Alan Kohler’s article last Thursday neatly exposed the problems water poses for our current political model – not just the crisis facing the Murray-Darling Basin, but urban water supply as well.

As with climate change, the previous Government remained in denial about water until the very end of its days when, in a desperate effort to appear engaged with the major problems emerging for the country, drew up a $10b MDB plan on the fly, without even consulting Treasury.

A key problem for the Howard Government was its Coalition partner the Nationals, who point-blank refused to countenance measures such as compulsory acquisition of water – and in fact even objected to the very notion of governments purchasing water for the environment, on the basis that it would destroy rural communities.

But the Rudd Government has its own structural problems on water. Committed to working closely with Labor states under its self-created “end the blame game” brand, Rudd and Penny Wong crafted a compromise MDB deal that kept the States’ decision-making role on water allocation and preserved their current water allocation plans until their expiry – which in the case of Victoria does not occur until 2019.

But the States are part of the problem when it comes to the MDB, not part of the solution. They have massively over-allocated water and mismanaged the entire basin over decades. Under the deal agreed back in March, the States continue to have a key role in making decisions about the MDB.

The Commonwealth and the States have also maintained the Howard Government’s refusal to countenance compulsory acquisition of water, in favour of a buyback scheme reliant on voluntary sales by irrigators and the emerging class of water brokers.

This was a straight political decision. Even given that the affected seats are mainly Coalition-held, there are votes for Labor in not upsetting irrigators and the communities around them. Under the current political model, any reform that creates significant losers is highly dangerous. And while compulsory acquisition of water will not create actual losers, those subjected to acquisition will be portrayed as victims of an environment-obsessed Government.

This is why the Murray-Darling is continuing to die despite Penny Wong’s repeated assurances that the water buy-back has begun. A number of figures, including Greens Senator Rachel Siewert, warned that the buyback would be insufficient when the Commonwealth, NSW, Victoria and South Australia announced the MDB deal.

On urban water, the States’ refusal to countenance proper price signals for water in favour of regulation ensures that state government mismanagement of water will continue to occur in metropolitan areas as well. As with congestion pricing – persistently rejected by state governments despite its proven capacity to address the massive problem of traffic congestion – demanding communities pay the real price of their infrastructure usage creates plenty of short-term losers but substantial long-term benefits. Under the current political model, however, that means it is simply unacceptable to governments concerned with managing the media cycle.

As with rising fuel prices and climate change, however, failure to seriously deal with water will create plenty more long-term losers. The massive benefits of creating an environmentally and agriculturally-sustainable MDB – in contrast to the dried-up, acidic creek it is becoming – have to be identified and sold to both the communities directly affected and more widely, to create a constituency for more aggressive change than governments have been willing to take so far. And the advantages of trading restrictive and divisive regulation of urban water usage for a price-based system that matches how much you want to use water with what you’re prepared to pay can also be sold to urban communities.

The extent to which state Labor governments, mired in tabloid headlines and reactive politics, are capable of understanding such logic and implementing it, has to be doubted. But the Rudd Government (which has commendably decided that the Federal level of government has a role in urban water infrastructure), is better placed to impose a more long-term agenda. But it needs to identify and aggressively promote the extent to which the whole community benefits from reform.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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