ADDRESS BY THE MINISTER FOR LAND AND WATER CONSERVATION
THE HON. RICHARD AMERY MP
TO THE AGRIBUSINESS ASSOCIATION OF AUSTRALIA - KPMG WATER ISSUES FORUM
WEDNESDAY NOVEMBER 4TH, 1998.
INTRODUCTION
I would like to start by thanking the organisers of the Water Issues Forum for inviting me here today.
The matter of water use regulation, policy and ownership is one that has a significant impact on agribusiness, and is clearly of increasing interest to the members of the Association.
There is obviously a lot happening in this area right now, which has been heightened by very dry seasonal conditions up until a couple of months ago.
POLICY SHIFT
Since this Government came into office in March 1995, there has been a definite shift in policy from "water use" to "sustainable water management".
In effect, this means the past practices resulting in seemingly unstoppable growth in water extractions are at an end, and the future is in:-
- recognising that our supplies of water are limited;
- making more efficient use of the water that we have right now;
- creating opportunities for water trading; and
- shoring up the health of our all important river and groundwater systems.
These goals are achievable, and agribusiness is at the heart of the reform process.
On average, agriculture consumes some 6 million megalitres of water each year - enough to fill Sydney Harbour twelve times.
While across the State irrigation consumes 75% of all water extracted in NSW, in some inland areas this figure approaches 95%.
Equally so, the irrigated agricultural sector in NSW has massive monetary and job flow on effects in regional centres.
The sector comprises 8,000 farms and employs 100,000 people.
It generates $1.6 billion worth of food and fibre products each year, with an additional $5 billion to $7 billion in value adding and processing.
Clearly, without a sustainable resource base we will not have a sustainable agricultural sector, and vice versa. They go hand in hand.
PROGRESS SINCE MARCH ‘95
Substantial progress has been made in water management in just three and a half years. Today, I will touch on just some of the key initiatives.
First and foremost, I am very pleased to say that this Government has devolved water mangement decisions to local community based committees, comprising all interested parties, including farmers.
There has been an unprecedented level of community consultation and involvement in decision making.
Personally, I have found that the "water debate" has made people (including myself) far more conscious about the impacts of decisions at the farm level, and likely flow-on effects on neighbouring properties, on the catchment, on upper and lower parts of the catchment, and, of course, at the State and interstate levels.
There are also always trade-offs between new and existing users, and I suppose these tensions are why discussions on water policy are complex and contentious.
The second point I would like to make is that the cap on total water extractions has been introduced in line with the decision made by the Murray-Darling Basin Ministerial Council in 1995 (and supported by subsequent meetings).
The cap effectively draws a line in the sand in terms of an upper limit on water availability.
The third point I would like to make is that immediate action has been taken on the regulated rivers and the Barwon-Darling to provide better water sharing arrangements between the environment and consumprive users.
Environmental flow rules for an initial 5-year period (starting from 1998/99) have been negotiated by community based river management committees.
This provides the basis for a fixed 5-year term of resource security for water users by guaranteeing that the impact of any rules over the 5-year period will not exceed 10% of the average long term diversions allowable under the MDBC cap for each river system.
A process is also underway to identify the unregulated rivers and groundwater systems that are stressed, and to establish local committees to assist in the development of long term management plans for these resources.
The fourth point I would like to raise is that greater opportunities for water trading are being created.
The interim trading arrangements for unregulated rivers came into effect on 1 July, and we are freeing up the arrangements for regulated rivers which have been in operation for a number of years.
Allowing the market to determine how water will be allocated is the future for water management in NSW.
No new additional water entitlements are being granted on the inland rivers and many coastal river systems, so trading provides the only real opportunity for new users to obtain supplies or existing users to expand their enterprises.
By moving water to higher value uses, trading could add an estimated $12 million a year to the value received from irrigation.
The fifth point I would like to make is that I see greater water efficiency as the key to the future of agriculture.
There is clear evidence that much greater gains can be made.
The potential to increase revenues from irrigated agriculture in NSW is large.
In many situations, returns are low because of the application of large volume of water onto low value crops, and generally poor water use efficiency on farms.
For example 80% of irrigated crops use flood and furrow irrigation systems with an operating efficiency as low as 40%.
The remaining 20% of irrigated crops are supplied by pressurised systems capable of 90% efficiency but often operate between 60% and 75% efficiency.
The continued use of water on low value crops, and poor water efficient irrigation systems are partly attributable to past policies associated with pricing and allocations of irrigation water in NSW.
The Government’s water reform program seeks to remove the influence of past policy.
To assist the agricultural sector to move to more efficient technologies, the Government has committed $33.4 million to a 5 year industry adjustment program.
This funding includes $25 million for an Irrigated Agriculture Water Use Efficiency Incentives Scheme administered by the Rural Assistance Authority which commenced in July 1998.
The scheme provides grants and interests subsidies to irrigation farmers for irrigation plans, investment in water use efficient technologies, and water use monitoring.
The adjustment program is estimated to generate at least $115m in private investment in irrigated agriculture.
Additional assistance to water reform is being provided by the establishment of a joint NSW Agriculture and Department of Land and Water Conservation Water Use Efficiency Advisory Unit at Dubbo.
That unit will provide a central facility and clearing house for advice and education on water use efficiency to farmers, commercial and public advisers, and related irrigation and water management organisations.
While not popular with water users, a very effective means of encouraging water use efficiency is through water pricing.
As most of you will know, the Government referred the pricing of rural water charges to the Independent Pricing and Regulatory Tribunal.
I should point out that this Tribunal has not just focused on water pricing.
The Tribunal has also required the Department of Land and Water Conservation to implement measures to improve the efficiency of its water delivery, administration and management functions as a requirement for increases in water charges.
The establishment of State Water, as a separate commercial water delivery business within the Department, will also ensure that there is transparency and clearer accountability in costs to be charged directly to water users.
THE WAY FORWARD
In terms of the way forward, I give you an assurance that this Government will continue to work towards a clearer and more secure system of water rights.
I know that investment confidence is paramount for the rural sector.
There is no doubt in my mind that, in future, water will remain in "common ownership", under the stewardship of the State Government.
Having said this, the Farm Dams Policy, which I recently announced, recognises that landholders should have a right to a portion of the run-off from their property without needing a licence.
Under the new policy, all landholders may collect up to 10% of their property runoff without having to obtain a licence, and have the flexibility to use this water for whatever purpose they desire.
The new policy addresses problems with the current licensing system - it does not signal the "privatisation of precipitation" as some people have claimed.
This decision arose out of many of the comments I received during the recent water amnesty which closed at the end of August.
During that time more than 7,000 enquiries were made about licensing and many of these were in regard to farm dams.
There have been about 4,000 registrations for consideration under the Amnesty.
The Amnesty Steering Group, chaired by Jack Hallam, is assisting in working out an equitable process for dealing with these registrations.
The aim here is to "regularise" the current activities that are not appropriately licensed.
Some of you would also know that we are currently reviewing the way in which the Murray-Darling Basin cap is being interpreted and administered in NSW.
I expect that the review will result in a greater degree of flexibility for irrigators, whilst still achiveing the same environmental outcomes required by the Ministerial Council.
A major review of the whole water rights system in NSW is also presently underway.
In April, I released the Discussion Paper, "Water Sharing in NSW", which sought the public’s views on a number of fundamental issues which affect water rights.
Issues such as the term of the right, review periods and conditions, riparian rights, floodplain harvesting and off-allocation water are all canvassed.
Today, Bob Smith will discuss many of the issues that are in the paper.
I hope you have all read the paper. While the official deadline for submissions has passed if you wish to make a further submission following today’s forum, I can assure that it will be taken into account.
Any changes to the licensing and access system will no doubt have important implications for the tax and financial sides of agribusiness, so I do urge you all to examine the paper.
Finally, an important point that needs to be made is that the changes arising from all these review processes are not occurring in isolation.
We have a considerable amount of community involvement at each stage, and our legislation and policy proposals across a number of fronts will be taken to the community as an integrated package early in the new year.
You can be assured that there will be considerable debate between the States and the Commonwealth at the next Murray-Darling Basin Ministerial Council meeting later this month.
I am looking forward to these discussions, especially in relation to the debate about how Queensland in particular is approaching the cap on water extractions.
CONCLUSION
Ladies and gentlemen, as you can see, there are a number of changes occurring in water policy and management at this point in time.
A fundamental shift in thinking and culture is occuring, and the era of unlimited supplies is all but over.
The challenge now is to use the transfer market and efficiency savings to underpin new developments or expansion of existing activities.
I encourage you to listen to the various presentations today, and I will be pleased to hear your views on the proceedings.
Thank you again for the invitation to speak at this Forum.