The majority of all water use in Australia is consumed in the Murray-Darling, with almost 90 per cent of the system’s water diverted for extractive uses (CRCIF 2005). In recognition of inefficient water allocation among extractive and non-extractive uses, ^[2] numerous resource policies have been implemented since the signing of the 1992 Murray-Darling Basin Agreement and the 1994 Council of Australian Governments (COAG) Water Reform. It was envisaged that these agreements would provide a coordinated approach of the concerned jurisdictions to restore the Murray-Darling system to good environmental health. Correspondingly, this period saw substantial public funds injected into natural resource management, and the advent of market-based instruments (MBIs), including cap-and-trade schemes (for example, water trade) and pricing schemes (for example, cost recovery). This policy direction was in line with the abundance of literature that advocates MBIs as the conduit to cost effectiveness, and is becoming increasingly favoured over traditional regulatory controls (Bjornlund 2003).

If judged by the media coverage of water management policies and the amount of public investment poured into various programs and initiatives, the public might justifiably have a ‘feel-good’ perception that some progress has been made. However, evidence of tangible on-ground achievements in terms of actual environmental outcomes is sparse. There is limited empirical evidence of real improvements; in fact a ‘report card’ produced by the Cooperative Research Centre for Freshwater Ecology (2003) has shown a marked deterioration relative to 1994 conditions. The Living Murray Initiative and the government buy-back of water entitlements have received attention, particularly the recent purchase of properties such as Toorale for the purpose of procuring their water entitlements, which some have labelled a waste of money (Ferguson 2008). But the progress of other prominent, yet less-publicised, natural-resource management initiatives have been less assessed. The list of these programs includes, but is not limited to, the Environmental Works and Measures Program, the Basin Salinity Management Strategy, and the Australian Water Fund projects. Given the limited coverage and assessment of the various programs directed towards improved water management, it is difficult to discern the state of affairs in the Murray-Darling and to scrutinise successes and weaknesses in current policies.

The general perception is that progress in the Basin is somewhat disappointing, despite almost two decades of concerted management. This paper attempts to take stock of the achievements and progress of natural-resource policies in the Basin, and the reasons contributing to the lack thereof. This involves an overview of the evolution of public policy in water management in Australia, and an investigation into the range of government initiatives to clarify the relation between achievements and funding streams.

The overall conclusion is that, in spite of the numerous agreements and initiatives, corresponding achievements have been decidedly lacklustre due to poorly informed decisions and buck-passing between the states. There remain several weaknesses in institutional arrangements as water reform has evolved, underlying which is a significant information gap at the core of the frustrated progress. Notwithstanding information barriers, the most straightforward solution — to buy back entitlements — has also been resisted. It is the contention of the authors that, by having put off this difficult but seemingly necessary action, the social cost has become even greater than if the problem had been confronted sooner. Stronger action may have resolved water-resources issues at a fraction of the expense, had decisions been based on transparent, cost-benefit criteria unbiased by political motivations.