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The topic that I really want to talk to about
today was, and this is maybe partly 'cause this
is one of my last addresses as Chair of the
National Water Commission was about the National
Water Initiative itself and its impacts and also
what we're recommending in terms of future action.
So what I propose to do is to go conceptual for a
moment, talk about the general framework of the
National Water Initiative.
Talk about some of the over-arching findings from
2011 biennial assessment.
Then I'm going to drill down into the evidentiary
base which I think is of particular interest to
this audience and particular interest to the
Murray Darling Basin before stepping back to
talk about some of our general recommendations.
And since I seem to have the old presentation,
not the new one that I'd actually brought today
that's entirely my error I'm sure,
I'll not necessarily talk to these slides.
So I'll just leave this front one up for a moment.
But if I can just start by answering the question
which probably you think you all know the answer to
and you probably do, which is What is the
National Water Initiative?
It is because it's been in existence now for such a
long time that people tend to sort of refer to it in
the abstract.
I think it's always important to go back to
what it's fundamentally about.
So the Initiative was an agreement between all
governments of Australia with the objective of
putting forward a very concrete action plan for
water reform.
And whenever I speak about it I always read out the
objective 'cause it's so long but every word matters.
And the objective was: "To achieve a nationally
compatible market regulatory and planning-based
system of managing surface and ground water
resources for rural and urban use that optimizes
social, economic and environmental outcomes."
So as I say, every word counts.
But I think the important thing is that this system
of planning regulation and markets and the intent was
that the planning would give rise to water access
entitlements which would have a degree of security
which meant that they could be traded in markets
and the side effects of their use would be regulated.
So that would be dealt with through regulation
rather than through the entitlement system.
And that also that the environment,
the entitlements for the environment,
would have similar standing to entitlements
for consumptive use.
So that was the general sort of schema.
So when we came to do the 2011 biennial assessment
we were really focusing for the first time not
just on whether governments had done the
things they said they were going to do in the
Initiative in the agreement but what were
the outcomes.
And so our assessment was based on, of course,
you know those outcomes.
--Oh fantastic, thank you very much.--
Right, so that was the architecture that I was
talking about, and here we go.
Now we're in business.
So the assessment was based on these four areas
of whether or not the outcomes were as had been anticipated.
Had the initiative, actions under the
initiative contributed to better governance of the
water resource which is the sort of underpinning
architecture, had it contributed to productive
and efficient water use?
Was there an improvement in the sustainability of
water management bringing benefits for the environment?
And was it contributing to the resilience of communities?
So that seemed to cover the sort of bases.
And if I can just sort of go through with,
and we never like to do scorecards in the
Commission because it's always,
there's always a lot of nuance and subtlety but
nevertheless I'll do this for today's purposes where
we got to.
First of all on governance,
we'd give it a small tick
Fundamentally, a lot of the legislative changes
that were required have been passed with a notable
exception of Western Australia and Northern
Territory who to their loss in our view have not
yet passed National Water Initiative consistent legislation.
But generally those frameworks are in place
and there have been advances in the
institutional arrangements that have been generally
beneficial and some quite significant changes
including of course the formation of the
Murray Darling Basin Authority.
So we give that you know this is so there's so
nuance, it's not all roses but there's certainly been
significant advances.
The next question was productivity and the
economic benefits.
And we give that a very big tick too and I'm going
to talk about that in more detail in a minute.
But really the guts of it is,
the centrepiece has been the impacts of trade and
we have very ample evidence of the benefits
that have flowed from that in the economic sphere and
actually in other spheres as well but particularly economics.
So that is a big tick
Moving on to sustainable water management though I
have to say in my son's language,
it's a fail.
And the reason that it's a fail is because when you
read the language of the National Water Initiative
and in fact language that's replicated in the
Water Act, which is about returning over-used and
over-allocated systems to a sustainable level of extraction.
Not only has that not been done there has not been
agreement about what any of those words mean and
certainly in some jurisdictions there is
still, you know, really a refusal to measure or to
say well actually we think this system is over
allocated or over extracted.
So for whatever reason despite the fact they all
signed up to this, it's been an extraordinarily
difficult thing to get to grips with and execute.
So that's one reason that it's a fail.
But another reason that it's a fail is because
although a lot actually has been done to return
water to the environment, and there are new
institutions and environmental water
managers and lots of good progress,
the measuring and monitoring of the impacts
and the understanding of the science which would
tell you that this hydrological activity will
lead to this ecological response is still very,
very patchy and so it's actually extremely
difficult when we look into the evidence base to
say what the impact has been.
So it's not that we're saying necessarily the
impacts haven't been there,
but it really is very hard to get the evidence of it
and it's only really in very recent times and
certainly not happening universally that water
plans are becoming clear about what the objectives
and targets are for the environment.
So the plan talks about how the water is to be
managed and allocated but doesn't actually get to
what it's there to achieve from an environmental perspective.
So that is why we overall I would say,
the progress has been disappointing to say the least.
And in that context, the Murray Darling Basin Plan
is an extraordinarily important opportunity.
We can understand, you know, completely the
difficulties and the reason why it's
controversial and the reason why it's so hard to
get the underpinning science not just done but
communicated and all of that.
But it is a great opportunity to turn
the corner on tackling that central question of
sustainable levels of extraction.
So we are not just supportive of the efforts
of the Authority but also say quite strongly that
it's, this is addressing ourselves to COAG and
the jurisdictions really.
Everybody all the parties who have an interest in
this is they roll up your sleeves and get involved
and help bring that process to a conclusion.
It's very troubling when you see evidence of people
just standing back and sort of waiting for
something to happen.
Everybody who has a stake in this really needs to
get involved and support that process.
And then the final points in resilient communities,
it's a bit of a maybe and again there's two reasons
for the maybe.
The first reason is because again the evidence
isn't actually that strong and when it comes down to
it, despite and absolutely understanably all the concerns that
are in the communities about potential impact of
big changes in water availability and water use
in their communities and the economies on which
they depend, but you actually look at what's happened.
The big changes that have been driven in rural and
regional communities have been as a consequence of
other factors than changes in the water the way that
water is managed and used.
So the evidence doesn't really show strong impacts
in either direction.
It has to be said they're almost independent variables.
So there's a bit of a question mark over that.
But the other thing that there's a question mark
about and again, you know the Murray Darling Basin
Authority is centre stage in this but they're not
the only players by any means,
is this is a real question about community engagement
and trust.
And this applies much more widely I have to say than in water.
And social licence to operators, you know,
the expression applies in so many industries about
here where the architecture of what you
do is based on a planning process that's an engaged
process and everything else flows from that.
Community engagement and trust and belief in the
outcome obviously is incredibly important and
you just can't underestimate the
effort that is required in order to produce that.
We've seen some very good examples when we were
doing our assessment but we also saw some areas of
weakness where really more needs to be done.
So going from that I just wanted then to drill down
into what has been very much a centrepiece of the
achievements of the National Water Initiative
and that has been the impact of water trade.
And while I think it's been quite a short period of
time an extraordinary journey in terms of the
change of sentiment towards trade as being a
threat towards it being a real source of opportunity
and economic value.
And I'm sure many of you have now seen this chart
or something similar that shows how water trade has
grown in the southern Murray Darling Basin which
is really obviously where the market is most
extensive and most effective over the last
couple of decades.
And there's a couple of important points I think
you can see in this.
First of all, you know up until '95 really both
allocation and entitlement trade were very small.
And then there was this dramatic increase in 1995
and I'm sure that those of you who got a good sense
of history in the Basin will realize that's
because that was an impact of the interim cap being applied.
And that really, you know, if there's no scarcity,
if there's no cap, there's no trade,
it really drove a response.
And at the time, really all that you could do was
trade on the temporary market and so that
happened in quite significant volumes and
very much in response to seasonal conditions
exactly as you'd expect.
I've always said the water market is actually the
economist's dream because it always behaves exactly
as you would expect.
It's been fantastic where it's unconstrained.
So the big difference that really happened as a
consequence for the National Water Initiative
and the efforts that were made since then was this
shift towards entitlement trade.
And you can see that really taking off in 2007,
the 2007-08 season and thereafter.
And I think just one of the important points of
this chart, there are many important things that I
won't dwell on given the time,
is you can see in here the pink zone is what we've
called titled entitlement trades of the environments
and of course that's primarily the Australian
government's water purchases.
And although they're you know they are big,
they are a significant proportion.
I think it's also this is very important because it
also shows how much trade was also simultaneously
happening between irrigators and the
intervention in terms of the buy backs is
substantial but it's not dominating the market.
The other thing that probably is not clear from
this is really how much that market has been
constrained so when we put the National Water
Initiative in place and these various rules which
were supposed to smooth the transition,
the 4% rule, the 10% rule and so on,
it had really been the view of people that they
wouldn't bite.
But the conditions were such by the time that
entitlement trade took off that they did begin to bite.
And so the removal of the 10% limit on non-water
users ownership entitlements in Victoria
for example is very important shift in terms
of reducing the constraints on trade.