E&OE...
Thank you very much Mr Chairman. I'm happy again to address the National Press Club on some of the great challenges that face our nation in 2007. Last year I spoke about the great sense of balance in public life and public policy which have been a hallmark of the Australian achievement. Today I want to address in a very direct and detailed fashion one of the great challenges of our time and that is water security.
Before doing so let me, of course, remind you that whatever policies we may have, in areas as specific as water security, ultimately, for their effective implementation, they depend upon the continuing strength and growth of the Australian economy. And there is no greater single challenge in face of this government and of others in public life, than demonstrating a capacity to maintain the enormous prosperity of this nation at the beginning of 2007.
Our lowest unemployment rate in more than a generation, a higher level of business investment, a very pleasing reminder that inflationary pressures are tending downward rather than in the other direction; none of these things have occurred by accident. They are not some kind of automatic God given right, they are only achieved by the implementation of the right policies in the right fashion based on experience and a capacity to take the decisions necessary to maintain the prosperity of our country. Water has always been at the very heart of the existence of the Australian nation.
It influenced the life and the activity of the first Australians. It determined that the British settlement would occur at Port Jackson rather than at Botany Bay, and the great Federation drought of 1892 through to the early part of the next century inspired Dorothea Mackellar to pen those immortal words about droughts and flooding rains. As we grew and prospered as a nation after World War II, we placed heavy demands on our water resources, but that was a time when we invested heavily in infrastructure.
We built the great Snowy Mountains Scheme, we invested heavily in dams and other ways of ensuring that our water resources were there and were available. But by the time of the 1980s, policies began to change. Governments became reluctant, for a combination, in some cases of misguided implementation of environmental policies, became reluctant to invest in the construction of water conservation infrastructure, particularly dams. And that, of course, created understandable concern about the availability of water to look after us in the years ahead.
In the last decade or so, we've begun to turn this around. Billions of dollars both at the state and a federal level have been set aside for projects individual projects. Our own $2 billion Water Fund is leveraging major investments in every state. And through the Living Murray Initiative, we are on the way to restoring six iconic environmental sites in our greatest river system. And with the National Water Initiative, a long-term framework is finally in place to increase the efficiency of water use, to service the needs of communities, and to return our river and groundwater systems to environmental health.
Despite this, the current trajectory of water use and management in Australia is not sustainable. In a protracted drought, and with the prospect of long-term climate change, we need radical and permanent change. I regard myself as a climate change realist. That means looking at the evidence as it emerges and responding with policies that preserve Australia's competitiveness and play to her strengths.
There does appear to have been a contraction to the south in the weather systems which traditionally brought southern Australia its winter and spring rains. Our rainfall has always been highly variable. The deviation around average rainfall is enormous. And it seems to be getting bigger. We need, so to speak, to make every drop count, on our farms, in our factories and in our homes. Our water management systems must be geared not to a world of steady averages that rarely materialise, but to the variability that has been part of Australia's climate since time immemorial.
Water solutions will vary from place to place. The truth is, as I said last July, we have the capacity to drought-proof our large cities. What is needed is more investment, sensible pricing and an end to state governments using water utilities as cash cows. Our water scarcity problems are bigger in rural Australia given the drought and unsustainable water use in many places.
Against this backdrop, I announce today a $10 billion, 10 point plan on a national scale to improve water efficiency and to address the over-allocation of water in rural Australia, particularly in the Murray-Darling Basin.
The plan has the following quite specific elements. Number one, a nationwide investment in Australia's irrigation infrastructure to line and pipe major delivery channels. Number two, a nationwide programme to improve on-farm irrigation technology and metering. Number three and very importantly, the sharing of water savings on a 50/50 basis between irrigators and the Commonwealth leading to greater water security and increased environmental flows.
Number four, addressing once and for all, water over-allocation in the Murray-Darling Basin. Fifth, a new set of governance arrangements for the Basin. Number six, a sustainable cap on surface and groundwater use in the Basin. Number seven, major engineering works at key sites in the Murray-Darling Basin such as the Barmah Choke and Menindee Lakes.
Number eight, expanding the role of the Bureau of Meteorology to provide the water data necessary for good decision-making by governments and industry. Number nine, a taskforce to explore future land and water development in Northern Australia and finally, completion of the restoration of the Great Artesian Basin.
This 10 point plan opens a new chapter of national water management in Australia. It is a large but prudent investment, especially given the importance to Australia of the Murray-Darling Basin, and the scale of the water crisis that confronts it. The Basin accounts for the vast bulk of irrigated agricultural production in Australia and roughly 85 per cent of our irrigation water use. It has a population of two million people, and another one million people in South Australia are heavily dependent on the system for their water.
The last five years have been the driest in the Basin since records began. As a result, the operation of the River Murray remains, in the words of the Commission, on a 'knife-edge'. In 2006, the inflows into the Murray were only 40 per cent of the previous all-time low. Water security will remain an enormous challenge in the Basin. Indeed, it could get worse.
The CSIRO estimates that by 2020, average annual flows could decline by about 15 per cent due to climate change, recovery from bushfire, farm dam and plantation expansion and increasing use of groundwater. All parties must recognise that the old way of managing the Murray-Darling Basin has reached its use-by date. The tyranny of incrementalism and the lowest common denominator must end.
I will therefore be writing to all relevant State and Territory Leaders requesting that they refer to the Commonwealth their powers of water management over the Murray-Darling Basin.
The $10 billion plan I have just outlined will only work if the governance arrangements for the Basin are put on a proper national footing. The proposal is conditional on this occurring.
In a normal year, irrigated agriculture uses about 14,000 gigalitres of water, that's roughly 70 per cent of all water used in Australia. This water is not used as efficiently as it should be. A huge amount, up to 30 per cent, is lost transporting the water, through leakage, seepage and evaporation.
To increase the efficiency of water use and to maximise future water security, the Government will embark on the largest modernisation of irrigation infrastructure, both on and off-farm, ever undertaken in Australia's history.
At a cost of almost $6 billion, works will include the lining or piping of major delivery channels, improved metering and the installation of drip systems. When complete, these investments should save more than 3,000 gigalitres of water - equivalent to an efficiency gain of more than 20 per cent in Australia's irrigated water use, or about 17 times the city of Adelaide's annual water use.
Many of our largest irrigation districts - such as Murray, Murrumbidgee and Goulburn-Murray irrigation areas - offer significant potential for water savings. Districts such as the Burdekin in Queensland and Harvey Irrigation Area in Western Australia will also be able to significantly improve the efficiency of water use.
The Commonwealth will be contributing about $3 billion to this phase of our plan, with irrigation companies expected to contribute $750 million. 50 per cent of the water savings will be retained by irrigators and 50 per cent held by the Commonwealth will go to enhancing water security and to sustaining river systems and wetlands. We also need a radical transformation in on-farm water efficiency. At the moment, up to 20 per cent of water delivered to the farm gate may be lost in on-farm distribution channels. And roughly 10 to 15 per cent of water applied to crops is lost through over-watering.
The Government will invest $1.5 billion nation-wide to raise on-farm water efficiency. Farmers will be expected to provide significant contributions to achieve a step-change in on-farm technology. This will lift the productivity of large parts of our farm sector through the ability to deliver water on demand and better match water application to crop needs. A further $225 million will be invested in accurate meters at the farm gate to increase transparency of use within irrigation systems.
To accrue the benefits of this multi-billion dollar infrastructure investment, farmers and irrigators will need to meet strict new conditions. These include full compliance with the National Water Initiative, acceptance of mandated metering standards, including the metering of all bores and a new metered regime for stock and domestic use in priority catchments and acceptance of an enforceable regime on the building of new farm dams.
To complement these measures, the Government will invest a further $500 million to improve the efficiency and effectiveness of river operations and storages. This is especially important in the Murray-Darling Basin where large-scale engineering works are required to improve water use efficiency and water trading options. At the Barmah Choke, for example, there is an urgent need to alleviate channel capacity constraints to enable more effective delivery of irrigation and environmental water, a fact acknowledged only two days ago Mr John Thwaites the Deputy Premier of Victoria.
As well as improving water efficiency, we need to confront head on and in a comprehensive way, the over-allocation of water in the Murray-Darling Basin. We must strike a sustainable balance between the demands of agriculture, industry and towns on the one hand and the needs of the environment on the other.
Therefore I announce that the Government will allocate up to $3 billion to adjust water entitlements in the Murray-Darling Basin. This is the Commonwealth assuming responsibility for a problem created by the states. We are willing to address the chronic over-allocation of water in the Basin and to carry the entire cost of doing so.
The CSIRO is working to ascertain the sustainability of allocations catchment by catchment and final results for all catchments are expected by the end of the year, and this will reveal the full extent of over-allocation challenge that we must deal with. Water acquired by efficiency measures or direct purchase can both provide greater security for water users in dry years and provide substantially greater environmental flows in later years. These measures will contribute to the changing face of agriculture in the Basin.
The Government stands ready to provide structural assistance and, if necessary, to purchase water allocations in the market. We could muddle through as has occurred in the past, but frankly, that gets us nowhere. Without decisive action we face the worst of both worlds. The irrigation sector goes into steady but inevitable decline while water quality and environmental problems continue to get worse.
Governments have a role in helping communities adjust, but we must also make sure that we have strong, efficient markets to continue this process once a sustainable base of water allocations has been established.
Australia has an enormous opportunity if we take the right action now to expand our role as a global supplier of food and fibre in coming decades. We live in an increasingly urbanised world whose population is expected to reach 8 billion people by 2030. These people will continue to demand food and clothing.
Ladies and gentlemen, none of this massive investment will make any sense or can be effectively achieved without a complete overhaul of the Murray-Darling Basin's governance arrangements. Putting the Basin on a sustainable footing can only occur through faster reform and fully integrated catchment management. And that requires an end to the parochial pursuits of state interests.
Rivers do not recognise those lines on the map that we call state borders and if I could have graphic number one, simply illustrating the Murray-Darling Basin straddles the boarders of a number of states. And if I can have graphic number two which illustrates that in northern Australia, the area that will be the subject of the taskforce work, straddles the borders of the Northern Territory, Western Australia and Queensland, and if I can have graphic number three of the Great Artesian Basin, the same point can be made. The Great Artesian Basin is no respecter of state borders, the solution to the problems that the Basin as well as the other problems I'm outlined will need us to straddle those boarders.
Criticism of the management of the Murray-Darling Basin is often seen as the Commonwealth blaming the states or one state blaming the other. And there is no doubt that many errors have been made in the past.
In the final analysis, however, the core problem is that the different states have competing interests. The South Australians resent, as they have for more than 150 years, the level of diversions by Victoria and New South Wales. The Queenslanders feel they were late to the party in developing irrigated agriculture and want to catch up. The New South Welshmen downstream complain that their overland flows have been diverted to cotton farms.
As long as integrated water systems are being managed piecemeal by governments with competing interests, the execution of even the best national agreements will remain challenging and contentious. Let me illustrate. We still do not have an effective Basin-wide cap on water extraction, 12 years after the introduction of an interim cap which Queensland and the ACT have essentially ignored and which New South Wales has regularly breached.
We still lack the most basic water information such as a consistent, Basin-wide register of water entitlements. There is still inadequate reform on issues such as water trading and pricing, and contrary to assurances made to the Commonwealth as late as the Melbourne Cup Day special summit I convened last year, states are not insisting that irrigation companies implement the ACCC's recommendations on exit fees. And finally because of the veto power individual states have over the Ministerial Council's agenda, some issues like unregulated flows are not addressed in a timely manner.
I've already stated my intention to ask the relevant state and territory leaders for a reference of powers over the Basin. At stake is nothing less than the economic, social and environmental health of one of Australia's most important regions.
We must think and act as Australians and not as Queenslanders, Victorians or New South Welshmen.
Australia's water scarcity problem also requires that we measure our water resources and our usage of them far more accurately. You cannot manage what you cannot measure.
At the moment in Australia, water information is dispersed across more than 100 agencies and to facilitate more accurate and timely water decisions, I announce today that a sum of $480 million will be invested in a significant upgrade in the role of the Bureau of Meteorology. And that will provide comprehensive water resource assessments, rigorous and nationally-consistent water usage measurements, greatly improved access to water information and much greater independence and transparency.
Armed with better information, we will be able to make sensible long-term decisions for future land and water use, and not for the first time in our history, water scarcity in southern Australia has spurred interest in further developing the water resources of northern Australia.
Queensland alone has about 45 per cent of Australia's surface run-off, and most of this originates north of the Tropic of Capricorn. Water is also concentrated in the north in the Northern Territory and Western Australia.
I intend therefore to establish a special Taskforce chaired by Senator Bill Heffernan to examine the potential for further land and water development in northern Australia. This work will be informed by a Northern Australia Land and Future Water Assessment. A key focus will be identifying the capacity of northern Australia to play a larger role in agriculture in the decades to come.
We must also improve the management of existing northern water resources and in particular, the Great Artesian Basin. The current phase two capping programme through to 2009 will see 60 per cent of all bores capped and 75 per cent of all drains replaced.
Today I announce that the Government will commit to phase 3 so as to complete the restoration of the Great Artesian Basin. Consistent with current arrangements, we will seek a commitment from participating states to joint funding.
With the exception of Perth, none of our large mainland cities has invested in significantly augmenting their water supplies for several decades. In some cases, Brisbane and Sydney, for example, decisions to build new dams were cancelled and then nothing else was done. Rather than investing in new infrastructure, state and local government have elected instead to constrain demand by imposing water restrictions.
This strategy was successful in preserving the cash flow of government-owned water utilities which enabled them to continue to pay large dividends to their owners, but the continuation of the drought has shown that strategy to be a foolhardy one. Permanent water restrictions should be no more acceptable in our great cities than electricity rationing. In several cities we are starting to see a scramble to build new water infrastructure be it recycling, desalination or new dams.
While the case for Commonwealth involvement in interstate water systems is a compelling, indeed overwhelming one, it is less obvious that the Commonwealth should be directly involved in the provision of urban water. The truth is that all of our cities are able to afford as much water as they need.
Of the $2 billion Australian Government Water Fund, close to $900 million has already been committed to important water projects. We are currently considering on their merits all of the major state projects for which Commonwealth finance from the Water Fund has been sought, but they must meet appropriate criteria, including proper pricing strategies.
And consistent with the criteria already specified, it is not unreasonable, as a condition of funding, that urban water utilities invest appropriate amounts in infrastructure rather than being constant revenue streams for their parent governments.
The fact that today the Commonwealth has offered to assume responsibility for a problem created entirely on the watch of state governments around Australia, namely the over-allocation of water in the Murray-Darling Basin, gives Australia's largest states in particular, significant capacity to focus their resources on urban water problems.
Ladies and gentlemen, today I have outlined the biggest and most costly and boldest plan to tackle Australia's rural water challenge. 70 per cent of Australia's water is consumed in rural Australia. We cannot solve the problems unless we do two things. We invest heavily and on an unprecedented scale in irrigation infrastructure, both on and off farm and we have the courage as well as the financial commitment to tackle the problem of over-allocation. The plan I have outline today is detailed, it is costed. It has been in preparation for some time, it represents a fundamental response to the greatest environmental challenge of our time and that is of water security.
It is conditional upon improving the governance arrangements. But we do not come to this debate unwilling to commit the financial resources of the Commonwealth. Those financial resources are available because, let me remind you, in a sense concluding where I began, they are available because of the sound economic management of the past decade which have taken this country out of debt, into surplus, which has delivered us the most consistently strong economy that we've had since World War II, a generationally low level of unemployment and a sense that optimism and hope that about the future that imbues the whole country.
Tackling Australia's water security is an immense challenge. It requires a comprehensive, bold plan. It requires a commitment of resources and above all requires people to think as Australians above any other parochial identification or consideration. I commend this plan not only to you and to my fellow Australians, but I commend this plan to all of those around the nation who have responsibility in government. This is our great opportunity to fix a great national problem. It can only be solved if we surmount our parochial differences, it can only be realised if, above all, we think as we should on the eve of Australia Day, overwhelmingly as Australians. Thank you.