1. The Draft Basin Plan: Making it Work Paper presented at Risk and Sustainable Management Group Workshop, Brisbane 21 October 2010

2. John Quiggin Federation Fellow Risk and Sustainable Management Group, Schools of Economics and Political Science,University of Queensland

3. Making it Work: Three Key Principles Willing sellers = No cuts in allocations Buyback price should be basis for assessment of infrastructure projects Social infrastructure should be funded where benefits are greater than for irrigation infrastructure

4. No cuts in allocations Voluntary sales are not “cuts” A major communications failure Has partly derailed process, but can be restored Need to understand history of risk allocation

5. The National Water Initiative Attempt at a fully specified risk allocation Governments bear risk of changes in policy Users bear risk of new information about changes in sustainable allocations Risk of climate change is shared

6. The National Water Action Plan (2007) Effectively abandoned market-based approach A big bucket of money $6 billion for on-farm works $3 billion for buybacks All back-loaded

7. Restoring the Balance in the Basin Shifts priority to buyback But no reallocation of funds Effectively precluded substantial cuts in allocations Undermined NWI risk allocation principles Cutting the Gordian knot

8. The Draft Basin Plan All changes are policy changes Hence Commonwealth must bear entire risk All reductions must arise from voluntary choices Buyback the only realistic option

9. Market repurchase and infrastructure improvements No necessary conflict Market price should inform benefit-cost evaluation Most large projects fail this test so far Wimmera Food Bowl

10. Repurchase will drive private infrastructure improvements Water savings on-farm allow sale of entitlements Need to be careful in accounting for return flows Laser levelling

11. What kind of infrastructure? Hard infrastructure: Irrigation works, other physical infrastructure Soft infrastructure: Education, health, services, support for tourism Physical investment or operating support

12. Targets and instruments If goal is to minimise reduction in agricultural output, priority should go to hard irrigation infrastructure Implied rejection of markets If main concern is with communities and people, soft infrastructure is more likely to be productive

13. Funding Wisely used, $10 billion sufficient to meet all goals Buyback, cost-justified irrigation infrastructure, soft infrastructure for communities, adjustment assistance Need to free funds currently earmarked for irrigation infrastructure

14. Where are we now? A bumpy start, but... As close to a solution as we have ever been

15. The Draft Basin Plan: Making it Work Paper presented at Risk and Sustainable Management Group Workshop, Brisbane 21 October 2010