Senator CHERRY (2:23 PM) —My question is to the Minister representing the Minister for Agriculture, Fisheries and Forestry and it concerns water reform. Does the minister agree with the assessment by the Queensland Department of Natural Resources that water property rights as proposed by the National Farmers Federation are one-sided, legally unsound, economically irresponsible and amount to merely intangible expectations? Is the minister aware that a water reform paper by PIRAC Economics, released by the National Competition Council last month, argues that water users are the main beneficiaries from reductions in overallocations of water because:

Can the minister assure the Senate that the government will not be arguing at COAG tomorrow for a model of water property rights that involves triple-dipping for farmers—that is, compensations for reductions in water allocations; benefits flowing to licensees from reduced overallocations; plus the government picking up the tab for environmental repair required because of poor agricultural practices?

Senator IAN MACDONALD (Minister for Fisheries, Forestry and Conservation) —I appreciate the question from Senator Cherry. I also appreciate his interest in what is obviously a very important matter in Australia generally, one that is exacerbated or brought into greater focus with the current very dry weather we are having. Senator Cherry will understand that water property rights are matters for the state government. Until we can change the Constitution or get rid of the states—something which grows more and more appealing to me personally with the passing of every day—

Senator Abetz —Just change the governments!

Senator IAN MACDONALD —Change the governments? Sometimes our people are not much better, I have to say, Senator Abetz! But it is obviously a state matter. We can urge, and we do; and, as you quite rightly highlight, it is a matter that will be discussed at COAG tomorrow. The Prime Minister has made the federal government's position very clear. Reform of water management arrangements by the states does not in our view provide sufficient certainty in water property rights to allow for efficient planning, efficient use and the investment that is required for the more careful use and application of water. As I said, we will be discussing this tomorrow at COAG and we are going to work with the states to ensure the protection of legitimate property rights for farmers.

We do not believe that farmers should have to bear the full cost of changes required in the public interest. Senator Cherry would also know that, under the National Competition Policy payments scheme, we did provide money to the states so that they could compensate those in the community affected by changes resulting from competition policy, particularly in relation to water. We are very disappointed that the states have not used the quite substantial amounts of money they have received from the Commonwealth under the competition policy payments to help out with the water reform that is so vital and so necessary.

Both Mr Truss and the Prime Minister have indicated that one of our considerations for future payment of competition moneys might be that we might have to take them back from the states and deliver them from the Commonwealth directly to those affected, because the states do not seem to have been holding up their end of the bargain. Of course, that is a matter that is open to discussion and is something that the Commonwealth will consider in the period ahead. But we do believe that there is a need to properly address the question of water property rights, and I repeat that it is principally a matter for the state governments to do.

Senator CHERRY —Mr President, I ask a supplementary question. I thank you for that slightly contradictory answer, in which you say that it is left to the states but they are not doing enough. The National Competition Council has said that the states are actually progressing quite well on these issues, as a matter of interest. The Wentworth Group has proposed a definition of water rights that recognises water licences as property that is tradeable, that water allocations should be a percentage of total river allocation, and that adjustments of allocations should be based on the amount of water available and the health of the catchment. Does the government support that view of water property rights or does it support water itself as property, where any reduction in water allocated should directly and immediately attract compensation?

Senator IAN MACDONALD (Minister for Fisheries, Forestry and Conservation) —As I have just explained, the actual formulation of what property rights should involve and how that should be applied and adapted is a matter for the state government. Until such time as the Commonwealth has constitutional power to deal with this, there is not a lot of use in the Commonwealth having a very prescriptive view. We want to work with the states to help them as much as possible with research and resources, to get to an arrangement that is appropriate—

Senator IAN MACDONALD —I hear Senator Brown's interjections about the environment. That is very important and a very significant part of the whole discussion on water property rights. I know you have that interest as well, Senator Cherry. But it is a matter that the Commonwealth will be working on to help the states, but, as I say, the end result is that it is a matter for the states. We will try to make sure that there is a nationally appropriate regime when there is one. (Time expired)