of course. Many have referred this week and last to the infamous Federation drought, which I think is still our worst in recorded history.

Given the significant increase in agriculture in the Murray-Darling Basin and the increased number of people living along the river and, of course, in my home city of Adelaide at the end of the river, the impact of such a severe drought is magnified and it does raise very serious and difficult policy questions. If the cake is diminishing, how do you, as a responsible government, slice it up in a fair and reasonable fashion?

Our government has been focused on this issue and the related issues for quite a while. That concern culminated in 2004, when the National Water Initiative was agreed with the states and territories. Under that initiative, six tenets of water reform were agreed upon focusing on the conversion of water rights into secure and tradeable access entitlements, allowing for open trading arrangements and improved water pricing. The basic principle is that water users themselves are best placed to determine the most efficient use of water. If water rights can flow to the most efficient uses and if the price signals exist to encourage water efficiency then users themselves can make the tough decisions about how to allocate the available water fairly.

It is regrettable and disappointing that the states have not moved to water trading as quickly as they had agreed. But at COAG earlier this year all states agreed that a comprehensive water trading system should be in place by 1 July next year. Of course the prolonged drought has made these reforms much more necessary, and that is one of the reasons why the Prime Minister, very sensibly and responsibly, has convened a summit of premiers and water ministers to be held here tomorrow. The summit is an opportunity to discuss these aspects of water policy.

Unlike Adelaide, the other state capitals are not dependent on the Murray for their drinking water. They can have more water available if tough decisions are made. More water infrastructure—be it dams, grey water schemes or other innovative solutions—does need to be built. Unfortunately, the public sector’s record on building this infrastructure is not good. State governments have been taking large dividends out of water utilities, thus limiting the capacity of those water utilities to invest sufficient money in their infrastructure. By way of example, the Sydney Catchment Authority has paid 97 per cent of its returns as dividends for the past three years and Yarra Valley Water has repaid 90 per cent or more of its returns as dividends for the past four years. I think state governments need to reassess their dividend policy and, as the parliamentary secretary Mr Turnbull has so sensibly pointed out, they need to examine the opportunities for the private sector to invest in water infrastructure.

The summit will be a chance for the Commonwealth to reaffirm our very strong commitment to providing funding to support water-saving projects right across Australia, and we will keep that focus very much on our $2 billion Australian government water fund and other significant initiatives. We live on the driest continent on earth and probably the one with the most variable climate, but we are a prosperous nation and we have a proven ability to innovate when it comes to water and to adapt to our variable climate. The government hopes tomorrow’s summit can demonstrate that, by working together with the states, we can find fair ways of dealing with this very serious drought.