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Chapter 1

Background and context of the Plan

1.1
The Murray–Darling Basin is the largest and most complex river system in Australia. It runs from Queensland, through New South Wales, the Australian Capital Territory, Victoria, and South Australia, and has 23 major rivers. The Basin is used by over 3 million people for access to clean drinking water, more than 40 Aboriginal nations call the area home, approximately 9200 irrigated agriculture businesses rely on its systems, and tourism within the Basin provides around $8 billion per year to local communities. The Basin also contains unique habitats for a diverse array of Australian fish and birds, as well as internationally significant wetlands.1
1.2
As set out in this chapter, the social, economic and environmental importance of the Murray-Darling river system is matched by the complexity of its effective management. The Murray-Darling Basin is both spatially and temporally variable; its conditions vary greatly between regions as well as over time. Management of the Basin is further complicated by water trading, consumptive water take, jurisdictional differences, and inconsistencies in measuring technology. The Basin also experienced its lowest average rainfall over a two-and-a-half year period on record for the period January 2017 to July 2019, with many areas in drought.2

Management of the Basin

1.3
Historically, water resources in the Murray-Darling Basin were managed by the states. Water rights were a significant and politically contentious issue between the then colonies of New South Wales, Victoria and South Australia in the latter decades of the 19th century, including during the Australasian Federal Conventions of the 1890s. Technical debates over how the proposed Constitution should address the sharing of the waters of the River Murray between the colonies threatened to derail the process of Federation itself. In summary, South Australia wanted to preserve in-stream flows for trade and navigation to its coastal ports, while New South Wales and Victoria were focused on preserving their ability to extract river waters for irrigation. During the Federal Conventions, South Australia argued that the proposed Commonwealth of Australia should be given the power to determine rights to the waters of the River Murray, an idea that was resisted by New South Wales and Victoria.3
1.4
As Paul Kildea and George Williams have explained, the influence of the competing objectives of South Australia on the one hand, and New South Wales and Victoria on the other, is apparent from a reading of ss 98 and 100 of the Constitution, the only two provisions that relate specifically to rivers and water resources. Whereas s 98 provides that the Commonwealth may intervene to protect river navigation (a section that became increasingly obsolete with the decline of river trade in the early decades of the 20th century), s 100 provides that the Commonwealth cannot restrict state rights to make 'reasonable use' of river waters for irrigation purposes. Aside from ss 98 and 100, however, the Constitution is silent on river management, reflecting the framers' decision that the matter would essentially be one for the new states, just as it had been for the colonies prior to Federation.4
1.5
In 1915, severe drought at the turn of the twentieth century compelled the New South Wales, Victorian and South Australian Governments to reach an agreement to regulate the flow of the River Murray for irrigation and transport purposes with the assistance of the Commonwealth. The River Murray Commission was established in 1917 with narrow powers to establish a work program to be carried out by the states and a water sharing formula for the river. The River Murray Commission only received powers to monitor water quality in 1981.5
1.6
In 1987, following the emergence of major water quality issues in the River Murray, the Commonwealth, New South Wales, Victoria and South Australia signed the Murray-Darling Basin Agreement. The Agreement provided an institutional framework to provide a more coordinated response to environmental and economic threats to the entire Basin.6 Queensland and the ACT formally became signatories to the Agreement in 1996 and 1998, respectively.
1.7
In 1995, the Murray-Darling Basin Ministerial Council, made up of Ministers responsible for water from each Basin jurisdiction and the Commonwealth, introduced the Murray-Darling Basin Cap on Surface Water Diversions. The Cap limited the amount of water that could be taken from rivers in 24 river valleys in the long-term. The Cap required Basin States to plan how these long-term limits would be converted into annual cap targets after taking into account weather predictions and water availability in each year.7 Once a Cap model was developed, it was subjected to an independent technical audit and submitted to the former Murray-Darling Basin Commission for approval. The Basin state concerned was then responsible for implementation, while the Murray-Darling Basin Commission was responsible for auditing compliance with the Cap.8
1.8
From the late-1990s to 2010, drought again exposed water management issues in the Basin and resulted in the Commonwealth passing legislation to ensure Australia's largest water resource would be managed in the national interest. The Water Act 2007 introduced greater Commonwealth responsibilities whilst recognising that Basin states continue to manage water within their respective boundaries.
1.9
The Water Act established the Murray-Darling Basin Authority (MDBA) and required it to develop a strategic plan for the integrated and sustainable management of Basin water resources. The Murray-Darling Basin Plan was adopted in 2012, and aims to bring the Basin back to a healthier level, while continuing to support the communities and industries that rely on it (discussed at paragraph 1.15).9
1.10
The Water Act also established a Commonwealth Environmental Water Holder to manage water acquired by the Australian Government for the restoration and protection of the environment (discussed in Chapter 3); provided the Australian Competition and Consumer Commission with a role in developing and enforcing water charge and water market rules (water trade is discussed in Chapter 4); gave the Bureau of Meteorology water information functions (discussed in Chapter 2); and tasked the Productivity Commission with reporting on the effectiveness of the implementation of the Basin Plan and progress towards achieving the objectives of the National Water Initiative (NWI).10
1.11
The Murray-Darling Basin is now managed simultaneously through legislation on three different levels: state, intergovernmental agreements, and Commonwealth. This provides a complex governance framework for the Basin. At the committee's October 2019 public hearing, the MDBA explained the relationship between this complexity and the history of water use and management in the Basin. The MDBA argued that each level of management (state, intergovernmental and Commonwealth) has a purpose, and each state brings the resources required to deliver the Plan on the ground:
[E]ach of the states, because of the history of their settlement, has different water sharing arrangements, and there's a huge amount of complexity below the level of the Basin Plan…In order to understand that complexity and, more importantly, to administer that complexity on the ground to entitlement holders, you would need the sorts of resources that the states bring to bear, which are vastly greater than what the Commonwealth has.11
1.12
Concerns have been raised that some work and responsibilities under the Plan are being duplicated across jurisdictions, thus creating inefficiencies in the use of resources. Further, some parties have argued that there is a lack of clear responsibility, accountability, and alignment between programs, as well as confusion about who to contact when issues arise.12
1.13
The Productivity Commission mapped out an overview of the water management roles under the Basin Plan, MDB Agreement and state water management laws (see Figure 1.1).
1.14
The committee is interested in understanding where points of duplication exist and the ways in which existing processes and structures could be improved and streamlined.

Figure 1.1:  Overview of water management roles

Source: Productivity Commission, Murray-Darling Basin Plan: Five-year assessment, 19 December 2018, p 345.

Governance arrangements

1.15
Basin states are largely responsible for water management and environmental protection, while the Commonwealth Government is responsible only for environmental matters that are of national significance.13 Each Basin state maintains authority for its water resources and is responsible for managing water in their jurisdictions through water management legislation, water entitlement and licensing, and regulatory and compliance frameworks.14 State legislation typically provides a framework for water rights, administration and enforcement, regulation of water use and return flows to protect the environment, and water infrastructure management. States are responsible for ensuring that their legislation is consistent with the Basin Plan.15
1.16
Each state has a Minister who is responsible for water management, and who is assisted in this role by a department.16 State water departments allocate water between consumptive and non-consumptive uses through a water plan following an assessment of the economic, social, and environmental benefits and costs.17 Most jurisdictions deal with supply variability by allocating water according to a pre-arranged order of priority.18
1.17
Basin states have a number of agencies that carry out water management functions such as allocation, administration, distribution, regulation, monitoring, and enforcement. Not only are there a large number of organisations involved in water management, but each organisation carries out multiple functions, and sometimes, the same function is performed by more than one organisation. In its 2003 report on water arrangements, the Productivity Commission observed that shared responsibility requires coordination to be effective, and noted that it can make it difficult to hold agencies to account. It raised concerns that in all the Basin states, policy development and allocation are not clearly separated from administration, monitoring and enforcement functions.19
1.18
The MDBA coordinates how the Basin's water resources are managed, operates the River Murray system on behalf of Basin governments, oversees implementation of the Basin Plan, and carries out compliance functions. The MDBA is accountable to the Murray-Darling Basin Ministerial Council, which sets the MDBA's objectives. The Department of Agriculture is responsible for water sustainability and recovery, funding and implementing SDL Adjustment Mechanism projects20, chairing the Basin Officials Committee (BOC), and policy advice. It works to the direction of the Commonwealth Minister for Water who is accountable to the Parliament. The BOC is responsible for providing advice to the Ministerial Council and for implementing the decisions of the Ministerial Council. Figure 1.2 outlines the governance arrangements of the Basin.

Figure 1.2:  Governance arrangements

Source: MDBA, Submission 1, p. 3.
1.19
An independent review of the Basin Plan's joint governance arrangements was commissioned by the MDBA and Basin governments in June 2018. The review was led by Greg Claydon and aimed to inform the improved stewardship of the Basin Plan by all governments through streamlined decision making, clarity of roles and responsibilities of various committees, improved efficiency and cost effectiveness of joint governance arrangements and increased transparency and community confidence. The review concluded in February 2019 and included recommendations on effective and streamlined processes to support the delivery of water reforms and improved institutional and governance arrangements for implementing the Plan. At the committee's public hearing on 18 October 2019, the Department of Agriculture advised that the Basin Officials Committee was considering the findings of the review and a response was expected to be finalised by the end of 2019.21
1.20
There are also concerns regarding the composition of the MDBA Board.22 The position of Chair of MDBA Board has been vacant since the former Chair's term expired on 31 January 2019. At the public hearing on 18 October 2019, the Department of Agriculture advised that the recruitment and replacement process of the Chair was still underway and that another Member of the Board, Joanna Hewitt, had been acting in the role in the interim.23 In September 2019, the Water Amendment (Indigenous Authority Member) Bill 2019 passed Federal Parliament and established an Indigenous member position on the MDBA Board for the first time.24
1.21
Concerns regarding the exclusion of Aboriginal people from key planning, decisions, and expert panels across the Basin have been summarised in a Conversation article by Bradley Moggridge and Ross Thompson from the University of Canberra.25 In addition to the Northern Basin Aboriginal Nations and the Murray Lower-Darling Rivers Indigenous Nations, which represent more than 40 Aboriginal nations across the Murray–Darling Basin, a Baaka Water Commission has been proposed by Barkandji Native Title Holders ('Baaka' is the traditional name for the Darling River). A Baaka Water Commission would provide Aboriginal cultural knowledge on water management, and would include state and federal politicians, department heads and bureaucrats, and Indigenous and non-Indigenous stakeholders.26

Intergovernmental agreements

1.22
Where water sources such as river and groundwater basins span jurisdictional boundaries, Basin states have in place intergovernmental agreements that cover division of waters and place obligations on parties regarding how common resources will be shared. The arrangements typically cover water allocation, data collection, sharing of costs, monitoring of water use and pollution, operation and maintenance of infrastructure, and conservation of the environment. Within the Basin, there are several intergovernmental agreements in operation, including the Murray-Darling Basin Agreement, NSW–Queensland Border Rivers Agreement 2009, Lake Eyre Basin Agreement 2001, and the South Australia–Victoria Groundwaters Agreement 1985.27

The Murray-Darling Basin Plan

1.23
The Basin Plan provides a coordinated approach to water use across the Basin States and seeks to balance environmental, social, and economic needs by setting water use to a sustainable level.28 The Basin Plan does not aim to drought-proof the Basin or return it to pre-development conditions; rather, it aims to share available water equitably between all users in variable climatic conditions.29 The Basin Plan is a legal commitment made under Commonwealth law; however, its implementation is complex, requiring cooperation and commitment from six governments. The Plan is over halfway to full implementation and will be complete in 2024.
1.24
The Plan has nine key components:
(1)
Consumptive water limits: restrict the amount of water that can be taken from the Basin each year and are delivered through sustainable diversion limits and Water Resource Plans;
(2)
Water recovery targets: set targets for recovering water at local and state levels to be retained in the system for the overall health of the rivers;
(3)
Environmental watering: allocates water to Federal and State Environmental Water Holders across the Basin who use the water to improve the health of rivers, wetlands, and floodplains;
(4)
Infrastructure operation and development: infrastructure is managed and operated along the River Murray to share water between NSW, Victoria, and South Australia. It is also being developed through the Sustainable Diversion Limits Adjustment Mechanism to improve efficiency of both consumptive and environmental water use;
(5)
Groundwater management: where surface and groundwater systems are connected, extractions are being jointly managed through Water Resource Plans to ensure overall Basin health;
(6)
Water quality management: water quality is being managed through WRPs which aim to meet national water quality objectives as well as through salt interception schemes;
(7)
Water trading: water can be traded across state borders to encourage more efficient use and is regulated by the MDBA, ACCC, and Basin states;
(8)
Basin Plan compliance: Basin states must account for water taken and comply with WRPS, while the MDBA is responsible for monitoring and enforcing states' compliance with SDLs, environmental watering plans, water trading rules, and water quality targets; and
(9)
Monitoring and evaluating Plan implementation and effectiveness.
1.25
The various components of the Plan will be considered through the remainder of this paper. The next first two abovementioned components of the Plan—consumptive water limits and water recovery targets—are considered in the next chapter.

Financial transparency

1.26
More than $13 billion was committed to implement the Basin Plan.30 As at 30 September 2018, $8.4 billion of this funding had been expended. A breakdown of committed funding and expenditure as at 30 September 2018 is included at Figure 1.3.

Figure 1.3:  Expenditure on implementing the Basin Plan as at 30 September 2018

Productivity Commission, Murray-Darling Basin Plan: Five-year assessment, Inquiry report, No, 90, December 2018, p. 77.
1.27
The following section summarises the different payments the MDBA and Basin receive for implementing the Basin Plan and outlines concerns that there may be insufficient transparency in how payments are made, including appropriate checks and balances to ensure money is used for the intended purpose.

MDBA Revenue 2018-19

1.28
In 2018-19 the MDBA received revenue from the following sources:
$94.2 million of department appropriations from the Australian Government. This included additional funding for the implementation of Basin–wide Compliance Review recommendations ($9.1 million) and the National Cultural Flows Research Program ($2.5 million);
$93.5 million from other jurisdictions. This money forms the Joint Programs budget (comprising of River Murray Operations and other Natural Resource Management programs). The Basin states and the Australian Government makes payments in accordance with agreed cost share principles;31 and
$12.8 million from other revenue including comprised interest, rent for land and cottages, royalty from hydropower generation and grant funding.32

Commonwealth payments to Basin states

1.29
Basin states receive payments from the Commonwealth to implement the Basin Plan. These payments are made under a number of different partnerships and across a number of different programs as detailed below.

National Partnership Agreement on implementing water reform in the Murray-Darling Basin

1.30
The National Partnership Agreements (NPAs) are intergovernmental agreements between Basin states and the Commonwealth. The NPAs set out the outputs, outcomes and milestones that Basin states are required to achieve to meet their Basin Plan commitments. It also specifies Commonwealth payments to be made to the states in return for meeting these requirements. Basin states are required to submit an annual Statement of Assurance that reports on their progress against their milestones.
1.31
The NPA specifies that up to $174 million could be afforded to Basin States over the course of the agreement (which runs to 30 June 2020).
1.32
Commonwealth financial contributions to Basin states under the National Partnership Agreement is included at Figure 1.4.

Figure 1.4:  Actual Commonwealth financial contributions to Basin states, 2012-13 to 2017-18 under the National Partnership Agreement on implementing water reform in the Murray-Darling Basin

Department of Agriculture, National Partnership Agreement on Implementing Water Reform in the Murray-Darling Basin: Commonwealth payments to Basin states, https://www.agriculture.gov.au/sites/default/files/sitecollectiondocuments/water/payments-basin-states-under-npa-water-reform-mdb.pdf, (accessed 4 December 2019)
1.33
Further information about the NPAs, including recommendations from the Productivity Commission on how the agreements should be changed, is provided in Chapter 6.

National Partnership on Murray-Darling Basin Water Infrastructure Program

1.34
Starting in 2019-20 the Commonwealth Government will provide funding for state led efficiency measures under the Water for the Environment Special Account in the Murray Darling basin. Over $1.5 billion is available to improve water efficiency to deliver 450 gigalitres of water for the environment by 2024.
1.35
Payment information for this program is included at Figure 1.5.

Figure 1.5:  National Partnership on Murray-Darling basin water infrastructure program funding

Commonwealth Government, Federal Financial Relations Budget Paper No. 3 2019-20, https://www.budget.gov.au/2019-20/content/bp3/index.htm, (accessed 4 December 2019), p. 59

National Partnership on the South Australian River Murray Sustainability Program

1.36
The three components of this National Partnership support the Murray- Darling basin water reforms by contributing to a 'healthy working river system, strong communities and sustainable food and fibre production, while providing certainty for affected communities and water user.' 33 There was $24 million distributed to South Australia for this program in 2018-19.

Sustainable rural water use and infrastructure program

1.37
The Australian Government is providing funding for this program under a number of arrangements, including the National Partnership on water for the future, water management partnership agreements under the Intergovernmental Agreement on Murray Darling Basin Reform 2008, the Intergovernmental Agreement on Implementing Water Reform in the Murray-Darling Basin 2013, and Project Agreements outside of the Murray Darling Basin.
1.38
The program funds most of the water recovery to ‘bridge the gap’ under the Murray Darling basin plan. It also aims to improve the efficiency and productivity of rural water management and usage, deliver substantial and lasting water returns to the environment, secure a long term sustainable future for irrigated agriculture, and improve the health of wetlands and freshwater ecosystems.
1.39
Payment information for this program is included at Figure 1.6.

Figure 1.6:  Sustainable rural water use and infrastructure program funding

Commonwealth Government, Federal Financial Relations Budget Paper No. 3 2019-20, https://www.budget.gov.au/2019-20/content/bp3/index.htm, (accessed 4 December 2019), p. 63

Murray-Darling Basin Regional Economic Diversification Program

1.40
The Australian Government is providing funding to basin states to support economic diversification in regional communities likely to be affected by the implementation of the Murray Darling Basin Plan. Projects seek to encourage sustainable economic development through joint government, private and community sector investment. $17.6 million was expended for this program in 2018-19 across New South Wales, Victoria and Queensland.34

Transparency in funding arrangements

1.41
In the preparation of this issues paper the committee found that it is not possible to see all this funding information in one location. It is not clear which individual programs and projects are funded through which agreement and which money comes from the $13 billion originally set aside to implement the Murray-Darling Basin plan, and which are funded through other budgets. The committee welcomes additional information to build the picture of how money is allocated for the scheme.
1.42
In addition, it is challenging to understand how Basin States spend the money allocated to implement the Plan and related projects. These projects might be implemented by several state agencies, for instance, and it is unclear (at least through publically available information online) the breakdown of how money is spent and the checks and balances in place to ensure money is being used in accordance to agreements. For instance, the annual Statements of Assurance produced by Basin Governments that detail progress with NPA milestones are not available online, nor is the assessment process used by the Department of Agriculture to assess these reports. The committee welcomes suggestions on how the transparency of financial transactions in implementing the Basin Plan could be improved.

Adaptive management and changes to the Basin Plan

1.43
Adaptive management forms a key part of the Basin Plan; it allows governments and communities to adjust the Basin Plan as needed to suit changed circumstances. While the mechanisms and processes for making some changes are relatively straightforward, in some instances amending the Plan can be a technically, bureaucratically and politically complicated process. The committee is interested in understanding the ways in which adaptive management processes might be improved.
1.44
The committee also notes that the Constitution Alteration (Water Resources) 2019 has been proposed as providing a potential remedy to the challenges of managing and execution of the Basin Plan, including the challenges inherent in making any amendments to the Plan when required. The committee is currently undertaking an inquiry into that bill, which is in addition to its main work as set out in the terms of reference (that is, its main inquiry, of which this issues paper is part). The bill is summarised below.

Constitution Alteration (Water Resources) 2019

1.45
On 4 July 2019, the committee was referred the Constitution Alteration (Water Resources) 2019. The bill is a private member's bill that was introduced in Parliament on 4 July 2019. The bill, subject to approval in accordance with section 128 of the Constitution, proposes an alteration to the Constitution that would:
provide the Commonwealth with the power to make laws in relation to the use and management of water resources that extend beyond the limits of a state; and
ensure that any Commonwealth law relating to water resources does not have an overall detrimental effect on the environment.
1.46
In his second reading speech, Senator Patrick argued that, despite the Commonwealth Water Act 2007 and the implementation of the Basin Plan, there are still different water rules in each state, different compliance measures, different governments distributing money for different elements of the Plan, different accountability measures and ‘general opaqueness in the execution and oversight of the Basin Plan caused by its multi-jurisdictional nature’. As a vital resource, Senator Patrick contended, the Murray-Darling should have a fully national framework that operates in the national interest. He argued that under the current arrangements, it is very difficult to secure agreement between the Commonwealth, state and territory governments ‘as parochial interests typically trump the national interest’. Any proposed reform to Basin-wide water management can effectively be vetoed by state governments and state water ministers threaten to pull out of the Plan every time a change is proposed. Senator Patrick suggested that such an alteration ‘would put beyond doubt the Commonwealth's ability to legislate to manage the water resources of the Murray-Darling Basin river system and the Great Artesian Basin and if necessary to override inconsistent state water management legislation’.35
1.47
In addition to the committee's main work inquiring into the multi-jurisdictional management and execution of the Plan, it is simultaneously conducting a separate inquiry into the Constitution Alteration (Water Resources) 2019 bill. Submissions pertaining to the bill inquiry will open at the same time as the committee's main inquiry. The committee intends to conclude both inquiries in November 2020. More information about the bill and the inquiry is available from the committee's website.


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