Water

Dr Emily Gibson and Dr Martin Smith

Introduction

This budget continues the Australian Government’s focus on the delivery of the Murray-Darling Basin Plan and further assessment of water infrastructure projects to be delivered under the National Water Grid Fund. The assessments are consistent with the recent broadening of the National Water Grid Investment Framework, which allows for investment in water quality and supply projects in regional and remote communities.

On Budget evening, the Minister for Water, Tanya Plibersek, said the government was ‘delivering critical water infrastructure, fixing the broken water market, and protecting the health of the Murray‑Darling Basin’. The 2023–24 Budget includes a range of water-related measures that are consistent with the government’s Water for Australia Plan, including delivery of the Murray-Darling Basin Plan in full and on time, and its acceptance of the Independent Principal Adviser’s recommendations contained in the Water market reform: final roadmap report.

The measures build on funding in the 2022–23 October Budget (see the Parliamentary Library’s Budget review October 2022–23 paper ‘Water reforms’ (pp. 104–108)).

Murray-Darling Basin

The Murray-Darling Basin is Australia’s largest surface water catchment and holds significant environmental, cultural, social and economic value. A framework for cooperative management of the Basin water resources by the Commonwealth and Basin states was established by the Water Act 2007 and the Basin Plan 2012; however, progress towards many of the Basin Plan’s targets has been challenging. At the time of writing, there is a shortfall of 46.0 gigalitres per year (GL/y) and 3.2 GL/y in the ‘Bridging the Gap’ surface water and groundwater recovery targets respectively.

The Basin states must also deliver a suite of supply and efficiency measure projects under the Sustainable Diversion Limit Adjustment Mechanism (SDLAM) to allow recovery of 450.0 GL/y of water for enhanced environmental outcomes. However, several of the major projects are unlikely to be delivered in full and on time, and there is currently a shortfall of 424.0 GL/y.

In late February 2023, the Minister for Water announced the beginning of a process to buy back water to meet the ‘Bridging the Gap’ surface water target. The announcement was met with a mixed reception. The tender opened on 23 March 2023 and will close on 19 May 2023.

States are required to notify the Murray-Darling Basin Authority (MDBA) by 31 December 2023 of SDLAM projects that are unlikely to be delivered by 30 June 2024, or of new efficiency measure projects that will be undertaken. In April 2023, the Victorian Government paused work on 4 water recovery projects which would not be completed by the 2024 deadline. A shortfall in water recovery will trigger a reconciliation process in 2024 and could lead to further buybacks.

Environment groups have called for more money for water recovery, noting the purchase of water entitlements from willing sellers is the most reliable and cost-effective method.

The Water Act and Basin Plan contain a number of statutory requirements for analysis, evaluation and review of the Basin Plan. Relevantly, the MDBA is required to review the Basin Plan every 10 years, with the first review to be undertaken in 2026. The review will involve consultation with the Basin states and communities and may result in the MDBA proposing amendments to the Basin Plan.

The budget measure ‘Future-proofing of the Murray-Darling Basin’ provides $148.5 million over 4 years from 2023–24 to enable the MDBA to undertake the statutory review ($103.7 million) and the Department of Climate Change, Energy, the Environment and Water (DCCEEW) ‘to provide advice and work with Basin states and affected communities’ ($44.9 million) (Budget measures: budget paper no. 2: 2023–24, p. 69). According to the minister:

The review will be based on updated science and incorporate knowledge of First Nations people. It will consider the challenge posed by climate change and set the Basin up for the future, ensuring the river system is healthy and the Basin sustainable.

The budget papers suggest this measure may support a substantial increase in staffing for the MDBA and DCCEEW (Agency resourcing: budget paper no. 4: 2023–24, p. 157).

Separately, on 2 May 2023, the Productivity Commission announced the commencement of its second five-yearly statutory review into the effectiveness of the implementation of the Basin Plan and water resource plans. The commission will report on the wide-ranging terms of reference by 19 December 2023.

The Australian Government is providing nearly $3 billion in National Partnership Payments to the Basin states to support the delivery of its commitments and programs under the Murray-Darling Basin Agreement (see Table 1). Most of these measures are funded through to 30 June 2024. Significantly, the Water for the Environment Special Account – established in 2013 to fund the recovery of environmental water – will sunset on 30 June 2024. Amendments to the Water Act and Basin Plan would be required to extend its operation.

Table 1 Summary of National Partnership Payments to support Basin state delivery of commitments and projects ($ million)

Measure	Year(s)	NSW	Vic	Qld	SA	ACT	Total
Implementing water reform in the Murray-Darling Basin	2022–24	17.4	12.8	4.6	3.8	1.8	40.3
Improving compliance in the Murray‑Darling Basin^a	2023–27	~	~	~	~	~	22.6
Sustainable rural water use and infrastructure program^b	2022–25	819.7	324.1	36.6	82.3	63.4	1,479.9
Water for the Environment Special Account
Implementation of constraints measures^c	2022–24	67.4	8.3	-	1.0	-	147.3
Off-farm efficiency program^c	2022–24	101.8	118.4	~	2.7	~	1,257.9
Water efficiency program	2022–23	-	-	-	-	0.3	0.3

~ = allocations yet to be determined
a       State allocations have not yet been determined
b       State allocations are indicative estimates only and will be determined on the signing of agreements. State allocations for 2024–25 have not yet been determined.
c       State allocations may not sum to total due to unallocated funds
Source: Parliamentary Library compilation from Federal financial relations: budget paper no. 3: 2023–24, pp. 84–94.

Water market reform

The budget measure ‘National Water Reform – strengthening integrity and transparency’ will provide $32.7 million over 4 years from 2023–24 (and $3.4 million per year ongoing) to the Bureau of Meteorology to establish a single digital platform for national water data management, a new water market website, and water market data standards to support transparency and enforceability of the new water market regulatory regime (Budget paper no. 2, p. 82). However, the regulatory framework, as recommended by the Water market reform: final roadmap report (pp. 92–93), is yet to be finalised and Budget Paper no. 2 indicates that part of the funding will be placed in the Contingency Reserve until the ICT investment approval process is completed (p. 82).

Prior to the budget, the minister announced $9.2 million for a ‘world leading initiative to deliver First Nations water across Australia’. The investment will allow DCCEEW to ‘consult on and design an enduring arrangement for First Nations peoples to own, access and manage water in Australia’ (Budget paper no. 2, p. 75). Funding for the measure has already been provided (Budget paper no. 2, p. 75), and the DCCEEW portfolio budget statement indicates an allocation of $1.0 million over the forward estimates (Table 2.4.2, p. 70). Notably, the government is yet to make headway on its commitment (first made by the former Coalition Government in 2018) to provide $40 million for First Nations Basin communities to invest in cultural and economic water entitlements.

National Water Grid Fund projects

The 2023–24 Budget provides funding to extend the resourcing of the National Water Grid Authority ($79.0 million over 11 years from 2023–24). It also reallocates $197.1 million over 6 years (from 2023–24) from the National Water Grid Fund to deliver 3 water infrastructure projects: the Northern Midlands Irrigation Scheme (Tas), the Sassafras-Wesley Vale Irrigation Scheme (Tas) and the Quality Water for Wannon project (Vic) (Budget paper no. 2, p. 75).

The 2023–24 Budget confirms that the government will not proceed with several proposed projects, resulting in savings of $872.5 million over 11 years from 2022–23 (Budget paper no. 2, p. 74). The discontinued projects include the Dungowan Dam, the Emu Swamp Dam and Pipeline project, the Southern Forests Irrigation Scheme, and the Fingal Irrigation Scheme. Budget paper no. 2 cites poor business cases, insufficient support for projects and low customer demand as reasons for discontinuing the projects. Other projects are being re-scoped, do not require additional funding, or are having funding deferred. The NSW Government similarly announced on 10 May 2023 that it would not provide funding for the Dungowan Dam due to cost blowouts and a poor business case. The NSW State Greens MP Cate Faehrmann described the decision as ‘a huge win for the community, science and common sense’.

The Australian Government will abolish the North Queensland Water Infrastructure Authority, saving $9.5 million over 4 years from 2023–24 (Budget paper no. 2, p. 78). The authority was established on 12 March 2019 as a standalone executive agency and non-corporate entity to provide strategic planning and coordination of Commonwealth resources to implement the Hughenden Irrigation Scheme (funding has been deferred) and Hells Gate Dam projects (will not be funded). The authority’s functions will be transferred to the DCCEEW.

The Irrigators Council welcomes the commitment to the National Water Grid projects but considers the cancellation of water infrastructure projects ‘short-sighted’. The NSW Farmers have also criticised the decision not to proceed with the Dungowan Dam, saying it ‘would have long-lasting impacts on the region’.

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