Confronting our water challenge

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.