Water, including the Murray-Darling Basin

Dr Emily Gibson, Science, Technology, Environment and Resources

Key issue

Integrated and sustainable management and use of Australia’s water resources is essential for national water security.

The Murray-Darling Basin, Australia’s most important river system, continues to face critical threats to its health. The Basin Plan, to be jointly implemented by the Australian and Basin state governments, still needs to be implemented in full to secure environmental, social, and economic outcomes for the benefit of all Australians. 

Australia is the world’s driest inhabited continent and experiences high variability in rainfall. Around 10% of annual rainfall reaches waterways, water storages or groundwater aquifers, while the rest evaporates, mainly through vegetation (p. 2). Much of the country is vulnerable to drought, which affects agriculture, natural ecosystems, human health, communities and our national economy.

The Millennium drought affected most of southern Australia (other than parts of central Western Australia) over the period 1997 to 2009, while the return of drought conditions over much of the country during 2017–19 culminated in severe bushfires in the summer of 2019–20. Conversely, while drought conditions currently persist in parts of Tasmania, the Northern Territory, South Australia, and Victoria, southern Queensland and NSW received a year’s worth of rainfall from February to early April 2022 and were impacted by severe flooding.

The variability in Australia’s rainfall is strongly influenced by climate drivers including El Niño, La Niña, the Indian Ocean Dipole and the Southern Annular Mode. However, the State of the climate report 2020 identifies concerning long-term trends in Australia’s rainfall record (see Figure 1):

There has been a shift towards drier conditions across the southwest and southeast, with more frequent years of below average rainfall, especially for the cool season months of April to October. In 17 of the last 20 years, rainfall in southern Australia in these months has been below average. This is due to a combination of natural variability on decadal timescales and changes in large-scale circulation caused by increased anthropogenic greenhouse gas emissions. (p. 6)

Figure 1          Rainfall deciles over the last 20 years

(a) April to October

map of Australia showing Rainfall deciles over the last 20 years (a) April to October

(b) the Northern wet season

map of australia showing Rainfall deciles over the last 20 years (b) the northern wet season

Source: CSIRO and Bureau of Meteorology, State of the Climate 2020, (Canberra: Australian Government, 2020), 6–7; reproduced by permission of the Bureau of Meteorology, © 2022 Commonwealth of Australia.

According to the Intergovernmental Panel on Climate Change’s (IPCC) Sixth assessment report, climate change projections indicate there will be less winter and spring rainfall in southern Australia, more winter rainfall in Tasmania, less autumn rainfall in south-western Victoria and less summer rainfall in western Tasmania, with uncertain rainfall changes in northern Australia (p. 11 – 4).

Management of Australia’s water resources is often viewed solely through the prism of its production value. For example, 67% of water taken for consumptive use in 2019–20 was used for agriculture (p. 5). In that year, the gross value of Australia’s agricultural production was $61 billion, with $16.5 billion generated from irrigated agriculture. Around 70% of agricultural production is exported, contributing 12% of Australia’s total goods and services exports (pp. 2; 7). In 2019–20, water markets in Australia had an estimated turnover of $7 billion (p. 4), while the value of water entitlements in the southern Murray-Darling Basin doubled from $13.5 billion to $26.3 billion in the 5 years to 2019–20 (p. 30).

However, water’s value is not limited to economic impacts. Integrated and sustainable management of Australia’s water resources underpins broader concerns about water security and ecological significance. Observing that water security involves complex and interconnected challenges, UN-Water defines water security as:

the capacity of a population to safeguard sustainable access to adequate quantities of acceptable quality water for sustaining livelihoods, human well-being, and socio-economic development, for ensuring protection against water-borne pollution and water-related disasters, and for preserving ecosystems in a climate of peace and political stability. (p. 1)

The Australian Government does not have direct constitutional powers for managing water resources; these powers lie with the states and territories. However, the Australian Government still has an important role in water policy. The Council of Australian Governments (COAG) water reform framework was agreed in 1994, followed by the National water initiative in 2004, and the Howard Government’s $10 billion National plan for water security in 2007.

There remains, however, no nationally agreed definition of water security in Australia and, over the past decade, Australian Government engagement in water policy has been oriented to the augmentation of supply (that is, developing dams) and reducing the impact of existing regulation on private sector water users (p. 33). The Productivity Commission’s report, National water reform 2020, which recommends renewal and modernisation of the National water initiative, identifies several opportunities for adopting a more holistic approach to water security. These include (among others) (pp. 9–12):

  • the adoption of best practice water planning, which takes into account all water uses (including floodplain harvesting) and provides for the rebalancing of environmental and consumptive uses as a result of climate change
  • improved arrangements to make the best use of environmental water to achieved agreed (or where possible, better) environmental outcomes
  • securing Aboriginal and Torres Strait Islander peoples’ interests in water, supporting the achievement of the 2020 National Agreement on Closing the Gap, including adopting management measures to achieve cultural flows and economic outcomes for Aboriginal and Torres Strait Islander communities
  • the adoption of best practice urban water system planning, supported by community-driven objectives for water security, and additional support to ensure small rural water utilities provide acceptable levels of service.

Urban and rural water use

Urban uses account for 22% of Australian water consumption. Households paid an average of $3.46 per kilolitre and industry $0.46 per kilolitre in 2019–20, with the difference driven by factors including the cost of treating water so that it is suitable for human consumption. Most water, especially for supply to major urban areas, is sourced from surface water sources such as rivers and lakes (75%), with the remainder sourced from groundwater (aquifers), desalination plants, recycling (including groundwater replenishment) and stormwater harvesting.

Water scarcity may become an increasing issue for urban water supplies in the future. For example, groundwater provides two-thirds of all water used in urban Western Australia. However, winter rainfall has declined 28% since 2000, with reduced groundwater recharge, while demand is increasing due to population growth. This is prompting a focus on water-sensitive urban design and climate-resilient water sources, including desalination in some areas. Perth, along with other state capitals (Adelaide, Brisbane–Gold Coast, Melbourne and Sydney) now have large seawater desalination plants.

The quality of drinking water in urban areas is usually high, but can be more variable in regional and remote areas due to the presence of natural-occurring contaminants (such as nitrates and uranium) and more limited capacity to treat the water. Water service provision in regional and remote communities can be more complex, and costly, due to poor water quality sources, water distribution and treatment challenges, and fragmented arrangements for delivery (p. 162).

Independent audits have found that water service provision in remote Aboriginal and Torres Strait Islander communities often fails to meet the Australian Water Quality Guidelines. Poor standards of water and wastewater services compound historical hardships and reinforce disadvantage, can worsen existing health issues and increase risks of disease and infection. Infrastructure Australia states ‘there is clear evidence that services in many … remote communities do not meet United Nations’ Sustainable Development Goal (SDG) 6: clean water and sanitation for all’ (p. 619).

Urban waterways, and their associated ecosystems, also provide important habitat for native animal and plant species as well as a myriad of recreational opportunities. The Australian Labor Party (ALP) has committed $200 million to an Urban Rivers and Catchments Program that will provide community grants supporting wetland restoration, naturalisation of riverbanks, and revegetation.

Water storage and irrigation schemes

With over 500 major water storages, several thousand small storages, and in excess of 2 million farm dams (p. 21), Australia has the highest per capita surface water storage capacity in the world. According to the Bureau of Meteorology, the capacity of Australia’s accessible storage capacity is about 81,000 GL. At the end of May 2022, they were 69.3% full.

Water harvesting, storage and distribution schemes have been central to urban and regional development in Australia. While dams and associated irrigation schemes have increased water availability, infrastructure and works interrupt natural flow regimes, waterscape connectivity and the operation of aquatic ecosystem processes that require the run of the river.

Water resources assessments have suggested that a combination of groundwater, large dam and farm-scale water storages have the potential to support the development of irrigable agriculture in some areas across Australia’s north. However, large-scale developments face significant hurdles, including economic viability, environment sustainability, and heritage concerns.

Over the last decade the Australian Government has announced numerous initiatives to support regional water infrastructure, including the:

In May 2020, the NWGF replaced the NWIDF, with the $2 billion in unspent funding from the Loan Facility transferred to the NWGF (p. 140). The Morrison Government’s 2022–23 Budget provides an additional $6.9 billion over 12 years for investments through the NWGF (p. 147). This includes commitments for water infrastructure projects such as the Hells Gate and Urannah dams in Queensland and the Dungowan Dam in NSW. This brings total investment available under the NWGF to $8.9 billion.

The ALP’s Water for Australia plan includes re-establishing a National Water Commission, supporting renewal of the National water initiative, and broadening the National Water Grid Investment Framework (which sets out how investment from the NWGF will be targeted) to allow it to fund a wider range of water supply projects (rather than only agriculture projects). The ALP has indicated water infrastructure projects will only proceed if they provide value for money.

Murray-Darling Basin

The Murray-Darling Basin (MDB) covers an area of 1 million km², is home to more than 40 First Nations, and hosts a wider population of 2.3 million people. The MDB produces food and fibre worth $22 billion and provides tourism services worth $11 billion each year. Two-thirds of Australia’s irrigation water is used in the MDB. However, evaporation rates in the MDB are high, with 94% of rainfall used by plants or evaporating. The demand for water has resulted in significant pressures on freshwater ecosystems and degradation of water quality. Water storage levels across the MDB increased from 58% to 90% between May 2021 and May 2022.

In January 2007, in the midst of the Millennium drought, the Howard Government announced a $10 billion National plan for water security to improve water efficiency and address the over-allocation of water in rural Australia, including in the MDB. In August 2007, the Australian Parliament passed the Water Act 2007 which establishes the legislative framework for managing water in the MDB in the national interest and for providing information on Australia’s water resources. The Basin states (Qld, NSW, Vic, ACT and SA) subsequently referred limited powers to the Commonwealth to allow for new arrangements in the MDB to take effect, including the establishment of the Murray-Darling Basin Authority (MDBA).

The Basin Plan

The Water Act is implemented through the Basin Plan 2012, which was legislated in November 2012 following a multi-year negotiation process. The Basin Plan specifies the surface water and groundwater long-term average sustainable diversion limits (SDL) for the entire MDB, as well as for each surface water and groundwater unit and water resource plan area.

The SDLs are essentially the maximum amount of water that can be extracted in a year. The original surface water SDL for the whole basin was set at 10,873 gigalitres per year (GL/y). In July 2018, the SDL was increased by 70 GL/y to 10,945 GL/y after the Northern Basin review. The SDLs came into operation on 1 July 2019, along with a mechanism for their adjustment.

The establishment of the SDL was accompanied by the setting of a water recovery target of 2,750 GL/y (also referred to as the ‘bridging the gap’ target). This represented the gap between the water being used prior to implementation of the Basin Plan and the SDL.

Under the Basin Plan, the Basin states manage water resources within their jurisdiction using their own respective water legislation. States were required to prepare water resource plans (WRPs) for specific areas that are consistent with the Basin Plan and relevant SDLs by 30 June 2019. WRPs set out how water will be used, how much water will be made available for the environment, how water quality standards will be met, and how water resources will be managed in extreme dry periods.

The WRPs of all Basin states- other than NSW- have been accredited by the MDBA. The MDBA and NSW have entered into a bilateral agreement to ensure that key elements of the Basin Plan are implemented while NSW’s WRPs are being prepared. In June 2022, the Inspector-General for Water Compliance (IGWC) argued that the Commonwealth Water Minister should utilise ‘step-in powers’ in the Water Act to ensure that NSW’s WRPs are completed as soon as possible. In August 2021, the compliance and enforcement powers of the MDBA were transferred to the IGWC. This followed numerous reviews, including the Five-year assessment of the Murray-Darling Basin Plan (see Box 12.1 at p. 301), to assess water management compliance across the Basin.

The Basin Plan also provides for:

The Basin Plan will not be fully implemented until 30 June 2024, when the agreed constraints measures and ‘supply’ and ‘efficiency’ measures under the SDL Adjustment Mechanism are completed.

Figure 2          Water recovery under the Basin Plan

diagram showing Water recovery under the Basin Plan in GL

Source: Parliamentary Library adaptation from Sally Farrier, Simon Lewis and Merran Kelsall, First Review of the Water for the Environment Special Account, Report to the Commonwealth Minister for Water Resources as required under Section 86AJ of the Water Act 2007, (Canberra: Australian Government, March 2020), Figure 1, 10.

SDLs and water buybacks

The establishment of SDLs- at an environmentally sustainable level of water use or take- has been one of the most contentious elements of the Basin Plan. The 2010 Guide to the proposed Basin Plan considered that water recovery ‘needed to ensure a sustainable level of take, is between 3,000 GL/y and 7,600 GL/y, on a long-term average basis’ (Volume 2, p. 166). This became politically untenable: South Australia argued for at least 3,200 GL/y to be recovered as environmental water, while NSW and Victoria wanted less than 2,750 GL/y to be recovered.

As a compromise, the Australian Government established 2 mechanisms:

Australian Government funding is supporting 3 types of measures or projects in the MDB. Supply measures deliver water for the environment more efficiently so less water is needed. Efficiency projects change water practices, such as improved irrigation methods, and save water for the environment. Constraints projects overcome some of the physical barriers that impact water delivery.

In January 2018, the Basin Plan was amended to provide for the implementation of supply projects to allow 605 GL/y of additional water to remain available in the system (altering the water recovery target to 2,075 GL/y), while still achieving the same or better environmental outcomes. This was dependent on the recovery of a minimum of 62 GL/y through efficiency projects by 30 June 2019. The 62 GL/y is a subset of the larger 450 GL/y target.

Progress on water recovery

Substantial progress towards water recovery targets has been made, however, as at 30 April 2022, there was a significant shortfall in the recovery of water for the environment. Only 2 GL of the required 450 GL/y water recovery for enhanced environmental outcomes has been delivered, although 23.9 GL/y has been contracted.

The MDBA’s annual progress reports for the SDL Adjustment Mechanism and the First review of the water for the environment special account indicate that it is unlikely the full amount of 450 GL will be recovered by 30 June 2024, putting the overall SDL adjustment at risk. The Water Act makes provision for the MDBA to recalculate (reconcile) an appropriate adjustment amount and prepare an amendment to the Basin Plan in these circumstances. The Australian Government would then need to consider the best options for bridging the water recovery gap to ensure the outcomes of the Basin Plan are achieved.

The Australian Government initially purchased water entitlements directly from landholders (‘buybacks’) to support the achievement of the 2,075 GL/y water recovery target; 1,227 GL had been purchased by the Commonwealth at a cost of $2.7 billion by October 2017 (p. 4). In September 2015, the Water Act was amended to cap the volume of water that can be purchased at 1,500 GL (subject to exceptions). The relevant provisions will cease to operate when the first 10-year review of the Basin Plan is completed (p. 7). In September 2020, the Morrison Government ruled out further buybacks; however, a substantial shortfall in water recovery raises the prospect that the targets will not be met by 2024 and further action will be required.

Policy commitments

The Morrison Government had committed to delivering the Basin Plan in full, including the 450 GL water for the environment. However, in July 2021, National Party senators attempted to move amendments to the Water Act that would have removed a requirement to deliver the 450 GL of water for the environment, prohibited further water buybacks, and extended the deadline for delivery of water recovery projects.

The incoming Albanese Government’s Water for Australia plan includes a ‘five-point plan to safeguard the Murray-Darling Basin’. This includes:

  • delivering on water commitments- including the 450 GL for environmental water
  • increasing compliance, and improving metering and monitoring
  • restoring transparency, integrity and confidence in water markets and water management
  • increasing Aboriginal and Torres Strait Islander peoples' ownership and involvement in decision-making, including delivering the $40 million of cultural water
  • updating the science, including data on climate change, evaporation and inflows.

Further reading

Infrastructure Australia, An Assessment of Australia’s Future Infrastructure Needs- The Australian Infrastructure Audit, (Infrastructure Australia, 2019).

Productivity Commission, Murray-Darling Basin Plan: Five-Year Assessment, Inquiry Report no. 90, (Canberra: Productivity Commission, 19 December 2018).

Productivity Commission, National Water Reform 2020, Inquiry Report no. 96, (Canberra: Productivity Commission, 28 May 2021).


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