Setting the Murray-Darling Basin Scene R. Quentin Grafton 1

A Hundred Year Policy Experiment Politics is front & centre in water policy and water reform (change) Classic case of trade-offs (upriver versus downriver; diversions versus environment; summer flows versus winter/spring flows; in- stream versus floodplain use;…) Parliamentary Inquiry Chaired by Tony Windsor is latest attempt to “balance” these conflicts. 2

National Water Initiative Para 23 “...complete the return of all currently overallocated and overused systems to environmentally sustainable levels of extractions” 3

Water Act 2007 Promote the use and management of the Basin water resources in a way that optimises economic, social and environmental outcomes to ensure the return to environmentally sustainable levels of extraction for water resources that are overallocated or overused; and (ii) to protect, restore and provide for the ecological values and ecosystem services of the Murray-Darling Basin; and (iii) subject to subparagraphs (i) and (ii) – to maximise the net economic returns to the Australian community from the use and management of the Basin water resources 4

Basin Plan and Water Act 2007 Establish SDLs that reflect “an environmentally sustainable level of take” that will not compromise: (1) the environmental water requirements of key environmental assets including water-dependent ecosystems; (2) ecosystem services and sites with ecological significance; (3) key ecosystem functions; (4) the productive base; (5) and key environmental outcomes for the water resource that, in doing so, the economic, social and environmental outcomes are optimised and the net economic returns maximised. 5

Proposed Basin Plan To meet key environmental outcomes and ecological health by Basin and catchment AND to minimise social and economic impacts on Basin communities and industries 3,000-7,600 GL 3,000-4,000 GL yet SDLs NOT at lowest cost 6

Public Benefits and Public Costs Improvements in environmental outcomes in the Basin generate national benefits although farmers & Basin communities likely to receive additional benefits (water quality, soil productivity, local recreation). Will not be achieved by infrastructure subsidies. Public benefits should be achieved at lowest cost so should buy water entitlements rather than subsidise infrastructure. If “Securing long-term future for irrigation communities” is a priority then better if allowed flexibility in how money spent in to achieve communities higher “social” rate of return. $5.8 billion for infrastructure ($3.7 billion for state priority) is not about maximising public benefits but supporting vested interests (SMDB upstream and broadacre agriculture). 7

Generating Public Benefits Effective watering plans that will need both regional and centralised controls Efficiency will likely be improved with augmented pulse events or timing but “works and measures” will likely generate only marginal gains. 8

Regional Impacts of SDLs WTM and AusRegion model coupling provides a solid basis to assess Basin and at a coarse spatial scale regional impacts. WTM provides results comparable to other models (UQ, CSIRO, the ANU) 9

Politics of Numbers: Credibility & Who Loses & Who Gains Credibility gap: Scenario 2 (p. 33) predicts increase in Basin employment. Such results need testing to what happened in the drought. How do GVIAP, crop activities, employment numbers track with worst years ( ) of drought? Is it possible to link WTM to employment numbers to indicate transitional job losses by sector? Political and community fears are much less about overall changes in employment but when and where these employment changes occur. 10

Extensions & Assumptions Data matching spatially (SDL region, WTM regions and AusRegion) and temporally ( & ) and Baseline (10,500 GL versus 10,940 GL). Check the water purchase in some regions (Goulburn-Broken) Incorporate “bridging the gap” in AuRegion likely to be $3 billion in addition to $3.1 billion in RtB Details on SRWUIP and efefct on GVIAP 11