Water shambles

Did you notice recent reports that one Richard Lourey is abroad hawking Australian water? Yes, he's a water marketeer. Yes, he's selling Australian farm water to investors in Asia, Europe and North America. Yes, he's trying to flog water rights along the Murray Darling Basin! Surely you remember the Murray Darling Basin? Yes, that's the one: the major river system for the eastern half of our continent that doesn't have enough consistently running water to survive, let alone to satisfy the already rapacious demands of its human exploiters. Yet he's trying to get overseas speculators in on a bit of wheeling and dealing in its precious flow? It shouldn't come as a surprise if you look at recent history.

The World Bank

Dr Vandana Shiva , the recipient of the 2010 Sydney Peace Prize, pointed out in 2001 that “... The water privatisation policy of the World Bank was articulated in a 1992 paper entitled ‘Improving Water Resources Management’. The Bank believes that water availability at low or no cost is uneconomic and inefficient. Even the poor should pay ...”

In 2003 the International Consortium of Investigative Journalists discovered that despite the World Bank's contentions that it does not force privatisation on the poor, research by ICIJ and the bank itself showed that privatisation is playing an ever-increasing role in bank lending policies. Using data available from the World Bank Web site, ICIJ analysed 276 loans labelled "water supply" awarded by the bank between 1990 and November 2002. In about one third of the projects, the World Bank required the country to privatise its water operations in some way before it received funds.

Here in good old New South Wales the free marketeers didn't need the helping hand of external "persuasion": water privatisation here seems to have been kicked off at the COAG meeting in February 1994 with the decision to establish an open water market as part of national push towards a uniform system of tradeable water rights. The decision making occurred in blinkered ignorance - the National Land & Water Resources Audit 2002-08 Achievements and Challenges Report highlights that Australia still does not have the necessary information to deal effectively with the pressing environmental and natural resource management issues it faces - but that didn't slow the push of the marketeers to open the trading!

This local philosophy was consistent with the World Bank's approach. An article “Tradable Property Rights to Water How to improve water use and resolve water conflicts” (PDF 159KB) that appeared in the World Bank’s Public Policy for the Private Sector February 1995 edition took the now familiar line that:

... Tradable water rights can help shift water to high value uses in a way that is cheaper and fairer than some of the present alternatives ... Under a tradable water rights system, the public sector’s role in the construction, operation and maintenance of hydraulic infrastructure can be reduced to financing selected high-return activities with strong positive externalities or public goods characteristics. The market - not the government - will determine the allocation and pattern of water use and the prices charged for water rights ...

A great idea if they're creating a true market instead of a casino, and if the players and the regulators can be trusted with our most precious resource of all. But they weren't, and they can’t.

Commoditisation of water in NSW

The Carr government introduced the Water Management Act in 2000. Its most significant change was that one did not have to own or occupy land to hold a water access licence. It permitted them to be held by anyone, including a passive investor, allegedly facilitated objectives such as maximising the social and economic benefits of water to the community while being consistent with the maintenance of long-term productivity of land. Unfortunately this kind of government propaganda, dubious economics and high fallutin' "public benefit" claptrap prevailed in the absence of any objective public benefit analysis or organised community opposition.

Important questions were posed but not answered: Who is the community? Who really benefits? Is a transfer of water rights to financial institutions and speculators something that is going to maximise the social and economic benefits to the rural community? Does gambling in water prices by water traders achieve this? Do the regulators care about the social or environmental effects of allowing water values to increase?

Ongoing concerns that have been raised about privatisation here include:

• that it basically gifts massive amounts of water to irrigators who did not pay for this previously publicly owned "investment" in the first place;
• that the whole plan lacks focus towards an end goal, with no distinction between water sold to supply overseas markets and water sold for domestic purposes, and no guarantee that water will go where it is most needed;
• environmental risks associated with water markets(e.g. salinisation);
• comments from Maude Barlow, Senior Advisor on Water to the President of the UN General Assembly, who last year said (PDF 73KB) “... While trading is still supposed to be limited to rural communities, it is only a matter of time before it is going to be opened up both to cities and to private foreign investors anxious to find new sources of water in countries that still permit the foreign sale http://www.brisbanetimes.com.au/environment/water-issues/thirsty-foreigners-soak-up-scarce-water-rights-20100903-14uev.html of this precious commodity. And who is to stop large water owners from deciding that their water is worth more on the open market than being used to grow food - the reason they were given these free allocations in the first place?” She gave the example of Chile, where all water is a private commodity and local farmers have been put off the land by big agribusiness and mining interests. Her concerns apply equally here in Australia; and
• the “sleeper” water entitlements will awaken.

The ultimate question is whether or not the putative intention of the legislation has played out? You can bet it hasn't, and it won't.

Haven’t we already seen farmers express concerns about Macquarie Agribusiness buying up water rights to secure water for its investments?

Privatisation

Not long before Carr took up his post with Macquarie Bank his government laid the ground work for a futures market in water rights. A NSW State Water media release from July 2005 reads:

A water index futures market would provide reliant, or water exposed businesses with an opportunity to hedge their risks to future climatic factors, particularly water availability. An ability to hedge future risks leads to better informed investment decisions and in turn stimulates economic activity, creating jobs and more certain profits for businesses. The establishment of a futures market would enable financial service organisations to develop simple yet effective products for the rural community designed to reduce the impact of drought or flood.

Rubbish! “Financial service organisations” exist to make profit and they will profit by selling water to miners or farmers, who are ultimately the only other real market in rural Australia, at prices that guarantee their profits. The press release doesn’t mention environmental concerns or any limitations on the activities of overseas “investors” or local speculators.

Essentially buying water now operates, it seems to me, like a bet on future scarcity but with a guaranteed "win" for those who have the money to play. In the driest inhabited continent on the planet, its drought conditions exacerbated by climate change, the only way for the price to go is up. It won't be long before only those who can afford to pay for the water will have the luxury of it. And domestic consumers are going to suffer as much as our surviving farmers.

Water brokers

Now with such a wonderful, well thought out scheme to benefit all and sundry one would have thought that the NSW State Government would have had an effective licensing regime in place when it introduced the Water Management Act 2000. After all, everyone else seems to be regulated nowadays.

Apparently not. The National Water Commission did commission the Allen Consulting Group to investigate national and jurisdictional governance arrangements for the conduct of market intermediaries and appropriate governance options, but a "minimalist intervention" approach was recommended.

So the wheelers and dealers are free to wheel and deal, substantially regulated only by the general law: for water brokers that are corporations the (Federal) ACCC has released a publication called Water brokers and exchanges - your fair trading obligations, and for those operating in partnership or as sole traders the equivalent State laws administered by the (NSW) Department of Fair Trading come into play.

If that arrangement is okay why was Waterfind, one of Australia's main water brokers, calling late last year for more regulation of water brokers (i.e. the introduction of a licensing regime for water brokers; brokers to conduct all trading activities through an independently audited trust account which is protected from creditors; brokers to be precluded from buying or selling water for profit on their own behalf; and the requirement for brokers to retain professional indemnity insurance to protect their clients against any business negligence)?

To be a reputable water broker you apparently need to be associated with the Water Brokers Compensation Fund, a member of the Australian Water Brokers Association and follow the Australian Water Brokers Association Code of Ethics and Standards (PDF 56KB). Even so, there have been reports of water brokers double dipping on water trading commissions. But without a licensing regime the shonks can’t exactly be struck off or prevented from operating as a water broker even if they are convicted criminals!

Conclusion

Our new federal government needs to urgently acknowledge that access to an adequate potable water supply is a basic human right, and that Australia's limited water resources need to be closely managed for the benefit of all Australians. Unless it does this it will not be able to gather accurate information and formulate and implement policies which address the needs of Australia. Within the framework of addressing water and food security, the requirements of industry and agriculture have to be met in tandem with the needs of the general population. Private enterprise does not and will not distribute water equitably or in a way that promotes the national interest.

It needs to be recognised that if the federal government does not voluntarily assume the role of conservator and distributor of water, acting without fear or favour to promote the national interest, sooner or later scarcity will force that role upon it. Corrupt and parochial state governments can have no part in such undertakings, and neither can cashed up private companies who grease the wheels of government for their own ends.

What Australia urgently needs, as former diplomat Bruce Haigh has recommended on several occasions, is a national regulatory authority with teeth, answering to the Federal Parliament, that can manage, regulate and allocate water in the interests of the country as a whole.