Aug 23, 2006

Australia’s water crisis: planning for future sustainability

Australian Financial Review National Infrastructure Summit

Australia’s water crisis: planning for future sustainability

23 August 2006

Thank you for the invitation to speak today about the nation’s infrastructure challenge, and the need for sustainable water solutions for Australia.

It is appropriate for such a major conference to be addressing this matter in World Water Week.

Addressing Australia’s national water crisis is an urgent task, requiring leadership and action from all levels of Government, especially from the Commonwealth.

As an optimist, I note Al Gore’s recent observation, that:

“The Chinese expression for crisis consists of two characters – the first is a symbol for danger, the second is a symbol for opportunity.”

Just as Australia’s water crisis presents an economic, social and environmental danger, it is true that it also presents an opportunity to shatter our complacency that fresh water is an infinite resource.

There is one fact which governs the development of water policy in Australia and investment in water infrastructure – while Australia has enough water, it’s a long way away from where most Australians live.

Australia’s water resources are highly variable and range from heavily regulated rivers and groundwater resources, to rivers and aquifers in almost pristine condition.

Over 65% of Australia’s water runoff is in the sparsely populated tropical north.

But Australia’s large urban areas are in southern Australia and irrigated agriculture is principally located in the Murray Darling Basin, where only 6.1% of the national run-off occurs.

Climate change means declining rainfall in southern Australia – the evidence of which we see most spectacularly in Western Australia.

As a nation we have never really valued water.

Our water supplies have been taken for granted: undervalued, over-allocated, and misdirected.

As our population has grown, competition for water has also grown, from the agricultural sector, from urban development, from industry and mining sectors.

As a consequence, the health of water supplies and their environments have suffered, and we have squandered the water resources of the nation.

The first time governments began taking the water quality and salinity in the Murray Darling basin seriously was in 1973, when the Whitlam Labor Government initiated the River Murray Working Party.

In 1994, the Keating Labor Government initiated further significant water reform, using the COAG process to commit to water reform as part of National Competition Policy.

These reforms were designed to develop a more competitive water industry.

They included broad issues of water management, including environmental allocations of water. This was revolutionary thinking at that time, and very controversial to some, who wanted unfettered access to the Murray Darling flows.

But Keating understood that the great Murray River was being exploited, and was dying.

He funded the Murray Darling Basin Commission to undertake the structural reform necessary to protect the Murray Darling system, to model the social, economic and environmental impacts of its exploitation, and to determine how that could be turned around.

Ten years on, and the competition reforms have started to take effect.

We are seeing the early development of a water market.

But getting this far was the easy part of the Keating reforms.

While some of these reforms have been continued by the Howard Government, the ongoing problems of salinity, the developing impacts of climate change and the growing water shortages all point to a failure by the Commonwealth Government to prioritise water policy and show leadership in water management.

After a long gestation period of 10 years, the National Water Initiative was created in 2004, again through the COAG process.

The National Water Initiative emphasises the need for cooperative effort, in the national interest.

It highlights the importance of community education about the critical water balance of this nation.

It recognises the importance of investment in water infrastructure to deliver efficiencies and water savings.

It acknowledges the social, economic and environmental aspects of water policy.

The principles behind the National Water Initiative are therefore very sound.

The National Water Initiative puts public and environmental needs into an economic system – it attempts to establish structures to manage growing demand for water and a diminishing supply, in a way that uses water efficiently and productively.

However, despite national water reform being touted as a priority for the Howard Government, in practice there is little to show for it over the past 10 years.

River systems, and in particular the Murray Darling system, are thirsty for water – yet water trading has hardly progressed.

The “Living Murray” is almost on life support.

In November 2003 the Howard Government promised to give the Murray River 500 giga-litres within five years.

That promise was warmed up in the 2006 Budget but, despite the rhetoric, not a single drop has actually been returned as a result of the Living Murray First Step program.

More recently, expressing frustration over the Murray River, the Prime Minister said he wanted to “put a bomb under the process”.

Well, it’s been almost three years since the Government promised 500 giga-litres. The bomb must have a very long fuse.

The Prime Minister is quick to blame the States – his default position for all criticism of all his political failings.

He forgets that one of the critical points of the National Water Initiative is for the Commonwealth and States to act co-operatively on the issues of water policy reform.

Yet this government is quick to penalise, to blame and to obstruct processes of reform that are not in their political interests.

There has been little or no private investment in water infrastructure.

The Reserve Bank has warned the federal government on three occasions about the impact that capacity constraints are having on our economy.

Infrastructure constraints, including water infrastructure of course, are increasing inflationary pressures.

But frankly, this is a national challenge that requires national leadership.

We need a national vision that is about improving water supplies for our cities.

We need national leadership to plan for and tackle the infrastructure needs over the coming decades.

And what we’ve got from the Howard Government after ten years is a departmental discussion paper released by a Parliamentary Secretary.

And it is looking fairly and squarely at others for answers.

On 18 July, the Prime Minister again spoke of his frustration with lack of progress in water reform. Weazle words, given his direct intervention in the Australian Water Fund grants process.

I have to say, I share the Prime Minister’s ambition of drought proofing Australia’s cities – that is a very important and worthy goal.

The difference is that after 10 years of a Labor Federal Government we would have made substantial progress towards that important goal – we wouldn’t have just started talking about it.

In that same speech, the Prime Minister asked “how can we seriously tolerate major water constraints in our great cities?”, going on to say the water restrictions had ”more to do with protecting the cash flows of water utilities”.

I disagree with the Prime Minister.

Demand management for water is important. Water restrictions help raise awareness of how precious water really is.

The Prime Minister has spent a decade denying the existence of climate change, and all that that implies.

The Prime Minister wants to take us down the path of nuclear energy – a process that is a massive drain on water supply.

The reality is that the lack of investment in national water infrastructure has brought us to this crisis. Australia must stop its profligate waste of water – both in our cities and in agriculture, mining and industry. We must establish economic frameworks that encourage water to be put to its most valuable use.

Today, I want to set out Federal Labor’s approach to water policy.

I want to make it very clear that Labor sees a strong role for the national Government in establishing water markets, supporting recycling and encouraging investment in water infrastructure.

Sustainability & water trading

The challenge for Australia is to ensure that sustainability is at the core of economic and social policy. And critical to sustainability is meeting the challenge of climate change.

Climate change is not just an environmental issue.

Climate change threatens to destroy much of our food supply and severely reduce access to clean water.

Sydney, Melbourne, Brisbane and Perth are using more water than is going into their dams. By 2030, because climate change will cut rainfall and increase evaporation, water supplies for these cities will drop by 25%.

Rainfall in the Murray Darling basin is expected to fall by 25% and evaporation rates will also rise. This will hurt Australian agriculture, our domestic food supply and exports, and directly threaten the supply of drinking water to Adelaide.

Climate change demands that water policies and environmental issues can no longer be at the margin.

The challenge of climate change fundamentally changes the paradigm in which water and more general environmental polices must be considered.

Considerable progress has been made in understanding that human activity must be in harmony with our natural resources, rather than being seen as autonomous and without consequences.

The first wave of environmentalism was very much about conservation. Campaigns were run to protect our natural heritage – saving old growth forests, protecting rivers.

The emphasis on conservation then progressed to government regulation to stop pollution and regulate behaviour of individuals and corporations in the interest of agreed environmental objectives.

Important gains were made through regulation, but climate change has brought forward the need to go beyond conservation and regulation.

The third wave of environmental policies involves investment in sustainability, and developing the economic structures required to promote that investment.

Those structures must include targets and benchmarks which encourage investment in sustainable industries and water use technologies.

Part of the solution is pricing water and our natural resources in an appropriate way.

The Hawke/Keating Labor Government got the price of capital right by deregulating the financial system, removing artificial barriers by floating the exchange rate and integrating the economy into the global financial system.

They got the price of labour right through enterprise bargaining.

The next Labor Government can achieve substantial reform by getting the price of water and our natural resources right.

Labor takes a consistent approach to developing an appropriate price signal for our natural resources.

While the Prime Minister loudly trumpets his support for a price signal and trading as the best way to conserve and appreciate water, he dismisses the need for a price signal for carbon.

The fact is, we need to get the price right for all our natural resources.

There is a direct connection between our water and climate change, and there is a synergy between developing trading systems for water and carbon.

If we promote market based solutions with pricing that reflects the finite nature of our natural resources then significant productivity and environmental gains can be achieved.

The discussion paper released last week for a State based emissions trading system is a significant step forward – especially in the absence of action at the national level. Emissions trading is the least cost way to reduce greenhouse gas emissions, an essential component of protecting our access to clean water.

Water is a precious asset and a valuable commodity, and it needs to be treated as such.

We need to appreciate that an effective nationwide trading system in relation to water is an imperative to meeting our challenges.

I agree with the Wentworth Group’s Blueprint for a National Water Plan that Australia needs new strategies for managing water in the 21st century.

Australia needs new ways of working with water that guarantee both river health and greater security for future investors.

Historically, land use and access to water was viewed in the absence of environmental standards or regulations, and in the absence of a clear understanding of environmental responsibilities.

As elsewhere in the world, Australia’s irrigation systems suffer from problems associated with losses in storage and conveyance, on-farm losses and variable water use efficiency.

The real wastage comes from not being as productive as possible with the water that is consumed.

Growing more food with less water alleviates scarcity – and it contributes to food security and puts less strain on nature. The most effective way to increase water productivity is to shift water use by trading from low value to high value crops.

To facilitate this, water entitlements and water trading regimes have to be developed. They must provide security for water users and the environment.

We need economic tools to ensure proper allocation of water resources to appropriate end users.

Pricing water to reflect its finite nature is the key.

And Governments have a critical role in intervening to ensure equity in the outcomes that these structures produce.

Once pricing reflects externalities and the full cost of the water cycle, much more rational decisions result with substantial environmental benefits.

Pricing reform can be achieved by clearly identifying the users of water, with potable water clearly directed to the drinking water market, away from irrigation and industry, where recycled water can be more appropriate.

Rights to access water resources must carry with it the responsibility to leave healthy rivers, a healthy environment and a productive natural resource base for future generations. These responsibilities include the management of salinity, soil erosion, pollution, and biodiversity.

While current CoAG policy includes broad principles around allocating water for the environment, restoring flows to stressed rivers and water quality objectives, they remain general and unspecific.

The time has come for some clearer national goals, targets and benchmarks in river health, water recycling and water quality.

That requires leadership from the national government.

Clearer goals are required to help in priority setting; to better inform water users and water markets; and to facilitate better evaluation of, and accountability for, outcomes in policy implementation.


Murray River

One area in which goals and benchmarks for performance are urgently needed is in relation to the Murray River.

To be “a healthy working river” the Murray River needs 1500 gigalitres more water per year. That’s the view of the Expert Review Panel appointed in 2001 by the Murray Darling Basin Commission.

Water levels in the Murray River are at their lowest level since records started 100 years ago.

While the Murray is in crisis, the Howard Government is fundamentally divided over how to address the low water levels in the River.

The Parliamentary Secretary for Water supports the Commonwealth buying water from willing sellers – but the Minister for Agriculture opposes this.

It’s as if they have decided to be undecided.

And while Ministers argue, the Murray River has been reduced to a trickle in some places.

Frankly, this is not good enough.

Revitalising the water flow and eco-systems of the Murray River and the Murray-Darling Basin should be a first order priority for the Commonwealth Government.

Real money is needed to buy real water so we can make a real difference to water levels in the Murray River.

Labor is committed to adding 1,500 gigalitres in annual environmental flows into the Murray. That’s the equivalent of adding 3 times the volume of Sydney Harbour.

Labor supports urgent action from the Federal Government including market based options such as purchasing water from willing sellers or acquiring options to access water entitlements.

Urban water & water recycling

I now want to address the issue of urban water supply, an issue that affects almost 75% of Australians.

There is no greater impetus for a thriving, healthy community and economy than healthy rivers and communities having a guaranteed water supply.

Where there is water, there is life – and when the water dries up, a town closes and businesses leave.

The future supply of water must be enough to meet the needs of Australia’s growing population.

Across Australia, towns and cities such as Toowoomba and Goulburn confront severe water shortages, while our major cities have long-term water restrictions.

Water use and water supply in urban Australia is a national crisis.

It is a disgrace that the urban water reform section of the National Water Initiative has been sidelined by the Howard Government for the last three years. Labor believes that the Howard Government should put the national interest first and work with the States to find sustainable water solutions.

Australia needs a steady flow of cooperation on water management because, as we all know, rivers and water sources do not stop at State boundaries.

Weather patterns and climate don’t follow State boundaries.

A portfolio of options are needed for water supply, with water recycling prioritised because it is cost effective, uses less energy than alternatives and has minimal waste.

That’s why it is with great pleasure today that I announce that a Beazley Labor Government will take action to ensure Australia’s towns and cities have a sustainable water supply.

Labor’s plan has four key elements:

1. Set a national target of 30% of wastewater being recycled by 2015.

2. Develop consistent, comprehensive national guidelines for water recycling. This is critical for building public confidence in recycling and increasing water security in all urban areas.

3. Provide the leadership, support and investment necessary to achieve the 30% recycling target.

4. Encourage innovation and new technological solutions to deliver a sustainable water supply for Australia.

The national target of recycling 30% of Australia’s wastewater by 2015 is ambitious, but realistic and absolutely necessary.

Many of the communities that are experiencing critical water shortages are in regional Australia.

After 5 relentless drought years in south eastern Australia, regional towns and cities are seriously considering the implications for running out of water.

Contingency plans for transporting water at massive cost, are being developed for communities like Goulburn and Ballarat.

Greater use of recycled water by industry and agriculture will free up valuable drinking water and help increase environmental water flows.

The target of 30% of waste water being recycled is an aggregate national target.

National targets, guidelines and investment in water recycling are needed to get the National Water Initiative out of its political and bureaucratic swamp.

Labor would closely look at investing in productive infrastructure that delivers sustainable water supplies.

We will work with State Governments and the private sector to raise capital for important water projects, and in particular for water recycling projects.

Labor is Australia’s nation building Party.

As well as through direct funding of water projects through Commonwealth water programs, a Beazley Labor Government will establish a Commonwealth Statutory Authority called Infrastructure Australia to coordinate the planning, regulation and development of infrastructure.

This will provide significant opportunities for good water infrastructure to be funded and built.

And, as already announced by Kim Beazley, Labor will establish the Building Australia Fund.

The existing assets of the Government’s Future Fund would be retained in that Fund and the income stream would be used for productive purposes, including infrastructure investment.

The reason we take this approach, in contrast to the Howard Government, is that we believe the income stream of the Fund could be used to enhance the productive capacity of our economy, not set aside solely to offset the cost of public service superannuation.

Governments must work together to build confidence in water recycling by establishing national guidelines for its use.

We must build the infrastructure we need to reuse water for non-drinking purposes, such as watering parks and gardens, and for industrial and commercial purposes.

For most of Australia, recycling water for potable use is unnecessary and a distraction from the need to progress reform.

COAG is working on guidelines for water recycling but, overall, Australia’s water recycling guidelines are inadequate.

Australia needs consistent and comprehensive national benchmarks and guidelines for water recycling which acknowledge different needs and circumstances, which ensure water infrastructure is maintained and which apply strong, consistent and high standards.

Labor will ensure Australia doesn’t end up with a rail gauge style mess for water supply.

The guidelines will be developed in consultation with state governments, water experts and Australia’s water users: farmers, businesses and households; city and country consumers.


The threat of climate change is very real, but senior Howard Government Ministers still refuse to accept its existence.

Climate change threatens to destroy much of our food supply and severely reduce access to fresh drinking water.

Procrastination is not an option.

We have to open our eyes, accept the truth of our diminishing fresh water supplies – and we need to take action.

The time has come for clear national targets and benchmarks in river health, water recycling and water quality.

The time has come to value water as a finite resource.

The time has come to develop the economic mechanisms which deliver environmental outcomes and ensure future generations can live and prosper.

Labor is absolutely committed to that task.