In a new political era when regional development is suddenly back in fashion, the process of fixing the Murray-Darling Basin puts regional issues front and centre in political debate.

It is state governments that are responsible for the near-death of the Murray-Darling, principally the Queensland, NSW and Victorian governments. They are the ones who over decades over-allocated water from the river, or in the case of the Queensland government allowed the diversion of overland flows that feed it. They are the ones who continue to fight against the establishment of a genuine water market to enable water to be traded to where it will be used most efficiently and productively.

Now they’ve ducked for cover and are only too happy that the Commonwealth will wear the odium of trying to fix the consequences of an historic policy error. The Murray-Darling Basin Authority — which, bear in mind, has not released a draft basin plan, but merely a guide for the draft, for the purposes of undertaking a consultation program that starts in Shepparton tomorrow and goes until mid-November — has the task of fixing a problem generations in the making.

There’s a ruthlessness to the numbers about all this. The MDBA says there needs to be an extra 3-4000 GL of water a year, from surface water diversion of 13,700 GL/year across the system, to ensure the river is environmentally sustainable. In fact, strictly speaking it says the science suggests up to 7600 GL/year is needed, but the Authority says taking more than 4,000 GL/year of water isn’t compatible with the social and economic criteria it has to consider. So we’re already starting at the lower end of what is needed to save the Basin.

The massive over-allocation has been a de facto regional development policy. Over-allocation has supported regional communities and lower food and fibre prices for all of us. The costs have been externalities, borne by the environment, and downstream communities, particularly in South Australia.

The debate is therefore as much about making the costs of regional development transparent as it is about the environment. A plan for a sustainable Murray-Darling Basin will end the funding of regional development and cheaper food and fibre at the expense of the environment. The problem is thus: with what do we replace that funding? Do we continue it at all? Are we asking regional communities, which are far more fragile than urban communities, to bear the full costs of fixing generations of over-allocation? One-off compensation via water purchases doesn’t replace long-term revenue from a key, indeed critical, local industry.

And that’s before you get to urban consumers. While the Food and Grocery Council has reacted hysterically to the MDBA’s guide, there’s no doubt cuts of the size needed will have an impact on the price of produce from irrigated agriculture.

Improving irrigation infrastructure keeps being raised as a possible solution, particularly by the Coalition. This is a critical issue. As too few journalists have noted, the Productivity Commission has repeatedly complained that government funding of improved irrigation infrastructure is a more expensive way of improving the sustainability of the Basin than water purchases, because if an irrigation upgrade was effective an irrigator or farmer would have already done it.

In the PC’s view, infrastructure upgrades are just a transfer from taxpayers to irrigators or farmers. Nonetheless, the PC in a report earlier this year thought hard about whether the extra cost of irrigation infrastructure investment might be justified because of its social benefits. “It could be argued,” said the PC, “that despite the negative consequences of paying premiums to recover water through infrastructure upgrades discussed above, some premium is warranted to assist communities that depend on irrigated agriculture to adjust to a future with less water.”

Like the MDBA, the PC undertook its own modelling to identify the socio-economic costs of substantial reductions in water allocations, and like the MDBA came under fire for producing modelling that showed the costs were much less than claimed by irrigators. While noting that its modelling suggested the case for paying the infrastructure upgrade premium was “weak”, it concluded from this that “if any such assistance is provided, it would be best to target it to communities that are particularly affected”.

The PC also suggests infrastructure upgrades may not be the most effective means of assisting communities affected by reduced water allocations — for one thing, the most cost-effective infrastructure projects may not be in communities most affected, and they may simply increase the economic dependence of the communities on irrigated agriculture when it might make more sense to move to non-irrigation-dependent activities.

The PC also grappled with the issue of food security, an issue that is suddenly fashionable and a particular favourite of Barnaby Joyce. The PC demolished the food security argument, noting that, given we export 60% of our agricultural output, we currently have a high level of food security, that irrigated agriculture only accounts for 12% of agricultural production and that irrigation infrastructure investment is only going to increase the amount of water available to irrigated agriculture by 5-10%, meaning investing in infrastructure will have a negligible impact on food security. Food production will, as the Commission noted, continue to respond to price signals.

Joyce might have thought about all that before demanding that the issue be sent off to the PC for consideration.

But in the absence of magic solutions to the essential problem of who pays for making the MDB sustainable, this is the issue that needs to be explored by policymakers: how best to support regional communities that face a substantial reduction in a key industry input over the long term. The costs can no longer be hidden: if we want to support these communities, what’s the most efficient and effective way of doing it? Infrastructure spending might be a part of the solution, but it’s nothing like the whole story. The water debate needs to be broadened into a debate about regional communities and agriculture — both irrigated and non-irrigated.

But no matter what the outcome, it is deeply unfair to ask regional communities to pay the full cost of fixing this by themselves.

Peter Fray

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