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STANDING COMMITTEE ON REGIONAL AUSTRALIA
18/01/2010
Impact of the Murray-Darling Basin Plan on regional Australia

CHAIR —Welcome. Would you like to make an opening statement?

Mr Brown —I appear here today as a private individual putting a private submission, although I do currently hold the positions of community liaison manager for the River Murray, which is a position I filled on behalf of the state government. I was appointed by the state government to manage the drought over the last four years. I am also the Premier’s Special Adviser on Drought, and in that role I particularly have worked through a process with banks to negotiate a satisfactory outcome, if possible, for primary producers in trouble with their banks. I have dealt with a large number of river irrigators in that process. So I have a particular interest in that area. For the last four years I have experienced first hand the impact of the drought. Initially, the biggest impact of all, of course, was below lock 1.

CHAIR —I do not think we need to brief you, of all people, on the matter of evidence before a parliamentary inquiry.

Mr Brown —If I may pass some introductory remarks, firstly, let me make it very clear that I support the proposal of the guide, which is aimed at trying to reduce the diverted water out of the river and to have a more sustainable and healthier river system. That must be the overarching objective and I support that. We need to make sure that there is no time lost in trying to achieve that, because although we are in a wet situation now droughts will come again, and the interesting thing with droughts is that they can be very severe because they last not for one year but, as we have seen, for a number of years.

Having said that, I want to paint a picture about where I see the problem is with the guide. The guide has been put out there as an objective about how to make it a healthier and more sustainable river. But it needs to be part of a broader government approach in terms of how you achieve those outcomes. I think a lot of that other side of the equation has been lacking and I would like to touch on a number of those points.

I think the federal government needs to very quickly move to put in place not only how it is going do it but also how it is going to achieve savings in delivery through the infrastructure program—the $5.8 billion program. Very little of that money has been spent so far. I would have thought that that should be the first priority. Previous witnesses before this committee have given evidence, particularly the previous witness, and have highlighted the fact that that should be a priority. I believe that significant savings can be made. Even though that scheme was announced 2½ years ago, very little has been achieved. It is of great disappointment that so little has been achieved in what should be the first priority.

Secondly, there needs to be a voluntary buyback scheme, but we need details now about what the price is going to be. I disagree with the current tendering system. I have seen the price drop in South Australia from $2,400 to $1,700 and now it is in further unknown territory. Let me make it clear that, although it is a voluntary buyback, I deal with people on a daily basis and these people are being forced by financial circumstances to sell their water back to survive another day. Therefore, the word ‘voluntary’ gives the wrong impression. It is a sale by necessity. That is why I think there needs to be a fair and reasonable price set and it needs to be understood. We need to have a schedule about how much and where the government is trying to achieve buyback. That would mean that growers could sit there with much more certainty and understanding, instead of the great deal of uncertainty at present where some of them who are tendering are missing out and then become absolutely desperate. The banks say, ‘You must reduce your debt,’ and therefore they drop their price even further. It is just becoming a downwards spiral, which is not good.

The other thing is that the federal government in setting these policies needs to make sure that it understands that water is only one of the financial assets. There are many other financial assets that then become stranded as the water is sold for which there is currently no compensation. I very strongly support the smaller irrigators exit scheme that applied for a period. That was a great success. I also support the current drought exit scheme, which will end at the end of June. Quite a few people I am dealing with at present are going to apply or have applied already for that exit grant. I would urge that there be a new exit grant scheme which would be specifically part of this overall Basin Plan to achieve savings. That will turn the so-called voluntary buyback into a genuine voluntary buyback and help to compensate people for what they will lose in other financial situations.

Many of the people selling their water at present are still walking away at the end of the day with an unresolved debt at the bank—a very substantial debt. In some cases the debt is well over a million dollars or several million dollars. So there is a significant cost there. Incidentally, if such an exit package were put in, I would urge the federal parliament to do what was originally done with one of the previous exit grants, which was to make it exempt from the bankruptcy scheme that applies. At present, any single creditor could bankrupt an individual and secure the present exit grant. I think that is a failing of that scheme.

There also needs to be some adjustments for those other parties, third parties, directly involved who would be impacted by the buybacks—the irrigation trusts, the processing industries et cetera. They will need assistance to adjust. I am a keen supporter of regional grants to help the broader communities to adjust as well. I think the so-called Mitsubishi fund here in South Australia—which we are very familiar with in this state—has been a great success.

I also believe that as part of the overarching policy at present the federal government needs to look at where it can make savings in environmental water. The river is largely an artificial environment at present. You have backwaters that are permanently held at high levels because of the weirs and locks and, as a result of that, evaporation is unnecessarily high. I believe that in many locations you could achieve a better outcome for the environment if in fact they became regulated backwaters that simulated the droughts and floods that the river faced in the past. I think the environment would be better off.

In my submission I highlighted some of the specific flaws that I saw in the guide as published. You touched earlier on the current diversion limit for South Australia, set at 665 gigalitres, whereas I believe that our cap is set at 719 after you adjust for interstate trade and the purchase of Living Murray Initiative water. I have taken that up. I attended the workshop that the authority put on in Canberra. I asked the question there and I got some less than frank answers. In fact the answer that I finally got was: ‘Well, this is what the computer model spat out on what was fed in.’ I would question what was fed into that model.

I question the Eastern Mount Lofty Ranges. If you look at the guide you see it is one of three so-called good catchments. There is a flow-through of 93 per cent in the case of Eastern Mount Lofty Ranges. To impose exactly the same reduction of 26 to 35 per cent on a good catchment, compared to all the poor catchments, again I think defies logic. And when I asked the environment manager that he said, ‘The modellers had to find the water from somewhere.’ I do not think that is a satisfactory basis.

The other area that concerns me here in South Australia is the Angas-Bremer Basin. The guide sets a current diversion limit of 6.5 gigalitres for the Angas-Bremer Basin.

CHAIR —This is groundwater?

Mr Brown —Groundwater, yes—the Langhorne Creek area. When I was Premier it had a current diversion limit of 27 gigalitres. We cut that from 27 down to 6.5 with the agreement of the irrigators because the basin level was dropping, the quality of the water was becoming very saline and something had to be done. There is no recognition of that in the guide at all, and in fact since that cut down to 6.5 gigalitres was made the quality of water in the basin has improved immensely and the volume has increased immensely as well. Frankly, it has recovered to where it was probably about 40 years ago. So I question a further 40 per cent reduction on that.

The other big problem with the guide is that they use averages; everything is based on averages. This river system has huge fluctuations from droughts to floods, and it is very dangerous to use averages when you are dealing with a system with huge variability. What you want to look at—particularly because some of those dry periods fall in consecutive years, as we have seen—is how you can better manage the river in the dry years or in the average years and not try just to come to averages. I think therefore the modelling has been fundamentally flawed because of that and I think you would find that you could get a much more satisfactory outcome for the irrigators, the environment and the health of the river if you looked at perhaps the driest quartile, the next driest quartile, the second wettest quartile and the wettest quartile and at how you might have quite different management processes for the river in those periods.

The other point I would make, from a somewhat parochial point of view, is that South Australia did set the cap in 1968. We have not exceeded that cap in any year since 1968. In fact, the cap has been reduced since then, by 10 per cent. Since we set that cap in 1968, the diversion in other parts of the basin has increased by 5,000 gigalitres, or 67 per cent. As has been said previously, we equally—because we saw the importance of the river—

CHAIR —If I could just clarify a point there, when you say a diversion of 5,000 gigalitres, do you mean allocation of new licence or allocation of actual water?

Mr Brown —Allocation of new licence. That is clearly shown in the guide. Look at page 27 of the guide. That is highlighted. I do pick up that page in my submission. So I think they are the main issues I want to highlight, and I am willing to answer any questions.

One other point I perhaps should make is that the guide talks about how the basin has recovered from fluctuations in commodity prices and from droughts, but the permanent loss of irrigation water has a quite different effect. There is no recovery once you have that in terms of those industries that have had water taken away, whereas you can recover from a drought and you can recover from low commodity prices.

CHAIR —Thank you very much. That is valuable evidence. Are there any questions? I have one a bit later.

Mr ZAPPIA —Thanks for your submission. I have two questions. One is about how you seem to support exit grants. It has been put to me that exit grants caused the demise of a community, because those growers that are left then have to pick up the full cost of the distribution of the water to them, and that in turn adds to their overhead. So I would appreciate any comment you have to make about that.

Secondly, you might have heard my question earlier on in respect of the carryover of water from last year. Given your close association with managing the drought in South Australia over recent years, do you have any comments to make in respect of the water carryovers that are now impacting on growers?

Mr Brown —Yes. With exit grants, remember that I did say that I thought there needed to be some financial support to allow your irrigation trusts et cetera to adjust. So I think an exit grant, together with that financial support to allow adjustment, would overcome the disadvantage of a straight exit grant. It does worry me, though, when I look at the Riverland irrigation areas and see the hotchpotch of weeds, dead trees and things like that in amongst viable orchards. In fact, I have seen classic examples of old orange trees that have had the water turned off and now have grapevines, passionfruit vine or bridal creeper growing up through the middle of them. The neighbour next door, 12 feet—three metres—away is still trying to struggle with keeping a clean orchard, and it is very difficult.

In terms of your carryover, you need to appreciate that carryover can be more than 100 per cent of your allocation entitlement for the year. In fact, a lot of the carryover water would be held by irrigators or dairy farmers on the swamps who have seen their swamps dry out to a massive extent. We have not gone into that, but there are cracks going down 10 or 12 feet—three metres—deep that are big enough to put your leg down right up to your thigh. They need to wet up, and they have carried over a lot of water. So therefore a lot of the irrigators would have up to 150 per cent of their entitlements carried over at present—in some cases more than that. That is the reason.

You need to appreciate that included in the allocation—because the allocation is only 67 per cent in South Australia at present—the authority itself actually holds 67 per cent of the 36 gigalitres of Living Murray Initiative water from South Australia, and it holds a significant volume of carryover water as well. I understand that, if you put those two together, the authority holds over 40 gigalitres of water for environmental management.

I would have thought that the environmental management would be solved by this huge flow coming down the river, and the flow that has already come down the river, and there is 40 gigalitres which, frankly, the authority could give up from this year’s allocation which could go to irrigators—and there would be no detrimental effect on the environment whatsoever. I personally think your committee should look at recommending—it would need to be an interim recommendation because it would need to be done this year—that the authority give up those 40-plus gigalitres immediately so they could be allocated within the cap in South Australia.

CHAIR —You spoke about the so-called voluntary buyback and how, in your view, there were distressed sellers involved. The buyback I think is 705 gigalitres at the moment. Do you have any evidence of people actually being stressed by banks in terms of entering into that so-called voluntary buyback arrangement?

Mr Brown —I have some figures here which you might find interesting. For instance, around Lake Albert on the eastern side of Wellington—we were just talking about Lake Albert and Lake Alexandrina—the total entitlement has dropped from 18.6 gigalitres at the end of June 2006 to 5.8 gigalitres at the end of October 2010. So in just over a four-year period it dropped very substantially, simply because those people could not irrigate and saw that, for survival purposes, they should sell their water whilst there was a willing buyer. There are also figures for the western side of Wellington, around Lake Alexandrina. There has been less of a drop there, but it has gone from 38.1 gigalitres down to 33.3.

In the Riverland, though, I deal with people who, through sheer necessity, to pay their creditors, are having to sell water, and even sell it at what they think are unsatisfactorily low prices. Unfortunately, I cannot give you the figure because Centrelink will not release it. We have asked for that figure. I have personally asked for it. It has been asked for through the Riverland Horticultural Reference Forum. Centrelink cannot give it, for privacy reasons. But your committee may be able to get the figure. How much water has been sold in the small irrigators exit grant? How much has been sold in the subsequent exit grant? It might be hard for them to do that correlation.

Then there is another group again who I deal with who are distressed financially and selling their water. In fact, in many of the cases that I deal with they have sold all their water and are now in the final stages of selling up what land they have so they can apply for the exit grant.

Mr SECKER —I think it might be useful, Mr Chairman, if we could actually get those figures from Centrelink.

CHAIR —Yes. Mr Brown, I thought you and previous speakers made a significant point in relation to, for want of a better phrase, micromanaging, or better managing, some of the environmental sites—you have suggested backwaters, in terms of the locks. I am not terribly familiar with that. Can you just give us a snapshot of the sorts of volumes we are talking about that could be utilised if the structures or management were changed?

Mr Brown —I will give an example. They set up dairy swamps along the river in South Australia and built levee banks. We have had some modelling done—because I chair a committee on the future of the river swamps—of how much water would be lost if they reverted to backwaters. The modelling shows that between 72 and 80 gigalitres a year would be lost through evaporation.

That is a relatively small area—and I am not advocating that these backwaters be turned into swamps; I am not recommending that at all. I am just saying that they traditionally went through their wetting and drying periods and I believe they were significant savings, far greater than here in South Australia. The other thing I stress—and I back up what was said by the witnesses before me—is that the chance of, on a voluntary basis, buying back the required savings in South Australia would have a devastating effect. It is 50 per cent of irrigators’ allocation for the 3,000 and 62 per cent—it is well covered in the previous submission. My experience is that you will not achieve that by voluntary buyback unless the price for the water goes very high. In doing so, if you did achieve that, it would have a devastating effect on the Riverland in particular because much of the water held by the bigger irrigators with entitlements for pastures—I have given you the figures—have already traded that back into the federal government or to the Living Murray Initiative. That water has been sold. The scope then to buy back other water comes from smaller irrigators with permanent plantings. You will funnel that down fairly quickly and I think you will see a much more significant economic and social impact as a result of trying to achieve that target. That is why I think you have to achieve your savings through infrastructure and better environmental management et cetera. Having achieved those savings you then decide how much you really have to buyback because I think the overall impact will be much more favourable. Savings from the infrastructure—incidentally, I am a firm believer that 100 per cent of that should go back to the river, whereas I think the agreement at this stage is for only 50 per cent to come back to the river, to the Commonwealth water holder. I believe it should be spread across the whole basin as part of the savings for the basin—that is the only fair and equitable way of doing it—and not just to the region where the savings are made.

Mr SECKER —The wetting and drying effect that Mr Brown talks about we could show to the committee if we go to the Riverland. One of the infrastructure things we have done at Moorook has achieved that very thing and with savings of two or three gigs at the cost of about $1,800 a meg. It was a good cost-benefit result.

Mr Brown —I see numerous locations where that can be put into effect very well indeed. Chowilla is a classic example, which is now under way.

CHAIR —Thank you very much for appearing before us and for giving very valuable evidence, in my view. I have no doubt we will be taking over those issues on board. If there are further suggestions that you have in mind, you might make those subsequently to the committee.

Mr Brown —Certainly. Thank you very much for the chance to appear and all the best for your deliberations, which are very important.

[12.34 pm]