Murray-Darling Basin

Budget Review 2020–21 Index

Clare Murdoch

As part of the 2020–21 Budget, the Australian Government announced that $269.6 million would be allocated over four years to a Murray-Darling Communities Investment Package (the Package) (Budget Measures: Budget Paper No. 2: 2020–21, pp. 52–53). The Minister for Resources, Water and Northern Australia (the Minister) initially announced the Package on 4 September 2020. The Budget measure is $35.4 million more than was initially announced. The Package includes 11 initiatives that are designed to invest in community resilience and river health; build trust, transparency and accountability in government; and improve implementation of the Murray-Darling Basin Plan 2012 (the Basin Plan).

The $269.6 million Package consists of $183.1 million in additional funding with part of the cost offset from a reallocation of funding from the Water for Fodder program and the Sustainable Rural Water Use and Infrastructure Program. The now-discontinued Water for Fodder program, introduced in December 2019, enabled farmers to purchase water to grow fodder and pasture at a discounted rate from additional water releases in the southern Basin. The Sustainable Rural Water Use and Infrastructure Program, established in 2008, is the key mechanism for water recovery required by the Basin Plan.

Implementation of the Basin Plan, led by the Murray Darling Basin Authority (MDBA), has now been underway for eight years, with full implementation due by 2024. In total, the Australian Government has committed more than $13 billion to implement the Basin Plan. There have been a number of recent reviews of the Basin Plan’s progress which highlight current issues and challenges of Basin Plan implementation.[1] The current budget measures are cited as a response to the findings of two recent reports: the Independent Assessment of Social and Economic Conditions in the Murray–Darling Basin (Sefton Report), and the First Review of the Water for the Environment Special Account (WESA Review). This Policy Area Brief provides a brief background to some of these key issues.

Supply and constraints projects

The Basin Plan sets limits (called sustainable diversion limits (SDLs)) on how much water, on an annual average, can be used for consumptive (household, urban, industrial and agricultural) purposes based on a determined environmentally sustainable level of take. When the Basin Plan was legislated in 2012, annual water use in the Basin exceeded the SDLs. Therefore, in order to ‘bridge the gap’ between those usage rates and more sustainable levels of water use, the Basin Plan set an environmental water recovery target. This target has now mostly been met, through the purchase of water licences (water buybacks) and the implementation of infrastructure projects. However, the SDLs have also been increased on the condition that the New South Wales (NSW), Victorian and South Australian governments implement a range of supply and constraints projects, designed to achieve equivalent environmental outcomes with a lower volume of environmental water. The Basin Plan requires these projects to be implemented by June 2024. Failure to meet this deadline will require governments to make up the shortfall through more water recovery. There is significant risk these projects will not be delivered in time.

Basin states are responsible for delivering the supply and constraints projects. The budget announcement includes $70.5 million over four years to work with Basin states to accelerate planning and delivery of projects that are at risk of not being delivered by 2024, and to develop a new National Partnership Agreement with Basin states. The supporting policy document of the Department of Agriculture, Water and the Environment (the Department) suggests that this funding is targeted at the delivery of supply and constraints projects, and is in addition to existing Australian Government commitments of up to $1.3 billion to support the implementation of supply measures, and $200 million allocated in the Water for the Environment Special Account (WESA) to fund constraints projects. The early stage of many of these projects means that much of this committed funding remains to be delivered. Throughout 2019–20, $129 million was delivered to the relevant states to progress supply projects, on top of $34 million spent to 2018. To the end of 2018–19, approximately $4.9 million had been spent on constraints projects from the WESA, with additional funding agreements worth $67 million signed (based on expenditure reported in WESA annual reports from 2015–16 to 2018–19).

Since the announcement of the Package, NSW Minister for Water Melinda Pavey provided evidence to the current Senate inquiry into Basin Plan management that NSW cannot deliver key supply projects by 2024. The Department has indicated it will partner with the National Water Grid Authority to deliver supply projects—the Budget’s funding for the National Water Grid is addressed in the separate Budget Review brief ‘Infrastructure portfolio’.

Efficiency measures

The Australian Government has a legislated requirement to recover an additional 450 gigalitres (GL) for enhanced environmental outcomes by June 2024. This water recovery must be delivered through efficiency measures: projects that provide additional environmental water through improved water use practices, while maintaining or improving social and economic outcomes. This additional water recovery is controversial—negotiated by the South Australian Government during development of the Basin Plan, the NSW and Victorian governments have opposed the measure since its introduction. Almost the entire amount remains to be recovered. The WESA Review concludes that the 450 GL of additional water will not be recovered by June 2024 (pp. 19–20).

The Australian Government is responsible for additional water recovery. This budget announcement includes $37.6 million over two years to deliver projects to sustain environments in the Riverland, South Australia. The Department notes that this measure contributes to the recovery of the additional 450 GL in recognition of delays in securing this water. The WESA allocates $1.6 billion to fund efficiency measures, delivered through the Water Efficiency Program since July 2019. It is unclear if this budget measure will be funded by the WESA or represents additional funding. As at 1 June 2020, the WESA had provided total funding for efficiency measures of approximately $12.2 million: around $12 million on the Commonwealth On-Farm Further Irrigation Efficiency pilot program in South Australia, and $0.2 million for two South Australian projects under the Water Efficiency Program.

The most controversial aspect of this measure is that, when announcing the Package, the Minister indicated that the Australian Government has ruled out further water buybacks, and will focus on off‑farm efficiencies to deliver further water recovery. This strategy is recommended by the Sefton Report and largely supported by irrigators and farmers, but has also attracted criticism on the basis that water recovered from infrastructure programs comes at a higher cost than water buybacks,[2] and there is uncertainty around the effectiveness of efficiency measures.[3]

Compliance

Compliance is critical to the integrity of the Basin Plan. The compliance framework for the Basin has developed since July 2017, when an ABC Four Corners report exposed problems with water take enforcement and state compliance regimes, including allegations of water theft and corruption. Following the report, investigations at state and federal levels[4] found deficiencies in water metering and measurement, water accounting and management, and compliance and enforcement, particularly in the northern Basin. Subsequently, the Commonwealth and Basin states signed the Murray-Darling Basin Compliance Compact and the MDBA implemented a range of measures to ensure transparency and accountability of Basin governments, including establishing an Office of Compliance.

The Budget includes $38.7 million over four years, and then an ongoing $9.8 million per year, for the establishment and operation of a new statutory authority, the Inspector-General of Water Compliance. The Inspector-General of Water Compliance will be the third iteration since 2017 of an oversight role separate from the MDBA. The position of Northern Basin Commissioner was initially established, with former Australian Federal Police Commissioner Mick Keelty appointed to the role in August 2018. In August 2019, the Australian Government announced plans to establish an Inspector-General of Murray-Darling Basin Water Resources to provide independent oversight of Basin Plan implementation and improve transparency, accountability and community confidence across the whole Basin. On 1 October 2019, Keelty was appointed as the Interim Inspector-General, pending legislative changes to establish the role as a statutory appointment; however, to date, legislation has not been introduced.

The Inspector-General of Water Compliance is slated to merge the responsibilities of the Interim Inspector-General of Murray-Darling Basin (MDB) Water Resources and the MDBA’s Office of Compliance. These changes align with recommendations made by the Productivity Commission Inquiry Report (see recommendation 14.2). The Department’s schedule for implementation of this budget measure sets a target for the Inspector-General of Water Compliance role to be established by the third quarter of 2021, although this will be subject to the passage of legislation.

Community resilience

Community resilience refers to the ability to cope with and adapt to changing conditions, such as climatic and economic variability. In the MDB, communities must also adapt to decreases in consumptive water use as a result of water recovery required by the Basin Plan. This has, from the outset, prompted concern and protest from many rural and regional communities, and even prior to implementation it was recognised that some communities would be more vulnerable than others to the impacts of water recovery under the Basin Plan. However, initial management of the socioeconomic impacts of the Basin Plan focused on water recovery rather than community resilience. The Sefton Report found that, while around $6 billion has been invested by the Australian and Basin state governments in water infrastructure, since 2008 only $260 million had been committed to support communities to adapt to less available water (with approximately $176 million of this spent by the Australian Government)(p. 73).

There is now a general recognition by the Australian and Basin state governments that more must be done to build resilient Basin communities. To this end, the Budget includes $37.6 million over two years to extend the MDB Economic Development Program. The Australian Government established the MDB Economic Development Program in January 2019. The Sefton Report considers the MDB Economic Development Program to be better targeted and potentially more effective at supporting transitioning regions and communities than previous programs. As such, the Sefton Report recommended the program be extended to 2030, with priority given to communities most affected by Basin water reforms (see recommendation 9).

The MDB Economic Development Program has so far provided funding of almost $38.8 million to 74 projects across 44 communities, including the development of tourism-related infrastructure and services, health services and community sporting facilities. However, this budget measure only commits to a two-year extension of the program, which is considerably less than recommended by the Sefton Report.

First Nations engagement

The Sefton Report echoes the findings of previous reports that implementation of the Basin Plan requires improved engagement with First Nations communities and improvements in the recognition and provision of cultural flows. Cultural flows are water entitlements that are owned and used for cultural, social, spiritual and customary purposes by Traditional Owners. To date only a small portion of water entitlements have been allocated to First Nations peoples, with water licences limiting use to cultural purposes, preventing trade or use for economic purposes.

Recent Australian Government initiatives to address these concerns include providing for a ‘standing Indigenous Authority member’ position on the MDBA, and a commitment of $40 million to support MDB First Nations investment in cultural and economic water entitlements and planning activities. It is unclear if any of this committed funding has been distributed to date—the Department’s schedule for implementation of this measure includes a commitment to ‘agree the framework for implementing the $40 million Aboriginal water entitlements program’ by the first quarter of 2021.

The National Indigenous Australians Agency will coordinate the MDB River Rangers Program, which will operate for 12 months commencing from 1 July 2021, and is estimated to generate 20 jobs. There are around 12 existing Indigenous Ranger Groups within the Basin area. Funding in this budget measure is in addition to funding for the broader Indigenous Ranger Program, which was recently extended to 2028. This program has received support from representative groups including the Northern Land Council and Country Needs People. Broader budget funding for First Nations peoples is addressed in a separate Budget Review brief on Indigenous Affairs.

[1]. Including the Productivity Commission’s (PC) 2018 Inquiry Report on the Basin Plan, the Australian Competition and Consumer Commission (ACCC) Interim Report on Murray-Darling Basin water markets, the Independent Assessment of Social and Economic Conditions in the Murray–Darling Basin (Sefton Report), and the First Review of the Water for the Environment Special Account (WESA Review), as well as a number of reviews into specific issues, such as the impact of low inflows on Basin state water shares, fish kill events in the Darling River near Menindee, NSW, and management of the Lower Lakes, South Australia.

[2]. See, for example, Department of the Environment (DoE), Water Recovery Strategy for the Murray-Darling Basin, DoE, Canberra, 2014, pp. 15, 17; and L Whittle, D Galeano, N Hughes, M Gupta, P Legg, T Westwood, T Jackson and S Hatfield-Dodds, Economic effects of water recovery in the Murray–Darling Basin, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra, 1 September 2020, p. 7.

[3]. See, for example, J Williams and RQ Grafton, ‘Missing in action: possible effects of water recovery on stream and river flows in the Murray–Darling Basin’ Australasian Journal of Water Resources, 23(2), 2019, pp. 78–87; QJ Wang, G Walker and A Horne, Potential impacts of groundwater Sustainable Diversion Limits and irrigation efficiency projects on river flow volume under the Murray-Darling Basin Plan, Independent Review, report for the MDBA, October 2018.

[4]. Including the Matthews Investigation into NSW water management and compliance, the independent audit of Queensland water measurement and compliance, and the Murray-Darling Basin Water Compliance Review.

All online articles accessed October 2020

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