Cost-effective-policy warning given to minister over Murray-Darling Basin management

By Melissa Coade

February 17, 2022

Keith Pitt
Minister for resources Keith Pitt. (AAP Image/Mick Tsikas)

The potential cost of implementing Australian Competition and Consumer Commission (ACCC) reforms for policies to manage the Murray–Darling Basin has been highlighted by an independent adviser, in a 27-page advice document issued to the resources and water minister.

In a roadmap document submitted to Keith Pitt, signed off by independent principal adviser Daryl Quinlivan in December, Quinlivan supported steps to help restore confidence in water markets quickly. His advice backed the analysis of the ACCC in its final report to the treasurer to support the future growth of Basin water markets, released last March, and the commission’s proposed reforms generally.

However, Quinlivan also noted in a letter attached to the roadmap, while stakeholder consultation and Basin states endorsed the final ACCC report (which delivered 29 recommendations and 70 individual reform actions), the price of the proposed response was a concern. 

The government would need to address how cost-effective the policy response was given limited resources, he said. 

“The concern this process will need to address is whether the commission’s recommended reforms are the most cost-effective policy responses to the generally accepted problem analyses when resources are limited and the agreement of all Basin governments is required,” Quinlivan’s letter to Pitt read.

Further down in the advice document, Quinlivan said: “The ACCC proposed wide-ranging and comprehensive reforms to support the future growth of water markets in the Murray-Darling Basin. And while it produced strong and innovative solutions to multi-faceted and complex problems, it did not have the opportunity to really test the practicality of implementing these reforms with government or non-government parties, nor to account for resourcing constraints.”

The initial advice to the government on a proposed roadmap to manage the Basin was developed by engaging industry, communities and other stakeholders, and working closely with Basin states. 

Together with an advisory group appointed by Pitt, Quinlivan’s initial advice considered four key policy goals, including the quality and transparency of data, market integrity, market architecture, and effective participation.

He added that the roadmap would not revisit policy decisions that underpinned contemporary water markets (such as re-bundling land and water rights or making the ability to trade water conditional on its use) and the investments in increased agricultural production that have flowed from those decisions. 

“Given the ACCC’s extensive analysis and the limited scope of this roadmap, governments will need to undertake further implementation and policy development to implement this set of water market reforms,” the initial advice document read. 

“Decisions on resourcing and the allocation of responsibilities based on this roadmap will be critical elements of this implementation process.”

The initial advice said an efficient market for trading and accessing Basin water, regarded as a ‘scarce asset’, must be a high priority in the context of ‘inescapable evidence’ that water yield in the past two decades had depleted by some estimates by 50%. This would require developing a phased and practical plan for water market reform.

“We are also seeing strong demand for Australia’s food products, and therefore critical inputs such as water, and the highest levels of profitability in agriculture for many years. Together, these trends have seen substantial increases in water and rural land values.

“There is good reason to believe these trends will be sustained for some time,” the advice said.

The initial advice said the actions to be taken by Basin states – which include the Queensland, New South Wales, Victoria, South Australia and the Australian Capital Territory governments – must also have regard to ‘implementation constraints’ and the challenges of an ‘established (if very complex) water management regulatory framework’.

“Work to assess potential costs and benefits has begun. This will provide a basis for comparing proposed and alternative reform measures and assist in guiding judgements about resourcing requirements and minimising complexity,” the document read. 

A final document is due for delivery in June, after which time Basin governments will need to confirm the initiatives and implement the reforms.

In a statement, Pitt thanked Quinlivan and the advisory panel for their work on the initial advice document. He said he looked forward to receiving final advice on ‘how cost effective, practical reforms’ could be implemented.

“A mandatory code of conduct for water market participants, measures to improve transparency of water market information, and changes to ensure a level playing field for all entitlement holders are some of the recommendations presented within the initial advice,” Pitt said. 

“Importantly, there’s a commitment to improve regulation to better protect against potential market manipulation and maintain confidence in the system.

“This is an important step in delivering water markets that operate more effectively and efficiently and don’t burden users with unnecessary costs.”


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