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Salinity and Water Quality Roundtable, Mildura: transcript of address.

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Parliament House, Canberra ACT 2600 Ph: 02 6277 7680 Fax: 02 6273 4126



Thank you very much for your introduction this morning. Can I say to John Forrest, my very good friend and colleague in the Federal Parliament, Karlene Maywald, from South Australia, and to others I haven’t had the chance to see and talk to this morning, but wherever you are I certainly salute you and thank you for having me in your area. You are talking about some very important things this morning, matters in which I certainly have a very real interest, so I’m delighted to be here to open the first Salinity and Water Quality Roundtable, in Mildura, and to say to you that you all have a critical role in Australia’s response to the water planning and management issues that we face as a nation. This week, you will work through some of the key issues involved in carrying out the National Action Plan and developing high quality regional plans.

I do want to talk today about how the National Action Plan fits into the Government’s overall approach to water policy. It’s a policy we have to - to use the cliche, in this driest of continents -- get right, because it is absolutely vital to the future of regional Australia and our country as a whole.

I think it’s fair to say that, often overlooked, as it is, Australia’s primary producers are leading the world in changing our farming practices and our use of the environment. Perhaps that’s partly because we imported some centuries-old practices from other cultures into this fragile and ancient landscape, and we’ve had to face the fact that it isn’t working as well as we might have liked in many cases. Nonetheless, massive change is afoot. I think it’s fair to say that Australian farmers are keen to ensure that the use of their land is sustainable and that it can be passed on to future generations. There’s widespread agreement, then, that we have to adapt our use of the land to make sure that it’s sustainable. We’ve come to recognise that Australia has a highly variable climate and that droughts and floods are an eternal part of life in this country.

I do want to say in that context that I think one thing is often overlooked when it comes to the stewardship of our land and natural resources by farmers in Australia and it is this. Often the process of adjusting and moving to more sustainable practices might very well be something that farmers would be keener and more able to pursue if it were not for the fact


that as a result of subsidisation of production and in many cases of exports amongst our major competitors in Europe and America and to some extent Asia. The net impact of those international practices means that many times Australian farmers are in reality receiving less than the true cost of production, particularly long term, and particularly if one takes into account the true cost of externalities - environmental costs. It’s often said to me by my colleagues that farmers need to learn to work in the market place. I’m afraid my immediate rejoinder has to be ‘that would be terrific, we’d love to work in a marketplace that functioned properly, but we don’t.’ Policy makers in the broader community everywhere must always keep that in the back of their minds. One of the best things you can do for the environment in Australia is to seek vigorously genuine trade reform, which will prevent the importation of price distortions and of price injury into Australia. Because that is what is happening at the moment. The real cost of grain and cereals, for example, is heavily distorted by trading and subsidisation practices in Europe and America, and if we were able to get genuine price reform the true cost of production I think would be factored in much more realistically into prices.

Coming to one of the things that we have done as a Government, though, which I think is terribly, terribly important in recognising the variability that Australian farmers and their communities face. It’s to properly upgrade and make fully functional what were once known as IEDs, Income Equalisation Deposits. They are now known as Farm Management Deposits. The Farm Management Deposits scheme is designed to help primary producers set aside income in good years for use in bad years. I think testimony to the fact that Australian farmers given the opportunity will prepare, will be flexible and will look to the future is the fact that there are now 43,400 participants in the scheme, with investments of over $2 billion. These are the primary producers who are taking action to secure their future, indeed to put it into some perspective there are only around 115,000 farm units in Australia. And to put it into even more perspective, only bona fide farmers and not Pitt Street farmers - if I can use that old fashioned term - are eligible to use the scheme. So it does point very clearly to the fact that when cash flows are there, the farmers will certainly prepare for the future.

The current drought in my view - as I’ve termed it a couple of times - is perhaps the cruelest of all. It is a very unfortunate, very abrupt and extremely unwelcome interruption to the strongest rural recovery that I’ve experienced as a farmer over the last 45 years of my life, and with the possible exception of a couple of industries like sugar, we were seeing a very, very substantial surge in farmers’ returns. That was beginning to flow beautifully through rural communities everywhere. There was a mood in the main streets of our country towns, until the drought interrupted, that I’ve not experienced for many years. And so I have to say that just as my heart goes out to farmers grappling with the dry at the moment, I would make the point that while the city media point to the fact that this might knock a little off economic growth - and I know that is a matter for national economic management to factor in, those responsible for it have to think of it - can I say the great burden of this will be borne by rural and regional Australians, and in many cases, unless it breaks shortly, it will take a very long time to recover from. So it’s extremely unwelcome.

We have, just on that, now proceeded to work through the exceptional circumstances applications that’s been filed by the NSW Government for Bourke and Brewarrina. We know that there’ll be more coming. We have moved now to take an important step, that is to provide welfare assistance to drought affected farmers as soon as applications are referred to the National Rural Advisory Council. We’ve also adopted the use of predictive modelling to trigger eligibility for EC assistance.


We’ve actually been quite keen for some time now, after our experiences in the mid 90s, to reform the EC system, to provide faster support to farmers and producers, an increased role for the states and local communities in decision-making, and more accessible and generous business support.

I do want to spell something out. You know, it’s very unfortunate when the media portray drought and the tragedy that it is, then immediately swallow the line that comes out sometimes by some commentators that the Federal Government ought to be doing more. The first point I’d make is that the Farm Management Deposits are an incredibly invaluable investment and they don’t come without a cost to the Commonwealth Treasury. They are not cheap to operate from our point of view. They represent large amounts of foregone taxation. We have programs like Farm Help, which has generated over $100 million worth of assistance already, and then there’s Exceptional Circumstances, which is the State-Commonwealth agreement. You wouldn’t know it, but it is. The states are meant to contribute. At the moment they put in 4 percent. We’ve been asking them to lift that to 17 percent without us reducing our base - we’re not talking about cutting the amount we put in, we’re just suggesting that the states could lift their contribution to business support - and they’ve rejected it, even though it would see us paying 83 percent of the burden and the states only 17 percent. Now none of us want to get into public slanging match given there are people experiencing the pain of drought, but I have to say I’m fed up to the back teeth, I really am, with the lie that the Commonwealth is not doing its bit when we have been trying to put in place a more generous Exceptional Circumstances scheme since well before this drought started.

No we’ve put a fresh offer to the states, and proposed that they would only have to increase their financial commitment in the second year of an exceptional circumstances declaration. I hope they will come to the party on that. In the meantime, we’ll operate under the arrangements and progress them as quickly as we can.

But now to come to water management, and I made those remarks about drought because as I flew in this morning you could see the vast difference between those areas that are drought affected - and certainly John Forrest has been keeping me up to date on how concerned he is on the impact on many cereal growers and others in his electorate - and seeing the verdant lushness of the areas that have water. So let’s come back to water.

Now more generally, it ought to be noted that Australian governments started to address in the mid-1990s, when CoAG - the heads of Australian governments -- adopted its strategic framework for the water industry. That was the right thing to do, although I do believe that at the time -understandably - the full extent of the issues that would have to be confronted and the policy prescriptions that might be needed were perhaps not fully appreciated.

Some progress has been made. The states have worked on implementing the CoAG reforms and adjusting Australia’s water usage toward sustainable levels. However, there are major difficulties relating to adjustment, compensation and property rights. The CoAG water agreement did, of course, commit the states to working this issue through. But one of the reasons - and I’ll touch on this later - that we haven’t made the progress that some people would like us to have made, is that a proper framework for the fair and equitable treatment of affected communities was not properly hammered out. It’s having economic, social and, I think, environmental impacts.


So far, the state governments have essentially refused to compensate landholders for their loss of water rights or provide them with adjustment assistance. In addition, the long-term water rights they are introducing do not provide the sort of security of property rights that in my view will be needed for investment security in the future. The decisions they are making will have a very serious effect on landholders and their communities. I believe that many of those state policies are unfair. They are expecting rural Australia to bear the full cost of moving Australian agriculture toward sustainability, even though we have all benefited from the wealth generated by the farm sector, and much of what has been done in the past that is now deemed to not be sustainable was not only condoned by governments, by their instrumentalities, departments of agriculture, extension officers, scientists, even some of our more august research bodies, but often reinforced by government policy. I mean there are parts of Australia where your land tenure depended on you clearing and developing the land. Use it or lose it. Certainly the taxation law of the land encouraged the very practices which in many cases we are now trying to discourage. We rode to great prosperity as a nation on the back of the rural sector. At a time when we face enormous adjustments in rural Australia and at a time when those adjustment pressures are being made more difficult by what is happening in the production and export practices of the Europeans and the Americans in particular. I have to say that it’s only understandable that rural communities now want to see a fairer way of approaching all this.

The new water regimes do not achieve the goal of providing long-term investment certainty, because of the lack of clarity and fairness in the new licence arrangements. Ironically, the states’ policies are unlikely, then, to achieve their stated environmental objectives, because farmers will not be able to make the long term investments necessary to improve water use efficiency, repair damaged ecosystems and move to sustainability.

There are similar issues in relation, I might note, to the command-and-control legislation that governments have imposed to protect vegetation and native species. For example, one recent study in northern NSW concluded that the NSW Native Vegetation Conservation Act has reduced land values in northwestern NSW by 21 percent below what they might otherwise have been. That impact would be exactly the same as would be the case if a government were to impose a wealth tax in urban Australia. It’s no wonder that there’s antipathy, concern and uncertainty. It’s interesting to note and very important to note that the lack of investment security produced disappointing results not just environmentally but economically as well.

As a simple illustration. I’ve used it before. I’m aware of a farmer - not old by farmer standards - who wants to buy a very run-down farm that’s in the hands of an older farmer next door. This is an actual case, it does exist. As he looks at that farm, he recognises that the topsoils been stripped off, that the soil fertility is gone, the farm infrastructure is badly run down in every way, and would be a long term job to nurse it back to sustainability. That younger farmer is not prepared to take it on because of the uncertainty created generally but not only by the Native Vegetation Act in NSW. He doesn’t know, and his potential financiers don’t know, what he’s going to be able to do with that land in the future. There’s no security of investment. I can see the results a million miles away. The land will not be purchased. It will just be left to fall further and further away. So you get a suboptimal environmental outcome and a suboptimal production and economic outcome. And indeed, we went through an interesting exercise the other day. You see, we’ve just become too prescriptive. And this is why the NAP must be based on effective consultation as much as anything else. Governments have assumed that command and control legislation is the way to handle these problems, so we’ve now got to the point where a typical farmer in NSW or


Queensland may, if they search the statute books, find they are subject to no less than 300 or so pieces of environmental legislation, prescription, or regulation. All of them understandable, I suppose, in terms of their intent to move to sustainability, to ensure that the future’s there, but far too many of them no based on the sort of sensible, down to earth approach which will give people security of investment and the certainty they can go on, the feeling that it’s worthwhile staying in the game.

So we’ve been working on this as a Federal Government, and we’ve developed a new approach to natural resource management, based on the principles that I outlined at the Outlook conference earlier this year. The principles are information, partnership, incentives and property rights. They are inspired by the lessons we have learned from our major environmental initiatives, including the National Action Plan. I’d like to work through them briefly.

The first one, information: governments, communities and landowners need comprehensive information, including social and economic information, to underpin their decisions. The National Land and Water Resources Audit, which the Government established in 1997, has made an enormous contribution to our understanding of Australia’s natural resources. I have a bit of an interest in this one. It actually has its origins, some of you might have heard me say this, in the time when Alexander Downer was the leader of the Coalition and Ian McLachlan was the Shadow Minister for the Environment, and an announcement was in relation to us moving to the Murray Darling Basin 2000 objectives and also landclearing. The political scene got very heated as Queenslanders became upset about this idea of no further clearing, and I was despatched to go to Queensland and find out what the story was. And nobody could tell me. No-one knew how much landclearing was taking place in Queensland. I kid you not, in 1995. The research body that knew most about it was the Tropical Beef Research Centre in Rockhampton, and I ended up there. And they told us that the Government believed that probably around 500,000 hectares of Queensland was being cleared every year, the Greens were claiming it was a million hectares, the farmers were claiming it was 100,000, and I said: ‘well which is it’ and they said: ‘we don’t know and no-one knows.’

I started to look at what we didn’t know about our land and water resources and found it was really very extensive. And so as part of the Natural Heritage Trust - and some of the officials here today will remember setting it up - we put quite a substantial amount of resources in the National Land and Water Resources Audit. We now have it. Its work has pinpointed the environmental hot spots; it’s been critical in guiding our investments in environmental protection, it will be even more critical in the future, and it will save us a fortune by enabling us to go straight to the heart of a problem and the find the most economical and realistic solutions.

The National Action Plan is generating information about salinity hazards and extending it down to the local level, so that community leaders and landholders have the scientific information they need to make good decisions. For example, the Plan has funded salt risk mapping in South Australia, Victoria and Queensland. These studies are producing not just important information baseline information to help us understand where the salt is, where it is going and how fast it is moving, but developing rapidly our capacity to interpret data and to use it more widely and economically in grappling with the problem of salinity.

The second point was partnership. The Natural Heritage Trust and the National Action Plan are both examples of how governments can work in partnership with regional communities


on natural resource management issues. We have restructured the NHT so it will make investments on the basis of regional natural resource management plans. Those plans are being developed at a regional level, so they will include the insights that can only be provided by people with grassroots knowledge of their local area. We still aim to have all of the regional plans in place by June next year, so we can start rolling out the additional funding we are providing under NHT2. In the meantime, we are providing the states with funding for their priority projects.

The Government recognises that robust community involvement is a vital component for the success of the National Action Plan. The Accreditation Criteria for Catchment Management Plans require the effective involvement of regional communities and the participation of all key stakeholders. We are helping communities build their capacity to participate in the plan. The majority of the funding for capacity building activities will be guided by the integrated regional plans. However, there has already been significant funding provided through the priority projects and foundation funding. As an example, there is over a million dollars in priority funding which has gone to the Mallee Catchment Management Authority for a community capacity building and information project. That project will encourage participation and education on a regional scale to support the Mallee catchment strategy.

Incentives. In the longer term, I believe that the best way to protect the farm environment is to provide landholders with incentives, and to build further incentives, to act voluntarily as good stewards of their land, given that I believe - as I said at the outset - that it is their basic predisposition in the first place, rather than always looking for restrictions and penalties. The National Action Plan is funding a National Market-Based Instruments Pilots Programme, to fund projects that test the use of market mechanisms such as trading schemes, auctions and price signals to better encourage natural resource management.

For example, there is a Pilot Auction for Biodiversity Conservation that’s being developed in Victoria, which will help direct public investment to conserve highly valuable habitat on private land. A competitive bidding process will reveal the most cost-effective type and location of intervention, with successful bidders receiving payments for their protection of public-good assets. Models along these lines can supplement traditional grants programmes, and benefit landholders who want to undertake conservation work in the public interest as a part of their overall land management strategies.

Now to return to property rights, the most important incentive, I believe, in all of this is to provide landholders with secure environmental property rights starting with water. In the last election campaign, I pledged, and so did the PM, that we would work to make sure that landholders and their communities receive compensation and adjustment assistance when their property rights are affected by environmental legislation, or where the pain of adjustment is simply too much or unreasonable to expect one group in the community to bear all or most of it. We have now developed a comprehensive approach to recognising property rights and providing adjustment assistance, in close consultation with landholders, and I thank the NFF and the various farm bodies, as well as conservation bodies for their input, which I think has been very valuable in this regard. And we’ve also consulted with regional communities.

It needs to be discussed with the states and agreed through the COAG process, and there is a meeting of CoAG scheduled for the end of November. I want to say that broadly my view is that the final approach should include: firstly, standards for the nature, duration and


renewability of water entitlements. Secondly, clear processes for the renewal of water rights, including the priority of allocations. Thirdly, a more consultative planning process for determining the likely level of change at the time that a licence or plan is renewed. Fourthly, improvements to the operation of water markets, incredibly important in my view. And fifthly, better ways of managing the burden of reductions to water entitlements when reductions prove necessary.

We will be seeking to establish firm timelines with the states about what will be achieved, who will achieve it and by when. I want to say to you that the moral responsibility for compensation lies with the states. Nonetheless, we are prepared to consider making an additional contribution above and beyond the $700 million we have already contributed to the National Action Plan.

I again want to emphasise why we see the establishment of a strong system of water property rights as so important:

We know that a secure system of rights will enable landholders to innovate and make good long-term investment decisions. The importance of secure property rights has been demonstrated repeatedly throughout history and indeed in our own economy, including in natural resource management.

The establishment of a nationally consistent system of water rights will encourage water trading, which currently accounts for less than 10 percent of the total yearly water allocations. Water trading would have a potentially positive economic impact because it would enable the resource to flow to its highest value use.

Finally, we know that it would lead to good environmental outcomes, because it would enable water users to plan sensibly for the long term and invest in improving their environment. Can I say in passing, importantly though, that I think that the Wentworth Group’s statement that the establishment of water property rights is essential for the future environmental health of Australia’s rivers is an important and welcome contribution.

The Government has also decided to ask the Productivity Commission to conduct an inquiry into the impact of native vegetation and biodiversity reforms on landholders. The Commission will look at both the state laws and the Commonwealth’s own Environment Protection and Biodiversity Conservation Act, or as it is known the EPBC Act.

This financial year, we will pay the states $740 million under the National Competition Policy. The states do not appear to have grasped the moral and political imperative that they should use the money to provide compensation and adjustment assistance to the affected industries. Overwhelmingly, it appears that the money has gone to the bottom line, and those who are expected in our community to bear the brunt of adjustment are not being properly considered. I cannot tell you how seriously I regard that issue, and how outrageous I think it has been, in some jurisdictions in particular, to have continually thumbed their noses at communities who are really doing it tough and face huge dislocation that more has not been done to recognise that there is a funding source that is specifically related to - in general terms - economic reform. Broadly speaking, it’s a dividend if you like on economic reform, one where I just think there is a moral and political case for using some of that money to defray costs and the pain of adjustment and moving to a more sustainable and hopefully more productive future. I just think it’s outrageous that this point has not been recognised by most jurisdictions, I really do.


In the face of what I see as a serious failure of political and moral will, we are seriously considering recasting the National Competition Policy system, to require the states to recognise the legitimate property rights of farmers and their communities. The states would have to meet their responsibilities, or put their ongoing funding at risk. And those, can I just say, who think that this is a call for a pot of money for farmers, of course it is not. There’s no such thing. It will never make up for the loss of resources that some farmers are going to suffer, but for those of you with a conservation bent, that’s your particular emphasis in all of this, can I say to you it is the key to your objectives just as much as it’s the key to economic survival and eventual growth out of the process of adjustment. If the nation wants us to move to sustainability, and I think overwhelmingly at the same time they want those who are going to have to make the adjustment fairly treated, there’s an economic imperative as well. You’ll get the investment security that will help maintain and maximise sustainable production in regional Australia.

I said a few things about the so-called Pratt Water proposal the other day. To touch on that again, we are looking at a number of options for improving the efficiency of Australia’s water use.

There’s s no doubt that there is real scope here. A study of the major irrigation districts in Northern Victoria showed that some 29 percent of the water in those irrigation districts was lost every year. Similarly, water losses in the Murrumbidgee water delivery and use system can exceed, astonishingly, 40 percent.

As you know, Pratt Water has suggested that governments adopt a national approach to water savings and conduct a feasibility study on water savings in the Murrumbidgee Valley. I do pay particular tribute to Kay Hull, the Member for Riverina, who has worked tirelessly with Richard Pratt to place this issue on the national agenda.

We have done an initial analysis of the proposals; we believe they have real merit. In particular, the proposed feasibility study could provide a sound basis for future investment by industry or governments in the Murrumbidgee Valley to realise water savings and improve the management of the irrigation infrastructure. The study may also provide a model to enable other catchments to evaluate their irrigation infrastructure to determine where the most cost-effective savings can be made.

I announced last Friday that we’ve written to New South Wales, proposing that the feasibility study should be considered by the NSW National Action Plan Steering Committee as a priority project and as a pilot project for other catchments. The steering committee consists, as you know of representatives of the Commonwealth and State Governments.

The committee would consider the feasibility study as quickly as possible and the process would involve further discussions with Pratt Water and the Murrumbidgee community, including Murrumbidgee Irrigation, to refine and cost the proposal.

I want to stress that the feasibility study would look at all of the causes of water loss in irrigation systems, not just evaporation and seepage. For example, the greatest potential for water savings may very well be on farms, where improved monitoring, better evaluation systems and new technology would provide the most likely forms of savings.


I also want to stress again, though, that the feasibility study will not just be relevant to the Murrumbidgee. It will provide us with information that we will be able to apply around the country. We believe that increased water availability through water savings should be targeted to: meeting environmental requirements to ensure a long-term future for irrigated agriculture and rural communities, improving the security of current water users so water shortages during drought are less severe, and contributing to the further development of irrigated agriculture where this is sustainable.

So in conclusion, can I say we have a vision for water policy and reform. It’s based on the same principles that have led to the success of the Natural Heritage Trust and the National Action Plan. We recognise that the only way to address Australia’s natural resource management issues is to establish a strong and enduring partnership between all levels of government, the private sector and regional communities.

So can I say in closing, again, I salute all of you, this is an important step today in the development of our partnership with you to carry out the National Action Plan for Salinity and Water Quality and repair Australia’s natural resources. So I wish you the very best for your work over the next three days, you’re in a very nice part of the world, I’ve been here several times, it’s a friendly community and a very pretty and attractive city, and there are many pleasant spots to enjoy when you’re not working, but I daresay you won’t have many of those moments. On that note, can I say that it’s a pleasure to declare the roundtable open.