Confronting our water challenge

We are, as the poet wrote, the land of drought and flooding rain. Our highly variable rainfall made agriculture, even urban existence, precarious until we built large water storages to outlast the droughts.

But today, even the massive storages we have built around our great cities are getting low. The water shortages we face today are greater than they have ever been. But our capacity to respond to them is greater too. Every Australian government is a signatory to one framework for action; the National Water Initiative. We have the resources a strong economy provides. We Australians are adaptable and innovative in meeting challenges and above all we have the sense of national purpose that is required to meet this challenge.

Our water shortages are not just a consequence of drought, exacerbated so it is plain, by climate change giving us hotter and drier seasons than those of years past.

It is because as our cities, our farms and our industry have grown so our demand for water has grown apace.

In rural Australia too we are using more water than ever. Over the last 20 years we have more than doubled the amount of surface water we take from our rivers for irrigation. In New South Wales alone, the extraction of groundwater has trebled.

Many would ask how that could have occurred. How can it be that in the lifetimes of even the youngest of this audience, during a time when the consequences of over exploitation of our waters was becoming more plain we managed to accelerate our withdrawals of water.

But let us leave the history and the blame game of over allocation to history. We are where we are. Today's task is to ensure we have the water we need for today and tomorrow.

Critics of over consumption of fresh water often describe it as a finite resource. That is a misnomer implying that the amount of water we have to deal with has known and fixed boundaries. The truth is rather different.

The amount of fresh water that is available for harvesting from the environment is not fixed at all. Rainfall, especially in Australia, can be highly variable. Moreover the amount of water which finds itself into rivers and dams or which seeps into groundwater and aquifers is dependent on many other factors including evaporation direct to the atmosphere and transpiration through vegetation.

These in turn are dependent on temperature. The hotter it is, the less rainfall will find its way into the river. In many parts of Australia, a 1 per cent decline in rainfall will cause a much larger decline in run off. This factor, known as precipitation elasticity, is why relatively modest declines in rainfall can result in big declines in dam levels.

Bushfires and the consequent regrowth reduce run off, so do forestry plantations in many areas. Indeed in that context it is worth noting that Perth has found by far its cheapest source of additional water is to clear and thin the forests in its own catchments.

Groundwater too plays a big part. Most ground water and surface water resources are connected. If we extract a megalitre from a bore the odds are, in most parts of southern Australia, that this will mean a megalitre will not find its way to a river. Yet here, as in most parts of the world, it is only recently that the interaction between ground and surface water has been understood.

Streams can be either gaining streams which are charged from ground water, or they can be losing streams which return water to ground water through seepage. The two resources are in fact one. Most importantly the impact of excessive groundwater extractions often takes many decades to be fully felt. Long after groundwater allocations are reduced to sustainable levels, the impact may be felt many kilometres away as streams dry up.

The scientists tell us to expect a hotter and drier future. CSIRO's rainfall estimates forecast significant declines in rainfall and stream flow in South Eastern Australia. Perth has already felt the brunt of a change in weather: the stream flow into its catchments has declined by 64 per cent in less than 30 years. The city has doubled in size but its surface water resources have declined by two thirds.

At the same time that nature is able to make this scarce resource scarcer, so too are we able to make it more abundant. All of us have the ability to use water more wisely. In my travels this year I have seen irrigators who by using smart techniques have been able to reduce their use of water by half; and increase their productivity. I have seen farmers who were losing nearly 90 per cent of the water they extracted from a river, save all of it by simply replacing open channels with pipes.

The water architecture of our cities has been based on two false premises. The first was that water was in such abundance we needed to use it only once. The second was that stormwater should be ignored, rushed away as fast as possible to the sea. We have more than enough water for our needs here in our own cities which we can recycle and reuse. We must learn to judge water by its quality not its history.

In the final analysis we can desalinate anywhere on the coast for a cost of between $1.00 and $1.50 a KL at the factory gate - not much more than the retail price in Sydney and the upper bounds of those cities who do impose volume related block charges. And in that sense regardless of what you think about the merits of desalination it has one great merit; it has provided a benchmark cost price for large scale production of freshwater in any coastal city of Australia.

Some people seem to take pleasure in pinning the blame for inadequate water planning on the users of water. As though the gardeners of Brisbane are personally responsible for the water level in Wivenhoe.

That is as unjust as blaming people with home computers for electricity blackouts.

The simple fact is this: our cities can afford to have as much water as they are prepared to pay for.

For many years our urban water utilities have been milked for their cash by their owners. So that I do not offend my hosts, let me observe, as one typical example, in the last four years of crippling drought Sydney Water has managed to pay, net of all receipts from Government, nearly $500 million to its shareholders - the NSW Government.

Water is a highly profitable business. Costs are largely fixed and, as a consequence, marginal costs of supplying additional water are low.

Consider a normal business, privately owned, a coal mine for example. Demand for coal is rising, but the coal mine is almost mined out. Two choices. Go out of business? Or find another coal mine. We want to stay in business. Demand exceeds supply so we invest to increase supply.

Unless of course, you are a water company and the Government is your owner. Then you can avoid making the investment to augment water supply. That extra supply will have a high marginal cost, maybe higher than your retail price. So rather than augmenting supply with water you cannot sell at a profit, you simply impose restrictions and constrain demand. Because you have no competition, nobody can undercut you.

And it is a rational approach, so long as the rain comes back. You can get away with restrictions for a year or two or three … but then you can get caught and in many places around Australia that has happened. Water restrictions have an economic cost, even at the lowest level, but as they progress up the grades of severity that cost becomes more and more significant. The Centre for International Economics puts the cost of even low level water restrictions in the ACT as $100 per person. Our economy, our growth, your growth here in Queensland needs water.

Now we have to make some decisions about what we want water companies to do. Do we want them to lecture us constantly about how little water we have while at the same time paying big dividends to their government owners? Or do we want them to deliver the water we need?

The time has come for us to recognise that long term or permanent water restrictions make no more sense in our cities than permanent electricity restrictions.

I should say something about dams. I am not ideologically or indeed hydrologically opposed to dams and I have not seen the case for the two dams Mr Beattie is proposing to build. But there are some points we can make about dams in this part of Australia.

Dams are costly. Not just economically, but from an environmental point of view. They interrupt rivers and disturb the ecology that depends on it. They inundate valleys, and may result in the loss of many hectares of productive country and the disruption of the lives of the families who farm that land.

Secondly, in our hot climate, shallow dams are particularly inefficient. High levels of evaporation result in massive water losses. Darwin's dam, for example, a large and shallow storage, loses 2 metres of water every year to evaporation and only 40cm to consumption.

Third, when you compare building dams to alternatives, there has to be a balance not just of financial factors, but also environmental and social issues as well. An alternative such as recycling creates largely positive externalities. Every megalitre of sewage you recycle is a megalitre of sewage that is not going into the river or the ocean.

And fourth, just because you build a dam does not mean it will fill with water. At a time of changing rainfall patterns, building a dam is placing a bet on the climate.

Many critics argue we have been too ambitious with our agriculture and we should not grow certain crops such as cotton or rice. But if farmers often find it difficult to decide which crops to plant, why would we imagine Governments could do better?

Developing efficient markets to enable trade are not a tribute to honour the memory of Adam Smith, but to ensure we efficiently use a scarce resource. Let the market decide where water can best be used, that is the mechanism a free society uses to allocate scarce resources.

But just as Queenslanders are asking whether it makes sense to allow local government boundaries to dictate the management of water, so Australians have to ask whether we are prepared to allow the state borders, lines on a map, to dictate how we plan our water future.

In years past, and not so long in the past I am afraid, water allocations have been made in this State with little or no regard to the consequences on the other side of the border. Mercifully the Murray Darling agreements and the MDBC have ensured that at least in the Southern Murray Darling Basin there has been extensive, if somewhat cumbersome and not always frictionless, collaboration.

South East Queensland is gripped with drought and new dams are planned, as are desalination plants and massive recycling schemes. But we are not hearing a discussion of sharing water across the border.

Mr Beattie is prepared to spend $2 million on a study to examine piping water 1,200 kilometres from the Burdekin to Brisbane, an endeavour he acknowledges in advance is uneconomic, at least for the foreseeable future. But one asks what is being done to consider water sharing opportunities closer to hand in Northern NSW whose Northern Rivers enjoy greater catchments and stream flows than the rivers which run through South East Queensland's catchments.

I have raised this matter with the Queensland and NSW water ministers, not as an advocate of either State, but simply as an Australian. We should solve our water problems together. The solutions to South East Queensland's water crisis should not stop at the state border.

Let us put all the possible solutions on the table. Nothing should be taboo, least of all stepping across thin black lines, heavy with meaning on a map or in a law report, but a pointless hindrance when it comes to water, and mountains and rivers.

After all there is more than a little potential for water sharing in both directions across the Queensland and NSW state borders? Are we prepared to look openly at our water needs and solve them as Australians, bound together as we face this challenge and with a single destiny to overcome it?