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John Quiggin

Blame shifts to the states

John Quiggin Australian Financial Review

4 June 2008

One of my earliest political memories, growing up in Adelaide in the 1960s, was that of Don Dunstan advocating the construction of the last big dam on the Murray River system at Chowilla in South Australia, rather than at the eventually selected site of Dartmouth in Victoria. Dunstan pointed to the fact that, if Dartmouth were built, Adelaide’s water supply could be cute by decisions made (or at least implemented) more than a thousand kilometres upstream in Victoria. The voters agreed, and Dunstan won the 1968 election, going on to become one of Australia’s great reformers.

Dunstan remains one of my political heroes but I later came to realise that Chowilla would have been an economic and environmental disaster. And, in the early 1990s, when we seemed close to achieving a co-operative federal solution to water policy, his parochial attitude seemed inappropriate.

But now, forty years after Chowilla was abandoned, Dunstan’s concerns look more reasonable. After a decade or more of failure, Australia finally has a water policy that has at least a chance of resolving the problems of the Murray–Darling Basin, and the biggest obstacle is Victoria’s determination to hold on to as much as possible of its water.

Until recently, despite talk of state obstructionism, the big failures in water policy were at the federal level. Economists and environmentalists have long agreed that unless governments are willing to buy back some of the water rights that were created on a lavish scale, then given away over the 20th century, there is no real hope for a solution to the problems.

The Howard government, and particularly Malcolm Turnbull as Minister for Environment and Water Resources, talked a good game, but failed to deliver significant progress. The Living Murray Program and the National Water Initiative went nowhere. Howard’s final venture, the National Plan for Water Security announced in early 2007 with no apparent input from Turnbull, was a big step backwards. The $10 billion allocation (most of deferred far into the future) concealed a decision to do nothing about buying back water for fear of offending the National Party.

But water policy is one area where the Rudd government has moved beyond review and consultation and gone on to effective action. The government’s purchase of water from Toorale station and the Twynam Agricultural Group in NSW with entitlements totalling nearly 300 gigalitres has the potential to secure more water for the environment, and for flows downstream to South Australia, than all the initiatives of the Howard era put together, and at significantly lower cost.

But a lot more action is needed, and the main obstacle is in Melbourne. The Victorian government has limited sales of irrigation water out of any given district to 4 per cent of total entitlements each water trading year. This limit is often reached in the first few days of the trading year, as farmers eager to sell water rush to beat the cutoff.

Until recently, Victoria also imposed a 10 per cent limit on total transfers. This policy was dumped under political pressure from the federal government. But despite recent talk of a compromise deal, the state government has not budged on the 4 per cent limit.

Unsurprisingly, New South Wales has now announced its own limits. South Australia has responded with legal action in the High Court to challenge Victoria’s limits. NSW would do far better to join this cause than to become part of the problem.

While this bickering continues, the spectre of climate change hangs over the whole debate. The best water policy in the world will achieve nothing if there is no water. And, since 2000, inflows to the basin have fallen well below the historical average.

We can reasonably hope that, as in the past, this drought will end. But the best available climate projections suggest that, if the global climate is not stabilised, the low inflows of recent years will become the norm by 2050. Under such conditions, irrigated agriculture will be little more than a memory, and the environmental icons of the Basin will be lost forever.

Climate change is already happening and more is inevitable. If the Murray is to be saved, we must combine adaptation and mitigation. We need an international agreement to stabilise the global climate, but we must also reduce water allocations to sustainable level through voluntary purchase. If parochial interests are allowed to obstruct this outcome, the scenario imagined by Don Dunstan all those years ago will finally have come to pass.

John Quiggin is an ARC Federation Fellow in Economics and Political Science at the University of Queensland.

John Quiggin is an Australian Research Council Federation Fellow in Economics and Political Science at the University of Queensland.

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