(Submission by Email: water@accc

(Submission by Email: <= /b>water@accc.gov.au)<= br>

Water Branch Water market rules—issues paper

<= /span> Australian Competition and Consumer Commission

GPO Box 520=

Melbourne Vic 3001

Public submission to water market rules= - issues paper

by = Peter Murray

on = 9^th May 2008

The water issue is extremely complex and calls for a unified and national approach. It is high time that unbundl= ing and water trading is seen as a device for taking much of farmer’s water, diverting it to the urban areas, thus forcing up the price of water and with it food to the detriment= of the masses.

For example the Northern Region Sustainable Water Strategy, a = major Victorian Government policy document to guide future water policy has many market driven features. None is more critical than the expansion of the wat= er (pipeline) grid.

Within this grid the Sugarloaf Interconnector pipeline (to Melbourne) and the other pipel= ines planned to link all major urban areas of Victoria, together with the planned link of the Murray system to the Goulburn system, are part of a grand schem= e of water trading, both intrastate and interstate. In highlighting the benefits= of expanding the water grid, the document reveals water trading as a Trojan ho= rse within rural communities and (the proposed Victorian) pipelines as a conduit with vast potential for urban areas to outbid the rural areas for water.

Governments at all levels are compl= icit in this mishandling of our water resources which goes against FAO and World Bank Research that argues strongly that= the primary allocation of water between sectors has to be done by governments a= nd that it cannot be done by markets. This recognises that water is not a priv= ate good, but a mixed good with many public good characteristics.

Further; trading water from low val= ue to high value agriculture is a flawed concept:

·        = Australia needs low value products to provide low cost quality food to both domestic consumers and overseas markets.

·        = Over investment in high value products (generat= ed from unfettered water trading) turns today’s high value products into tomorrow’s low value products.

·        = Farmers already act on market forces to shift to high value agriculture. Water trading is not essential to their increa= sing output. This is quite evident with the growing productivity from their innovations over the years.

·        = Most permanent water trade (until recent government intervention in the water market) has been to managed investment schemes (MIS) that have been driven = by government tax breaks, not market forces. (Moreover many of MIS involve new land opening for irrigation, often distant from major supply sources, with consequent high levels of evaporation in delivery.)

·    &= nbsp;   Open water trade has seen MIS, water barons, urban areas, industry and the massi= ve involvement of governments purchasing water for the environment, drive up t= he price of water beyond the reach of most forms of agriculture. (Given the effect of prolonged dro= ught on many farmers viability, with many receiving close to zero allocations ov= er several past years, many are forced sellers of water. This is inequitable a= nd leads to stranded assets and higher maintenance and delivery costs to be bo= rne by fewer consumers. It also has detrimental social effects on many communities. (Basically the r= eal value of water, taking into account community benefits is substantially gre= ater than that being realised through the market.)

In a well based = belief that National Competition Policy in its present form is destructive of well established farming policies and practices the following should apply:=

1.     Permanent water = trade must be restricted to within irrigation regions, to avoid stranding of asse= ts and collapse of regional economies.

2.     The science of t= he health of the Murray River Basin was fou= nd by a Federal Government instigated inquiry to be so little known that there wa= s no sound basis on which to allocate environmental flows. Current government policies, despi= te the greatly reduced in-flows from drought affected streams, call for a massive increase in environmental flows, fuelling governments at several levels entering the water market. Given the dire predictions of the effect this ve= ry major player will have on the market; there is a much greater urgency for rigorous scientific studies to be completed and circulated widely. Meanwhile there should be no incre= ase in environmental flows, only limited dilution flows.

3.     Finally, water p= olicy is of such critical importance that the peak body (National Water Commission) must include experts in irri= gated agriculture and water supply that are not over beholden to market driven forces, to undertake a National Water Initiative that ensures a full and professional overhauling. For example, where is there an ade= quate understanding of the complexities of water delivery, with more than 24 different water entitlements in the Murray Darling Basin alone?

4.     Finally, governments particularly in Victoria must build new dams and inves= t in alternative water sources to avoid reliance on the water market, particular= ly for urban water supplies. Whilst desalination is an obvious alternative, st= orm water storage in aquifers for use in industry and on parks and gardens has = much promise. The alternative, particularly the model underway in Victoria, drawing on a highly depleted irrigation storage (Eildon Reservoir) to supply major urban areas, will devastate large areas = of irrigated agriculture causing massive social disruption. To justify such gross inequ= ity the Government uses what has to be emphasized is a partial upgrade of a significant State Government owned asset (the Irrigation System) that produ= ces the food that is essential for the people of Melbourne and beyond, as reaso= n to take water from this highly stressed system. It puts at r= isk the future security and investment in a real food bowl that contributes ann= ually over $8 Billion to the GDP of the State’s economy and is the source of the majority of the fresh, clean food and milk coming from our Supermarkets= .

5.     Water policy is far too complex t= o be left to market forces and an unwarranted reliance on the practicality of complex regulations to protect consumers.

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