The resignation of the MDBA Chair, Mr Michael Taylor, brings into sharp focus the precarious state of the current Basin planning process and the frail state of Australian water management generally. The fundamental platform of the MDBA process of water policy reform is the misconceived MDBA Guide to the Basin Plan which must surely be discarded if it is not headed to the shredders already. So why is the Guide misconceived and what should be the future of the water reform process?

This MDBA Guide is a curious document. The Guide portends profound changes to the water economy of the Nation, but is claimed to be a work in progress. The Guide has missed the economic dimensions of the problem in the Basin and seems to be continuing the best practice water management which has blighted the nation for the past 124 years.

It is clear that the recent scramble to include socio-economic issues to the Guide is merely a post hoc cover up of a decision on policy which has already been made. Once the misbegotten baby of a buyback policy was born, it was then permissible that some social and economic impacts of the new policy could be identified. But the in his parting statement Mr Taylor notes; “that a sustainable plan for the Basin would require far more than a decision by the Authority on how much water should be transferred from human uses to the environment”. Clearly, the Authority is uncomfortable with the prospect of accounting humans in the Basin Plan, and they have yet to appreciate that an environmental allocation of water is a human use as well. Unfortunately, no amount of scientific tiddlywinks is going to paper over the fact that the Guide ignores the socio-economic dimension.

The general misanthropic thrust of the Guide means that the usual socio-economic policy considerations are not in evidence. The basic institutional distortion of water use and its consequences since Federation appears to be completely missed. This means that the fundamental policy questions of water use and misuse are never identified. The result of the MDBA’s deliberations is that the Guide deals with the consequences of problems and does not identify the crucial problems which give rise to those consequences in the first place.

The MDBA does not seem to have the vision to identify that low water flow and dirty water might be the consequence of something else. The result is that while the consequences of the problem might be ameliorated for a short while, it will be necessary to keep revisiting the ecology from time to time, until it is finally realized that the a huge waste of public money has occurred and the economy has been wiped out.

The elephant in the room is that prescribed uses do reduce water flow and cause environmental deterioration. It is the activity of water users responding to distorted economic incentives which is the problem. And these incentives result in some bad practices which cause the consequences of low flow and dirty water. Until this simple fact is recognised and dealt with explicitly, the mess in the Murray will continue.

A snapshot of Australian water use is that a large number of water users pay very little to use a substantial share of the nation’s limited water supplies, causing considerable waste and environmental damage while a small component of high value food producers and urban communities are frozen out with the prospect of enduring calamitous water charges in the future.

The failure of the Guide to recognise and engage these fundamental questions, means the region and the nation as a whole will be sentenced to a grim water future. Problems of water use within the Basin will not be fixed and the emerging urban and industrial users beyond the Basin will be locked into an uncertain phase of exceedingly high cost water supply options.

By defining the preferred instrument in terms of ecological health and ecological responsibility, rather than environmental damage and cost, the Guide precludes any analysis and comparison of alternative policy instruments, which might be more efficient and effective. Environmental policy in the Basin has been led to a dead end.

At this dead end, the process of policy implementation takes a turn for the worse. It is proposed to implement the favored environmental policy instrument via a buyout based on existing water markets. But the distortion to the existing market with one large strategic buyer is compounded with uncertain numbers of sleeping – dozing licenses and the unaccounted economic externalities of infrastructure distortion and return flow disruption. Unfortunately, the experience of other resource buyouts suggests that the possibility of perverse outcomes is likely, where the more capable and less polluting entrepreneurs escape to better outcomes, whilst those inefficient and polluting operators, unable to see a better future, will remain portending worse outcomes in the future.

The other dimension where the scope of the Guide is completely wrong is in connection to the limitations of its prescribed geography. Management issues within the Basin will have profound implications beyond the region. There will be a precedence set for the substantial irrigation elsewhere on the continent. Also, most urban, industrial and mining water issues are not recognised as relevant to Basin issues.

But, not including the urban, mining and industrial sectors, which could be technically linked to the Basin, will lock such users into a bleak and insecure era where the only alternative appears to be the incredibly high costs of desalinated or recycled water. Urban users do not use much water, but their costs are two orders of magnitude higher than those within the Basin. It would be a national folly or comprehensive stupidity not to incorporate Basin water issues with broader National water issues when the issues and outcomes are so profound and stark.

Clearly, the MDBA process is incapable of dealing with the policy problems and institutional setting which blight the distorted water use sector within the Basin, and it is a bit much to expect the current process to be visionary in terms of National issues. But persisting with the MDBA process and seeking to beat it into something worthwhile would seem to be a waste of time and money.

The logical alternative is that consideration of water issues within the MDB should be subsumed to a National Water Plan as soon as possible. At a national level, issues of appropriate and effective use of Australia’s limited water supply could be rationalized and a reasonable process of socio-economic readjustment implemented with appropriate time and financial arrangements. The current malaise of water industry distortion involving gross subsidization, inefficient use, high social cost, high environmental cost and very high opportunity costs could then be brought into the open for the first time in 124 years. This would open the way for a better water future which could prevail until the next century.


A. K. Dragun

(December 2010)


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