Water reforms, including delivering the Murray-Darling Basin Plan


Budget Review October 2022–23 Index

Dr Emily Gibson

On Budget evening, the Minister for Water, Tanya Plibersek, announced that the Australian Government was delivering more than $2 billion for the Water for Australia plan. This implements the Australian Labor Party’s (ALP) plan to future-proof Australia’s water resources and includes establishing a National Water Commission, broadening the National Water Grid investment policy, and a 5-point plan to safeguard the Murray-Darling Basin. The 5-point plan includes:

  • delivering on the water recovery targets in the Basin Plan, including the 450 GL of water for enhanced environmental outcomes
  • increasing compliance, and improving metering and monitoring
  • restoring transparency, integrity and confidence in water markets and water management
  • increasing First Nations ownership and involvement in decision-making
  • updating the science underpinning the Basin Plan.

The Budget measure Water for Australia Plan provides $2.6 million over 2 years to the Murray-Darling Basin Authority (MDBA), Department of Climate Change, Energy, the Environment and Water (DCCEEW) and Department of Treasury to deliver ‘the Government’s commitments to national and First Nations water reform’ (Budget measures: budget paper no. 2: October 2022–23, p. 79). This includes $2.1 million for expert legal support and $0.5 million for initial scoping work to establish a National Water Commission (NWC). A NWC was established in accordance with the Intergovernmental Agreement on the National Water Initiative in 2004 to assist in the implementation of the National Water Initiative (NWI), but was abolished by the Abbott Government in 2015.

The Productivity Commission’s National water reform 2020 inquiry report, which provides advice on national water reform, including renewal of the NWI, found that ‘governance arrangements established for the [NWI] have been significantly eroded’ and recommended ‘a strengthened governance architecture’ (p. 13). The Plan to future-proof Australia’s water resources (p. 2) indicates the NWC will:

  • lead cross-portfolio and cross-jurisdiction work to make sure Australia has secure and sustainable access to water
  • support the renewal of the NWI and conduct ongoing reviews
  • work with jurisdictions to implement water-related priorities included in Infrastructure Australia’s Infrastructure Priority List
  • ensure First Nations knowledge and perspectives are taken into account.

The Government is also returning responsibility for delivery of the $40.0 million Aboriginal Water Entitlements Program to DCCEEW. The program was announced in 2018 but was yet to be delivered when it was transferred from the former Department of Agriculture, Water and the Environment to the National Indigenous Australians Agency in October 2021.

Delivering the Murray-Darling Basin Plan

The Murray-Darling Basin, which covers 14% of Australia’s landmass, is Australia’s most important water catchment. The Basin provides water for 2.3 million people, including the city of Adelaide, and supports thousands of farms and over 30,000 wetlands, 16 of which are internationally recognised under the Ramsar Convention.

The Basin Plan 2012, a legislative instrument under the Water Act 2007, provides for the integrated management of Basin water resources, with the aim of bringing the Basin back to a healthy and sustainable state. The Basin Plan establishes the volume of water that can be extracted from the Basin (the ‘environmentally sustainable level of take’) and the volume of water required to be recovered by 30 June 2024. Following amendments to the Basin Plan under the Sustainable Diversion Limit Adjustment Mechanism, the overall target for water recovery is 2,075 gigalitres per year (GL/y) plus 450 GL/y to support enhanced environmental outcomes by 2024.

However, progress has stalled. While 2,107.4 GL/y has been contracted for recovery towards the ‘Bridging the Gap’ target, allocation across water resource plan areas means that 31.1 GL/y of local water recovery (mostly in the northern Basin) and 14.9 GL/y of shared water recovery (mostly in the southern Basin) remains outstanding. The Water for the Environment Special Account (WESA) was established in 2013, with funding of $1.775 billion, to fund efficiency and constraint measures that would contribute to enhanced environmental outcomes. The Second review of the WESA, released in August 2022, found that only 2.6 GL/y of the required 450 GL/y has been recovered, and that full recovery through efficiency measures would likely cost between $3.4 billion and $10.8 billion (p. 8).

A Five-point plan

The 2022–23 Budget includes several measures that implement the ALP’s commitment to safeguard the Murray-Darling Basin.

The Budget measure Murray Darling Basin – Delivering on Water Commitments includes an undisclosed sum (‘not for publication’ due to commercial sensitivities) in 2022–23 to ‘provide initial funding towards meeting environmental water targets under the Murray-Darling Basin Plan’ (Budget paper no.2, p. 65). The DCCEEW Budget factsheet on the Water for Australia plan (p. 2) echoes the October 2022 MDB Ministerial Council Communique:

As a matter of priority, the Commonwealth will work with relevant communities and Basin states on options to bridge the remaining gap in water recovery, including through strategic purchase, and to carefully consider opportunities to achieve the additional 450 GL.

To date 1,231.2 GL/y of water has been recovered towards the ‘Bridging the Gap’ target through water purchases by the Commonwealth Government (referred to as ‘buybacks’). In 2015 the Water Act was amended to set a cap of 1,500 GL on the volume of water that could be recovered through buybacks until the first review of the Basin Plan is completed. However, there are exceptions to the cap, including for water purchased under the WESA.

NSW and Victoria, and key stakeholder groups such as the National Farmers Federation and National Irrigators’ Council, reportedly oppose further buybacks, citing negative effects on regional communities and increasing costs for remaining farmers. However, the Minister for Water indicated in early October that she believes ‘voluntary buybacks in a strategic way can be very beneficial’.

The Minister has clarified that the funding allocated in the budget is not only for buybacks and that the Government expects to get value for money in any water purchases.

The Budget measure Murray-Darling Basin – Compliance and Science provides $51.9 million over 5 years ($46.3 million over the forward estimates) to the MDBA, DCCEEW and Department of Treasury (Budget paper no. 2, p. 66) to:

  • improve trust in the management of water resources through improvements to the metering and monitoring of water use and increasing regulatory compliance ($29 million over 5 years). Of this, $18 million (over 3 years from 2023–24) will be provided by the Department of Treasury to the Basin States and ACT through National Partnership payments to ‘improve the automated measurement of water use and the subsequent transmission of data to regulators’ (Federal financial relations: budget paper no. 3: 2022–23, p. 75).
  • update the science for water management ahead of the statutory Basin Plan Review in 2026 ($22.9 million over 4 years). The ALP’s Five-point plan indicates this will (among other things) include data on climate change, evaporation and inflows; knowledge about floodplain harvesting; and evidence about the effectiveness of efficiency measures.

The Budget measure Murray-Darling Basin – Water Market Reform provides an unspecified sum (‘not for publication’ due to commercial sensitivities) over 5 years (with an ongoing component) to the Australian Competition and Consumer Commission (ACCC), Bureau of Meteorology and DCCEEW to implement the recommendations of the recently released Water market reform roadmap (Budget paper no. 2, p. 66).

The ACCC’s Murray-Darling Basin water markets inquiry, which concluded in March 2021, recommended ‘a package of reforms which aim to restore confidence in water markets across the Basin, and to improve their operation and efficiency so that they work better for market participants and deliver enhanced benefits for the Australian economy’ (Final report, p. 2).

The Morrison Government subsequently appointed an independent Principal Adviser to develop a water market reform roadmap. The Water market reform: final roadmap report (September 2022) sets out a ‘phased, practical and cost-effective plan’ for water market reform in response to the ACCC’s water market inquiry. The Final roadmap report makes 23 recommendations, including dividing water market functions among the proposed new National Water Commission (in the interim DCCEEW), ACCC, Inspector-General of Water Compliance, and Bureau of Meteorology (p. 16).

In October 2022, the Australian Government and the MDB Ministerial Council agreed in principle to implement all of the roadmap’s recommendations. A media release from the Minister for Water states:

The Australian Government will introduce legislation and a mandatory code of conduct to deliver integrity safeguards, and lift conduct standards, comparable with other markets ... Under the Government’s reforms, market conduct will be regulated by the ACCC, building on their expertise and experience with water markets.

A cost benefit analysis found the roadmap’s recommendations could be implemented at lower cost, albeit with lower benefit, than proceeding with the full set of ACCC recommendations (Final roadmap report, p. 143).

The Government has also extended the end date for several programs (Budget paper no. 2, p. 79) relating to the Murray-Darling Basin:

  • On-farm Emergency Water Infrastructure Rebate Scheme is extended to 30 June 2024; launched in 2018, the program allows eligible primary producers to claim up to 25% of the cost of eligible critical infrastructure up to a maximum of $25,000. Budget paper no. 3 indicates $30.5 million has been allocated to Basin states for delivery of this program (p. 77).
  • the 2022–23 March Budget measure Water – Supporting the Murray Darling Basin is extended to 30 June 2025; the measure supported community-driven infrastructure projects, delivery of environmental water in the Edward-Wakool region, compliance and the delivery of the water market reform roadmap (Budget measures: budget paper no. 2: March 2022–23, p. 58).
  • the Goyder Water Research Institute program (Healthy Coorong Healthy Basin) is extended to 30 June 2026; in early October 2022, the Minister for Water announced an additional $8 million over 4 years for the institute.
  • Sustainable Rural Water Use and Infrastructure Program is extended to 30 June 2025; the program provides funding for irrigation infrastructure projects, water purchase measures and supply measures. Budget paper no. 3 indicates $1.5 billion has been allocated to Basin states for delivery of this program (p. 81).

The October 2022–23 Budget included savings of $97 million (timeframe unclear) from the reversal of the 2022­–23 March Budget measure Water – Supporting the Murray-Darling Basin, including uncommitted funding from the Healthy Rivers – Healthy Communities program (Budget paper no.2, p. 62).

National Water Grid Authority

The National Water Grid Authority (NWGA) was established in October 2019 to ‘develop a national framework to identify priority water infrastructure initiatives’. The authority is now part of DCCEEW, having initially been established as a Secondary Australian Government Body within the then Department of Infrastructure, Transport, Cities and Regional Development. The authority coordinates ‘a national approach to water infrastructure planning and development, and shaping national water infrastructure policy and investment’.

The authority administers the National Water Grid Infrastructure Fund in accordance with the National Water Grid Investment Framework. In her Budget media release, Minister Plibersek announced changes to the Investment Framework to allow for a broader range of projects to be funded, including essential town water supplies in regional and remote communities.

The Budget measure National Water Grid – Delivering Commitments provides $278.1 million over 5 years ($226.1 million over the forward estimates) ‘to expand investment in nationally significant, transformational water infrastructure projects’ (Budget paper no. 2, p. 67).

Changes to major water infrastructure projects

The October 2022–23 Budget includes savings of $4.6 billion over 12 years (Budget paper no. 2, p. 63) by:

  • not proceeding with $5.4 billion funding for the Hells Gate Dam project
  • deferring funding for Dungowan Dam and Pipeline, Emu Swamp Dam and Pipeline, Hughenden Irrigation Scheme and Wyangala Dam Wall Raising projects; these projects may be reconsidered once business cases have been completed
  • returning unallocated and uncontracted funding within the National Water Grid Fund.

Some of the cancelled and deferred projects have been criticised for not providing value for money and for their potential negative impacts on the environment, including on the Great Barrier Reef.

The October 2022–23 Budget does, however, set aside $1.0 billion over 8 years from 2026–27 for the National Water Grid Fund (Budget paper no. 2, p. 64).

There has been mixed reaction to these changes, with some irrigators expressing concern and environment groups such as the NSW Nature Conservation Council welcoming the pause on projects.

Budget paper no. 2 indicates that the cost of the Budget measures Water for Australian Plan (including the extension of programs) and Murray Darling Basin – Delivering on Water Commitments will be partially offset by redirecting funding from within the Climate Change, Energy, the Environment and Water portfolio (p. 65 and p. 79), while the Budget measure National Water Grid – Delivering Commitments will be partially met from existing resourcing of the Department of Infrastructure, Transport, Regional Development, Communications and the Arts (p. 67). Savings from the Budget measure Government Spending Audit – National Water Grid Fund – Responsible Investment will be partially redirected to fund other government priorities (p. 64).

Comment

The water recovery targets under the Basin Plan are required to be delivered by 30 June 2024; any deficiencies will be assessed in accordance with the reconciliation process provided in the Water Act.

The continuing, seemingly intractable, differences of opinion between stakeholders, including the Basin States, remain a risk that threatens full delivery of the Plan. It remains to be seen whether these targets can be met on time, and whether bringing forward the review of the Basin Plan (currently scheduled for 2026) would prompt sufficient cooperation to achieve the outcomes required to underpin the healthy, productive, and sustainable use of the Basin’s water resources for the benefit of all Australians.

 

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