Land and Water Link

December 2004

Feature article: Robust water reform

Mike Young, Director of the Policy and Economic Research Unit at CSIRO Land and Water, has helped to shape national water reforms endorsed by the House of Representatives inquiry into future water supplies for Australia’s rural industries and communities, the Council of Australian Governments (CoAG) and the NSW Government.

This article, extracted from a paper in Dialogue (the Journal of the Academy of the Social Sciences in Australia), describes how the National Water Initiative could either take Australia to the frontier of water management – or simply provide a framework for a series of small steps in an ongoing water reform process. The choice is ours.

Driven by the emergence of widespread urban water shortages and the declining health of the River Murray System, Australian governments are pushing the frontiers of water policy reform.

There is a sense of urgency. Arguably policy reform is now ahead of theory and empirical analysis, especially theory and analysis that is publicly available and, hence, contestable.

Concern about the way we manage our water supply systems, both rural and urban, is being accelerated further by increasing awareness of the prospect of adverse climate change; well illustrated by Perth’s recent experience.

The detail of the National Water Initiative is set out in two Inter-governmental Agreements. The first commits all States and Territories except Tasmania and Western Australia to a 10-year schedule of 87 time-stamped reforms to the management of water and water-dependent systems (COAG 2004a). The second addresses water over-allocation and environmental objectives in the Murray-Darling Basin (COAG 2004b) with a commitment ‘to invest $500 million to address water over-allocation’ and to do so in a manner that is ‘cost-effective’.

Collectively, these documents set three interdependent agendas relating to urban water, rural water, and the River Murray. The goals and approaches set for each mix theoretical insights with a degree of political pragmatism. At the highest level, there is interest in and support for the proposed reforms to produce ‘robust’ outcomes.

Robust arrangements stand the test of time and endure. They are designed to work efficiently and equitably in all circumstances. No further modification is expected.

When the system they are associated with is severely stressed, robust arrangements can be relied upon to continue to function and produce the intended outcome. In contrast to many policy reform processes, the perspective offered by instituting ‘robust’ arrangements is very long term. One example of a robust institutional arrangement is the Torrens Title system now used to register interests in land throughout much of the world.

If willingness to search for robust solutions is pursued aggressively, Australia can expect to become the world leader in water policy development and implementation. Indeed, the opportunity is already there. Last year in an international review of water policy, The Economist stated that ‘the country that takes top prize in water management is Australia’.

In a robust institutional environment, one can imagine a future where urban water supply utilities, sewage management utilities, irrigators and environmental water trusts all trade water with one another on a regular basis. They may also trade salinity credits, or even greenhouse gas emission credits.

All Australians need to be aware that the National Water Initiative could result in optimal outcomes that endure forever, but it may not. The nature of the outcome will depend upon the willingness of governments and the people who serve them to attend to the detail, which in turn is reliant upon ensuring the understanding of, and obtaining support for robust reform from the community and from industry.

There are five key things that business and community representatives can do to help manage our water resources:

• demand excellence in water management and governance
• insist on robustness in the definition and registration of entitlements coupled with simple, fast, low-cost trading arrangements
• ensure water accounting arrangements include the assessment of all impacts on flow
• argue for ‘upper bound’ pricing – to include externalities, coupled with opportunities for private investment in salinity management
• support the introduction of incentives for the innovative management and sourcing of environmental water.

If Australian businesses and Australian communities support and advocate for these five things, then Australian water managers will become renowned for the way they have managed a reform transition, and in the process built industries and communities that can rely upon them.

Dialogue Vol. 23, No. 3 (2004)

CSIRO contact:

Mike Young
Ph: +61-8-8303 8665