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STANDING COMMITTEE ON REGIONAL AUSTRALIA
25/03/2011
Impact of the Murray-Darling Basin Plan on regional Australia

CHAIR —I now welcome members of the National Irrigators Council to today’s hearing. Thank you. You have been involved with the committee before and thank you, particularly Stewart, for the time you spent with us some months back now. We appreciated it. Although the committee does not require you to give evidence under oath, I should advise you that this hearing is a legal proceeding of the parliament and therefore has the same standing as proceedings of the respective houses. We have received your submission, thank you. Would you like to make some introductory comments, and if there is further material you would like to leave with the committee, please do so.

Mr Ellis —Thanks, Chair. Good afternoon to yourself and the committee. Firstly, if I may give a very brief overview of the National Irrigators Council, we now have some 32 members. They are mostly Murray-Darling Basin situated members, but we do span from Bundaberg in Queensland down to Adelaide, so we have irrigator representative bodies from the four states and a number of national commodity groups as well.

I would like to reiterate the point that irrigators are and have been willing to be a constructive player in the water reform process. We certainly accept that there needs to be some water permanently returned to the environment for environmental purposes. We are not opposed to a basin plan. We welcome the development of a plan, but we would love to see one that does not decimate our communities in the process. The vast bulk of the environmental problems in the basin, we would state, have been caused by the worst drought in recorded history and certainly Danny will be touching on a couple of issues there that highlight and illustrate that.

I would also like to make the point that irrigators only have access to their irrigation entitlements when water is available, when it is actually allocated, and we have seen in the last few years in the Lachlan Valley they have had six years of zero per cent allocation and certainly in my area, Murray irrigation in the New South Wales Murray Valley, we have had two years of zero and then a nine and a 27 per cent. So I think in some instances irrigators have been extremely unfairly blamed for causing some of these environmental problems when in reality it has really been the drought that has caused those problems.

For this process to be truly inclusive, we believe it needs to target the triple bottom line and, for that to work, it is going to require some ground to be given on all those fronts. It will have to be a balancing act and that is what we believe needs to be achieved.

Certainly the National Water Initiative committed reform to that triple bottom line but the act gives supremacy to the environment. Whilst we are looking forward to a much more balanced version of the Basin Plan coming out shortly, the National Irrigators Council is clearly of the view that the Water Act is a problem for us. If we do get a basin plan shortly that we believe we can live with, we still do not believe we will have any certainty whilst the act is written the way it is. That is a huge issue facing irrigators and infrastructure service providers wanting to go on investing huge sums of money into more efficient irrigation systems if we do not believe we have some sort of certainty coming out of this water reform whilst we have a Water Act hanging over our head the way it is currently written.

The best available science used in the guide is, at best, medium quality and the advice from the MDBA should only form part of that decision-making process. We there refer to the CSIRO submission to back up that statement. The Sustainable Rivers Audit: they have erred in using that audit as the basis of the need to act because it was unrealistic, given it was undertaken in the middle of the drought. It also suggests the sole cause of the problem is not so much a lack of water, yet more water is the only solution being suggested by the authority, so there are certainly more issues affecting environmental health than either lack of water or too much water at certain times.

We believe you certainly can have a healthier environment without destroying regional communities and food and fibre production. However, to do this we must consider alternatives other than the ‘just add water’ approach of the act and the authority to date. It certainly must include infrastructure upgrades, environmental works and measures—those projects—and it also must consider those other aspects that impact on environmental health, not just water flow or river flows. We have referred to other issues that certainly affect environmental health as well.

I have a couple of specific points around the terms of reference. Socioeconomic effects are grossly underestimated in the guide. We would be certainly concerned to see structural adjustment money going to painting town halls or achieving other not really worthwhile projects out in communities. Whatever is proposed in that way must address some of the real structural adjustment issues that are going to need to be addressed in basin communities.

Infrastructure upgrades to improve water efficiency are essential both on farm and in delivery system service providers so that farmers can produce at least the same amount of food and fibre with substantially less water. Environmental works and measures have largely been ignored. National Irrigators Council have compiled a list of current, planned and completed projects and I am pleased to hear the new chair of the authority saying that he is keen to undertake an audit of works—environmental achievements—that have been made to date, because we do not believe the guide captured those things.

There has been a lot of good stuff done, but largely overshadowed of course by the effects of the drought, so we really need to understand the good things that have been achieved. Certainly more efficient river operations: there is a real opportunity there. We would also say there is little opportunity for development of new industries in affected communities, even if that is supported by government programs. So in the whole restructure process, just to think something completely new is going to come out of the blue to replace food and fibre production from irrigated agriculture is going to be very difficult and we would just caution against that. I will now ask CEO Danny O’Brien to speak.

Mr O’Brien —Thanks, Stewart. As Stewart mentioned, we have tried to be proactive on the environmental works and measures front and, although it is not an area that we have expertise in and probably cannot be expected to have expertise in, we have been working with many organisations, particularly state governments, to try to push them to put forward projects. Some of those are reflected in the list that we have appended as a supplementary submission that you will have there.

I wanted to add a couple of things, really to try to bust a few myths that have been thrown around in this debate as well. The first one is the ability to adapt. It has often been said by people, ‘We went through the drought and everything was still okay. We only had a slight dip in production.’ That in itself is a misnomer. It is an odious comparison in our view. In a drought situation, farmers adapt completely differently to how they would in a permanent situation where water has been taken, whether it is bought or otherwise.

That is evidenced by the fact that dairy farmers in the Murray-Darling Basin increased debt on average by 41 per cent throughout the last drought. They will not do this under a permanent removal of water. In fact, many of them will be removed themselves by buyback and that will have an impact on the wider community. So do not look at gross value of irrigated agricultural production, because it is completely misleading. Look at farm profitability and equity. Not surprisingly on that front, ABARE does regular farm surveys and it showed through the second half of the previous decade from 2000 that farm profits practically disappeared, which will be no surprise to anyone.

Another one that is regularly used as a reason why we have to act is that there were 23 dairy farms around the Lower Lakes in South Australia and now there are only three. Whilst that is very distressing and very disappointing and a lot of it was caused by the drought, the figure in the southern Murray-Darling Basin—so southern New South Wales and Victoria—is that 1,235 dairy farms disappeared in the decade from 2000. So to suggest that there was only one part of the river that was suffering is wrong and the number I have just given highlights that many dairy farms were suffering stress and also the effects of deregulation through that period. So to simply say that there has been this problem with the lower end and that is why we need to act I think is misleading.

Another one has been found out recently by one of our members. We have heard statements from several groups about a loss of 90 per cent of the flood plains in the Murray-Darling Basin. One of our members has done some work and found that the source of that study is a member of the National Water Commission. It was referenced to south-east South Australia, not the whole Murray-Darling Basin and in fact the flood plains had been lost due to filling and drainage. So no question that we have had huge impacts on the flood plains and on the Murray-Darling Basin basically, but the loss of the flood plains has not been because of overextraction, it has been because we have actually changed the nature of those flood plains. I will make another comment about that in a moment.

This one is perhaps a bit facetious but we often the cry that ‘irrigation extractions have increased 500 per cent in the last century or so’. That sounds pretty scary. But that is from a very low base and, when you look at it, you could make similar comparisons. One is that white settlement, for instance, has grown 380,000 per cent since 1800. That is an alarming statistic too, but both of them are pretty silly because when you are talking from a low base, that does not make sense. I wanted to make a point on that.

I have two final points. Firstly, the guide highlights that the water available to the environment in the Murray-Darling Basin is about 58 per cent of the natural flow. A similar figure for the Yarra catchment in Melbourne, according to the Central Region Sustainable Water Strategy in 2006, is 57 per cent. I just highlight that to the committee and say that when we are comparing our natural resource management, let’s compare and be fair dinkum about what the realities are in the Murray-Darling Basin, where we have 58 per cent of the water available for the environment compared to, for example, the Yarra where there is 57 per cent.

Interestingly enough, when I have had discussions with some public servants about this, they have said, ‘Yes, but you can’t compare the two because the Yarra doesn’t have a flood plain. Obviously the Murray-Darling has a flood plain and needs to get water out to that.’ Why doesn’t it have a flood plain? Because four million people live around it. We are not suggesting that anyone up and move those four million people. I make the point to highlight that this is an issue that we have to accept: that we do have an impact on the Murray-Darling Basin. We have had an impact. It is a highly changed system but let’s get real about what we need to and what we can achieve.

Finally, I would like to provide members of the committee with a copy of a submission made by Professor John Briscoe from Harvard University to the Senate inquiry into the Water Act. It is a six-page submission on water reform in general in Australia. I highly commend it to members of the committee. If you only get time to read one submission read this one from an independent outsider who has had an interest in Australian water reform. Effectively he is saying, ‘The rest of the world has been watching what you’ve done and been very impressed. We’re now starting to wonder where you’ve gone wrong.’ I will leave it at that for the moment. I am happy to take questions.

CHAIR —Thanks, Danny. Stewart, when we visited your area there was a lot of concern about the so-called Swiss cheese effect of the buyback arrangements. Since then—and the committee has been partly responsible for it—we have seen the minister and there has been some change in terms of the capacity for a more targeted approach from the irrigation districts in terms of proposals that have been put before government before but been rejected. Since the time we saw you before, is there a changed feeling in your area or are there going to be proposals that you are hearing about in the various irrigation districts that not only have an impact on those particular individuals but also the integrity and the fixed costs of the districts themselves?

Mr Ellis —We have certainly had discussions. Minister Burke had a roundtable a couple of weeks back and we had a presentation there from the department that talked about some new guidelines for the PIIOP type projects. We have still got a couple of the irrigator led group proposals within Murray Irrigation, the subsystem retirement type proposals. I am not at all confident that the new guidelines are any more helpful, really. I was quite disappointed with the new guidelines as I understand them.

I did highlight to the department that the issue we have got within Murray Irrigation is that, say two years ago, the government bought a large parcel of water out of Murray Irrigation for some $1,467 in entitlement. The current irrigator led group proposal that we have from one of our groups is looking at selling their water and decommissioning their farms for about $950. The department talks about needing to achieve value for money. Some of those farmers were extremely, I think, offended when, only two years ago, some of their neighbours sold water for $1,467 and they still sit there connected to the system. They can require water to be delivered to their farm at four days notice at any time; they can enter the temporary market. We have got these other farmers that are prepared to shut down and disconnect now at that price. That is just the way the water market has moved, I suppose.

In saying that, the water market, largely, is the government purchasing water. That is about the extent of the water market at the moment. That makes it really difficult for us as an irrigation supply company to put these proposals together. A lot of our farmers just think, ‘Well, why would I do that when they were able to achieve something much better?’

CHAIR —So if you have got an actual proposal at $967, put it to the irrigators rather than the other way around.

Mr Ellis —That is correct. They are actually sitting on draft contracts at the moment and scratching their head as to whether they go with that or hope for something better out of these new guidelines. Some of them are thinking, ‘Well, I’ve got a bird in the hand at $950. Maybe I’m better to go with that than potentially a new program which may or may not work.’

Ms LEY —Chair, just to remind you: when the department were here, they actually highlighted that circumstance as an example of how well the process was working.

Mr O’Brien —I think they also admitted that two of the irrigator led group proposals had actually got up. That is one of the ones that Stewart is referring to. At the roundtable the other week, the minister was very keen to emphasise to us that this was very early drafting by the department and he wanted to share it with us on that basis. That was certainly welcome. I think most of the corporations share Stewart’s concern that it is not necessarily going to solve the problem, but we are in the process at the moment of trying to organise a meeting—next week in fact—between the key department officials and some of the corporations, given that it is particularly an issue for southern New South Wales. We hope to be able to have an influence that means that they get to put forward a proposal that works and we get a proposal that works as well.

CHAIR —It might assist if you were able to give the committee some information as to why this new arrangement does not seem to cater for what you were requesting, because it has come off the back of not only request but some others who were requesting the same things in terms of their fixed-cost arrangements in relation to their districts. We would be very interested to hear why it is not working.

Mr Ellis —It is a very difficult topic, I suppose, given the structure we have got. Our customers in New South Wales, within the irrigation supply or the irrigation corporations, are our shareholders. We are not a government department, as they are in Victoria where they drew different colours on a map, so we cannot actually go and tap any of our members on the shoulder and say, ‘Sorry, mate, we’re no longer going to supply you with water,’ as they seem to have done in—

CHAIR —I do not think they were suggesting that, but it was suggested to us that there were various proposals led by the growers in various districts—we do not have to name them—that were not acceptable to government under the buyback arrangements; hence we were getting the Swiss cheese effect, which created all sorts of other problems in terms of the operation of the districts. If there is an issue where a group do want to sell or retire their assets and it is not working through the current system, we would like to know how to make it work, because I think there is an intent to make it work if there is an intent to sell.

Mr Ellis —We are working hard, because certainly Murray Irrigation understands. The other irrigation corporations, as well, know that if they are going to have substantially less—30, 40, 50 per cent less—water to deliver in the future, they can no longer afford to maintain similar sized schemes and channel systems as what they have had. They have got to achieve a footprint reduction to achieve some water efficiencies. So we need to work hard but we are certainly looking for some further help and refinement of some guidelines to actually get there.

Our PIIOP application requires us to have proposals to put in the application. To actually get people to want to go through that process, which may take a couple of years—they are looking at what has happened in the last couple of years, where I believe we have got fairly close to achieving them but none of them have got over the line to date. People are saying, ‘Well, you haven’t been able to do it there. We’d prefer just to get on with life. There’s some water available and we’ll go back farming.’ So what has happened in the water market has made the achievement of these subsystem retirements very difficult.

Mr O’Brien —There are two issues. The department has put forward a proposal to try and assist with the subsystem retirements, so they are actually saying that they would propose a fixed price with a premium on it that would be advertised and available for people to apply for as a group, which is, I think, the key difference from what they have done in the past.

This is an issue that affects all of our members in irrigation districts, including South Australian Central Irrigation Trust and Renmark Irrigation Trust, for instance, and the problem is that that does not solve the Swiss cheese effect of the buyback coming in over the top and still taking little bits out here and there in the areas that are not going to be shut down. We have been encouraging the government to put the people who are running the buyback program and the people running the infrastructure programs together with us to actually try and nut out some solutions to that.

Mr Ellis —Chair, there is a real need for that whole program to be very integrated to make it work, otherwise we are going to have the rug pulled. We can spend on some efficiencies over here, only to find someone there then turns around and sells water to the government, and it is another stranded asset. Those programs really do need to be talking to one another.

Mr SECKER —Do you have any idea how much entitlements have been reduced in New South Wales with the water sharing plans? We have seen quite a bit of evidence, but I have not got an overall figure. And are there further water sharing plans to come into place? I am not sure of that either.

Mr Ellis —Have you got that detail?

Mr O’Brien —No, I do not. As a national body, we do not have that sort of detail. I think there were various cuts. I think the New South Wales high security gave up five per cent as a specific—

Mr SECKER —Everyone has basically taken a five per cent cut, but the water sharing plans in some places were 50 per cent cuts or even more.

Mr O’Brien —And in groundwater, yes—

Mr SECKER —I have not got a total figure. Do you have a view whether that should be included together with the Living Murray Initiative as part of the SDLs?

Mr O’Brien —Absolutely. I think that has been one of the biggest issues that has caused angst amongst the community. There would not be an irrigator in the Murray-Darling Basin that has not lost water in the last 10 or 15 years, almost all of it uncompensated. So that is one of the things that has really annoyed people; that that loss of water, through state based water planning processes and the other works that have been done, like Living Murray and the various other programs, did not appear to be considered. Certainly some of them, I think, were in the numbers, but it was not explicit and it made it very difficult to find out how they had been considered. We discussed that with Craig Knowles on Tuesday at our meeting that he attended and he is very keen to try to get that up and going.

Mr SECKER —Yes. He expressed the same view last Thursday in the Riverland, in my electorate.

Ms LEY —We had the National Water Commission come and give some evidence. I certainly do not expect you to have read the transcript, although it is available publicly. It seems to me that their role now is quite a confusing one. It may even confuse them. Really, they pinned it down to the ability to audit the final plan once the final plan is developed, but not to have any input into the production of the plan. Where do you see the National Water Initiative and, in fact, the commission itself, given that it is a significant body that costs money to run?

Mr O’Brien —I think the NWC’s role is that of an umpire or an enforcer; not really an enforcer, but ideally it would be an enforcer. To give an example, with the National Water Initiative the government committed to creating a register of environmental water which was to be drafted by 2005 and finalised by 2006. We are in 2011 and it still has not been done. If that had been done, the MDBA could have just gone to the shelf, gone pluck, ‘Here’s the existing environmental holdings.’ That would have been a lot easier.

But we think that unfortunately the reform path has diverted well off the National Water Initiative path. That was very much a triple bottom line approach. There were always going to be risks in it for irrigators, but I think most irrigators at the time—and the NFF and the New South Wales Irrigators Council and other organisations that were involved—acknowledged that there was a need for that reform and there would be some pain but we would actually get some certainty. I think it has moved away from that. I guess there is a question at the moment as to what the NWC’s role is. They are facing a sunset clause shortly. I would have thought that it could play a role in keeping governments and people like the MDBA honest in what they are doing and whether they are meeting their commitments.

Ms LEY —But do you think the role it currently has makes sense?

Mr O’Brien —I think, as you said in the first question, it is a bit hard to know exactly what they do sometimes.

Dr STONE —We have heard from some irrigator communities—for example, cotton growers—that they believe they have probably gone about as far as they can go in water use efficiency with their crop planning. What they are suggesting is that they could perhaps deepen their ring tanks or their on-farm storages to have less evaporation and so on; of course water loss there. Given that the Murray-Darling Basin guide to a plan is very much focused on water clawback through so-called willing sellers and not on-farm water use efficiency measures—very little attention is given to that, also not much money, as we know, is flowing to the systems either, but private places like Coleambally versus Murray-Goulburn—in your view what potential is there for further efficiencies of water use without affecting production; in fact increasing production in the basin? What order of efficiency do you think is possible with technologies or different management regimes? What is the capacity of irrigators at the moment to implement those extra efficiencies, given a lot of them have just come through seven years of drought, floods, locusts and so on?

Mr SECKER —Mice.

Dr STONE —Sorry, I forgot about the mice.

Mr Ellis —I think everywhere—certainly in my area in the New South Wales Murray Valley—there is a great deal of interest in the on-farm efficiency works. I have been really surprised by people’s resilience: how they have come out of the drought and they are really looking to further invest in their efficiencies on their farm. You would be aware of the land and water management plan type program that we have had over the previous 15 years and then that phased out and there was a bit of a lull, but now people are really looking to further invest in on-farm efficiencies. That seems to me, with what I have seen around the basin in the areas that I have travelled, to be pretty much the case everywhere. Some places are just about hitting the limit of what they can do and still make their water use affordable, because ultimately they have got to be able to use their system, use the water, and make a profit with whatever they are producing.

Dr STONE —In seeing that thirst still for more efficiencies, are you also seeing a capacity to be able to invest in it in terms of what funds are available to the irrigators?

Mr Ellis —Certainly. With the on-farm efficiency and the funding, there has been a degree of frustration, I would say, in people actually waiting for the department process to get there, because there has certainly been a lag in getting that money out and on the ground and that has really been frustrating. If a farmer has got a program, he generally wants to do it and work with the coming seasons and not be held up for a year or two waiting for funding. So that has been a real issue.

Mr O’Brien —I think we actually saw, particularly with the on-farm program, that there were people ready to go when it was announced in October 2009, expecting that they would be able to put a summer crop in for 2010-11, and they have still not even started work because it has been so slow. Probably our colleagues from Ricegrowers will be able to tell you more about that as one of the delivery partners. We certainly have a preference for infrastructure investment over buyback. We acknowledge the role of buyback and we are not opposed to it, but we think getting those efficiencies, both in the irrigation infrastructure and also the environment, is critical and needs to be done. There will be a point where it does become too expensive and it is just not viable, as Stewart said, both for the farmer and the government, but there is probably still a fair bit that can be done out there, I think.

CHAIR —Does your council see a group like Water for Rivers as being some sort of model in terms of achieving water use efficiency, both environmentally and within irrigation areas?

Mr Ellis —Out of all the purchasing schemes, I am of the belief that Water for Rivers actually had a social conscience. I thought that program worked reasonably well out of all of them.

Mr O’Brien —We put in our submission that we think it is a pretty good model for how you go about it. They literally went out and talked to people on the ground, worked with corporations, worked with individual farmers, with state governments, and quietly got the job done. As a council, other than what we have put in our submission—it has not been specifically addressed as a policy position—I think most of the people involved would say it is a far better way of going about it. One of the projects they have got, the Murrumbidgee River management project, is another one that is starting to push the boundaries of what can be done simply with river management that might save a whole lot of water.

CHAIR —Thanks very much. We are over time. We do thank you for coming. One thing you might be able to get back to us on, Danny, if you could: in your submission you talk about water savings at Lindsay Island if in fact works and measures were put in place. We have been getting a little bit of conflicting information as to the amount of water that could be saved if those works and measures were put in place. I think it is 1,200 gigalitres as against 90 when the event occurs. We are getting different information as to when the event needs to occur. So if you had any information on that we would like to see it, because they are the sorts of things that could have an impact on the total amount required.

Mr O’Brien —We are trying to get that too, Mr Chair. It is a difficult one, but we do need to have those projects extrapolated out to long-term cap equivalent. I have been working with the Victorian government where some say, yes, they can do it; others say, no, it is impossible. Now that the MDBA is taking a more willing approach to these projects, hopefully we will start to be able to get some of those numbers.

CHAIR —We will be talking to the Victorian minister next week, so we might raise that issue with him. Thank you very much for coming. There will be a transcript that will be made available. If there are any issues or further information, please feel free.

Mr O’Brien —Thank you.

Mr Ellis —Thanks for the opportunity.

[1.50 pm]