As the El Niño drought extends its tight grip over inland eastern Australia, the tragic consequences of mistaken policies introduced over the past 20 years are becoming more and more evident.
The Millennium Drought was
exacerbated by keeping water
back for environmental flows.
When the Snowy Mountains Scheme was developed in the 1940s and ’50s, it was intended not merely to provide inexpensive hydropower to Australia’s towns and cities; it also created vast water storages which would, for the first time, turn the Murray-Darling Basin into Australia’s food basket by providing large quantities of reliable irrigation water for New South Wales, Victoria and South Australia.
Water licences were made available to farmers, guaranteeing long-term security of water, which enabled the cultivation of high-value horticultural crops, dairying and fruit trees across much of southern NSW and northern Victoria.
Secure water guaranteed full water entitlement to permanent plantings for 95 to 97 out of 100 years, reduced the risk of farming in this arid zone and guaranteed that banks would lend for farm investment.
The Basin came to produce as much as 40 per cent of Australia’s agricultural output.
There were problems with the system, particularly in NSW, where more water licences were issued for the existing amount of water being allocated to irrigation. But for decades, it worked effectively, providing the conditions for the establishment of productive farms, towns and inland cities, which contributed enormously to the growth of Australia in the second half of the 20th century.
Then, in the 1990s, this remarkable achievement came under sustained attack from two opposite directions.
Extreme environmentalists, who resented the interruption of the natural flow of the region’s rivers, demanded that a much larger share of the available water should be set aside for environmental flows.
Based on questionable research claiming that the river system was “dying” (it’s an arid river system that naturally degrades in a drought), they successfully lobbied governments beholden to inner-city electorates to cut substantially the water allocation to farmers.
At the same time, free-market economists and their political allies, who believed implicitly in Adam Smith’s “invisible hand”, demanded the deregulation of agriculture, including dismantling the marketing boards that had overseen the growth of numerous agricultural crops, and the uncoupling of water licences from land title to buy and sell water.
There were, of course, some powerful economic interests, including managed investment funds, merchant banks and international grain traders who also wanted to wind back the regulations that underpinned the success of Australian agriculture, and they lobbied long and hard to achieve this goal.
Government bodies such as the Productivity Commission and the Murray-Darling Basin Commission, influenced by either a blind ideological commitment to deregulatory theory or a desire for power, joined the chorus, persuading politicians in both the Liberal and Labor parties to support the changes.
Among them was Malcolm Turnbull, then minister for environment and water in the Howard government. His Water Act 2007 deregulated the supply of water in the Murray-Darling Basin, allowing financial institutions and companies to buy and trade water.
After minimal consultation with farmers, large amounts of water were earmarked for environmental flows, while the sale of water was deregulated in the name of economic efficiency.
The first effects of the changes were seen in the Millennium Drought, which lasted from 1995 to 2009, the most severe drought in a century. During this period, despite emergency funding for indebted farmers, thousands walked off the land, causing the collapse of many small rural communities, while many others sold their water rights as a means of staying on the land.
The haemorrhaging stopped only when the drought finally broke around 2010. But the latest drought in eastern Australia has now returned rural Australia to crisis.
Under the deregulated system of water supply, farmers have to buy water from non-water users, speculative water barons, who are holding back on selling water in order to force up the price during this crippling drought.
Water that previously cost around $80 per megalitre (approximately what is held in a swimming pool), is now fetching $300 per megalitre, a ruinous impost for struggling irrigators who are battling historically low prices for basic commodities like milk, meat and fruit imposed by Australia’s supermarket duopoly.
Despite Turnbull’s promises after his accession to transfer responsibility for water from the Environment Department to Agriculture, where the National Party’s Barnaby Joyce is Minister, nothing seems to have been done.
Meanwhile, the steady decline in Australian agriculture continues.
Peter Westmore is national president of the National Civic Council.