Budget Review 2007-08 Contents

National Plan for Water Security

Bill McCormick
Science, Technology, Environment and Resources Section

Introduction

The National Plan for Water Security [1] was outlined by Prime Minister Howard in his address to the Press Club on 25 January 2007. It will be implemented with $10 billion being provided over a ten year period. The aim is to increase production with less water use and improving environmental outcomes. Aspects include: modernisation of irrigation and addressing over allocation of water in the Murray-Darling Basin (MDB); investing in information and monitoring; new governance for water management in the MDB and acceleration of the National Water Initiative implementation. [2] There is also funding to complete the Great Artesian Basin Sustainability Initiative and allow a Taskforce to examine further land and water development in Northern Australia.

At the water summit of 23 February 2007, NSW, South Australia and Queensland agreed to refer relevant constitutional powers to the Commonwealth to enable it to manage the MDB in the national interest and the ACT agreed to cooperate fully. Victoria is still negotiating with the Commonwealth to identify “mutually satisfactory ways of achieving agreed outcomes”. The referral of powers is the issue upon which the Plan is based. Memoranda of Understanding with the states are being developed. The Commonwealth will introduce legislation to establish a replacement body for the Murray-Darling Basin Commission, which will enable the Commonwealth Government to oversee water management in the MDB. The States will introduce necessary legislation to transfer powers. The passage of legislation will be delayed until Victoria comes to an agreement with the Commonwealth. At the end of the water summit, the Victorian Premier, Steve Bracks, said that Victoria would be:

 “hoping for a bigger share” of the $10 billion to ensure it was not disadvantaged. Adoption of the Howard proposal would fiscally reward states with poor infrastructure and poor water efficiency, he said. “We don’t want to see all the money going to the worst offenders with over-allocations and over-entitlement,” Mr Bracks said. [3]

On 4 May 2007, Simon Ramsay, President of the Victorian Farmers Federation, which had opposed the original proposal for Victoria ceding its powers over water management in the MDB to the Commonwealth, was reported as rejecting a revised Commonwealth proposal.

Canberra had shifted position from wanting all the states' powers over the Murray-Darling Basin to "only specific powers". "We have seen the draft legislation and do not believe the referral of power issue has been dealt with adequately to give either the VFF or other farming organisations the confidence to proceed with the plan," he said. "We will not agree to hand over full control of Victoria's resources. This has been our position from day one." [4]

In the same article, Victorian Minister for Water, John Thwaites, restated the state's position of wanting to work with the Commonwealth in a "co-operative and co-ordinated" way, rather than handing over powers. [5] On 17 May, he was reported as saying the Victorian Government would not agree to hand over unspecified powers to Canberra under the National Water Security Plan but it was prepared to improve the management of the MDB. [6]

Under the Plan, the Commonwealth is to be generally responsible for the water resource management in the MDB in the areas of:

preparing a Basin-wide Strategic Plan setting a sustainable cap on surface and groundwater use at the Basin and individual catchment level;

• establishing Basin-wide water quality objectives;
• setting standards for catchment level plans, including for the management of interception and floodplain activities;
• seasonal allocation of water resources;
• directing the operation of rural bulk water supply systems;
• environmental water management; and
• setting rules for water trading and charging regimes.

All the funding in the Budget papers, except the Northern Australian Task Force, is conditional on the “governance arrangements for the Murray-Darling Basin (MDB) being placed on a national footing” [7] . There is no explanation given as to why the funding for phase three of the Great Artesian Basin Sustainability Initiative should be conditional on agreement in the MDB. The Northern Australian Taskforce is not affected by this caveat because its funding of $20 million over five years will come from the Australian Water Fund.

Table 1 outlines the funding for the five programmes of the 10 year National Water Plan for its first four years. There is rounding in the totals so the 10 year totals do not quite add up.

Table 1 Funding for the National Water Plan for Water Security

* rounding errors affect figure which is $10 billion over 10 years

Source: Budget Paper No.2 Budget Measures 2007-08 [8]

Under ‘Addressing Over Allocation’ in the MBD, CSIRO is expected to estimate actual level of the overallocation of water in the MDB by the end of 2007, through the MDB Sustainable Yields Assessment. [9] Three billion dollars will be invested to buy back water entitlements and assist unviable irrigators to exit the industry. Water savings from this programme may be made available to irrigators when this is not in conflict with environmental needs.

There have been media reports that the government is not united over the voluntary buyback scheme and that the Minister for Agriculture, Fisheries and Forestry, Peter McGauran, wants the buyback of licences to be a means of last resort for the government. [10] It has also been reported that groundwater and surface water resources in the MDB are connected but have been double-counted with the result that there has been a significant overestimate of the actual amount of water flowing in the system. This overestimate has been claimed to be as high as 40 per cent. The Minister for Environment and Water Resources, Malcolm Turnbull, said this was wrong and misleading and the impact of this double counting could be as low as 3 per cent. [11] Professor Peter Cullen, a National Water Commissioner, disagreed with the Minister’s comments and said there appeared to be a massive error [12] . He said unregulated use of groundwater is one of the biggest threats to the MDB and that it needs to be regulated along with a buyback of licences. [13]

I think for a long time people have measured and managed surface water in our rivers, and they've seen ground water as totally disconnected, so in this river, the Lachlan, where we're sitting beside at the moment, floods have been seen to come down the river, and entitlements to those floodwaters have been issued to farmers. However, we didn't really appreciate it's those floods that replenish the ground water, and so ground water licences have also been issued, and so after a period of years with this double-counting, we find we've grossly over-allocated the wate r in a number of our river basins.

This would appear to be a massive error which would no doubt have huge implications on agriculture, urban users as well as water entitlement.

Yes, there are big errors. It's not just the ground water misallocation, but other things also affect the amount of water in our rivers - the amount of water that's captured in farm dams, the water that's captured by forest plantations. All of those things mean less water enters our rivers, so in many ways our counting has been very crude for water, and now that water is getting short and everyone is looking to try and maximise the amount of water they get, we find that all these errors in the accounting of the water are coming home to roost and we're finding ourselves in serious trouble. [14]

The $5.9 billion to be spent to improve irrigation infrastructure under Modernising Irrigation Australia aims to achieve efficiency gains of 25 per cent of total irrigation water use or 3,000 gigalitres (GL) in savings, of which 2,500 GL will be in the Murray-Darling Basin. These water savings will be allocated 50:50 between irrigators and programmes to address over-allocation and river health issues. Four elements of this programme are projected to achieve the following savings: improving delivery system efficiency ($3.1 billion to save 1,500 GL); improving on-farm irrigation efficiency ($1.6 billion to save up to 1,200 GL); more accurate metering and monitoring ($617 million to save up to 700 GL); and improving river and storage operations ($500 million to save 200 GL). In order to receive funding and share in water savings irrigators will be required to make investments and management commitments. [15]

There have been concerns about the limited scrutiny of the Plan by the Treasury and the fact that the Department of Finance and Administration had only two days to cost the $10 billion National Water Plan. [16] Victorian Minister for Water, John Thwaites, said:

We’ve always said that this takeover of the Murray-Darling Basin by the Federal Government was not properly prepared.

The whole thing was really the back of an envelope….prepared without any input from Federal Treasury, Federal Cabinet, the Murray-Darling Basin Commission, the states or indeed the experts. [17]

Natural Heritage Trust Phase Three

Bill McCormick
Science, Technology, Environment and Resources Section

Natural Heritage Trust Third Phase

The Australian Government will provide annual funding of $395 million for the third phase of the National Heritage Trust (NHT3) over five years staring in 2008-09. NHT3 will merge the two major Natural Resource Management Programmes, the NHT2 programme and the National Action Plan on Salinity and Water Quality (NAP), both of which finish in June 2008, with the aim of reducing red tape and to allow more integrated investment. These programmes were assessed by the Keogh Review of regional delivery of NRM programmes [18] . The Review found NRM was worthy of a continued and sustained commitment from the Australian Government and that it must persist with regional NRM arrangements or be prepared to risk losing community backing and on-ground support.

The review also recommended that a process be developed where stewardship payments may be made available to those landholders who can demonstrate a public good outcome, through improved resource management systems.

Five key themes will provide a broad focus for investment decisions for NHT3:

• biodiversity decline;
• salinity and water quality;
• coastal and peri-urban areas;
• productive and sustainable landscapes; and
• capacity building and institutional change. [19]

NHT3 will continue NRM delivery at the national, state and territory, regional and local scales, eg through the regional bodies and Envirofund. Specific details of new programme operations are still to be negotiated with the states over the coming months. Details relating to allocations for each state or territory and requirements for their matching funding contributions will be determined during the bilateral agreement negotiations currently taking place with each state and territory. It is possible that the current mix of State/Territory matching contribution in dollar and in-kind funding may continue in some form. A three year strategic national investment plan will be developed to address Australian Government priorities with some of the specific programmes funded through the national stream expected to continue.

Uncompleted projects under NHT2 and NAP, delayed due to drought or other unforeseen circumstances may be able to be completed after June 2008, subject to negotiations with states and territories.

It should be noted that, while all the allocated NHT2 funding will have been spent by June 2008, it appears from the estimated actual expenditure figures that $659 million rather than the predicted $700 million in NAP funds will have been spent by June 2008.

The future NHT3 spending of $395 million per annum in 2007-08 dollars over the five years from 2008-09 will be some $40 million per annum less than the average spending in 2007-08 dollars of the combined NHT2 and NAP programme spending over the period of 2002-03 to 2007-08. This reduction in provision of resources by the Commonwealth may have some impact on the ability of NRM programmes to deliver outcomes.

Environmental Stewardship Programme

As mentioned above, the Keogh Review recommended some form of environmental stewardship programme for landholders. This Budget provides $50 million in funding over four years for an environment stewardship programme. This will involve private land managers being contracted over the next four years to protect nationally important environmental assets on their land.

There will also be a commitment from the Australian Government for an unspecified amount of follow-up payments to these contracted land managers for up to 15 years [20] .

The first priority in the programme will be the protection of the national endangered box-gum woodland that extends from Queenslan d to Victoria and which forms important habitats for a wide range of plants and animals, including rare and threatened species such as Superb Parrots, Regent Honeyeaters and Squirrel Gliders. [21] [22] .

Details of the specific aims of the programme are not available and there is no definition of what is considered to be a “nationally important environmental asset”. It is essential that the effectiveness of the limited funding in the programme is not diluted but remains concentrated in protecting nationally threatened ecosystems and species.

Endnotes

[1] .     http://www.pm.gov.au/docs/national_plan_water_security.pdf

[2] .     Forbes, M 2007 Information session on the Prime Minister’s National Water plan for stakeholders 14 March 2007

[3] .     Austin, P, Grattan, M, Ker, P 2007 Bracks isolated as premiers sign up for water deal Age 24 February 2007

[4] .     Hughes, D 2007 Not biting: farmers reject water deal Australian Financial Review 4 May 2007

[5] .     ibid

[6] .     Hughes, D 2007 Victoria still prepared to go it alone. Australian Financial Review 17 May 2007

[7] .     http://www.budget.gov.au/2007-08/bp2/download/bp2.pdf

[8] .     http://www.budget.gov.au/2007-08/bp2/download/bp2.pdf

[9] .     http://www.pm.gov.au/docs/national_plan_water_security.pdf

[10] .    Grigg, A and Morris, S 2007 Battle looms over broader buyback of water licences Australian Financial Review 17 May 2007

[11] .    Tingle, L 2007 Compo concerns surface Australian Financial Review 18 May 2007

[12] .    SBS World News 16 May 2007

[13] .    Grigg, A and Morris, S 2007 Battle looms over broader buyback of water licences Australian Financial Review 17 May 2007

[14] .    SBS World News 16 May 2007

[15] .    ibid

[16] .    Martin, P 2007 More water torture for PM Canberra Times 18 May 2007

[17] .    Robinson, N 2007 Lack of papers ‘proves river plan was rushed’ Australian 18 May 2007

[18] .    http://www.nrm.gov.au/publications/regional-delivery-review/pubs/regional-delivery.pdf

[19] .    http://www.nrm.gov.au/publications/future/pubs/future.pdf

[20] .    http://www.environment.gov.au/minister/env/2007/pubs/mr08may707.pdf

[21] .    ibid

[22] .    http://www.environment.gov.au/epbc/publications/box-gum/pubs/box-gum.pdf

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