Australia’s water resources were unequivocally vested in the states when the constitutional reformists chose to reject the doctrine of riparianism ^[4] in the late nineteenth century (Musgrave 2008: 35). This was ratified in the constitution itself by the inclusion of Section 100 which sought to constrain interference by the Commonwealth and limit national powers to ‘abridge the rights of the State or of the residents therein to the reasonable use of waters of rivers from conservation or irrigation’. Given such a strong stance against Commonwealth intervention, this meant that agreement was required between those states that shared the water resources in the Murray-Darling Basin. Accord originally took the form of the River Murray Agreement of 1914 which has subsequently evolved into the Murray-Darling Basin Agreement. These arrangements leave Basin water management in the hands of representatives of each of the signatory states plus an agent of the Commonwealth. Notwithstanding that the Commonwealth intermittently played an influential role in several earlier water-policy decisions, such as the Snowy Mountains development, the Commonwealth’s authority over water resources in the Murray-Darling remained largely in line with the intentions of the constitution until the mid 1990s.

Commencing with the CoAG Agreement on Water Resource Policy in February 1994 and the related Competition Principles Agreement of 1995, the Federal government has progressively sought to increase its influence over the water-policy agenda. For the first decade or so, this was accomplished primarily through the suasive influence of the Federal purse. The early CoAG reforms and the National Water Initiative (NWI) of 2004 were all premised on state jurisdictions complying with a national framework in order to be eligible for tranche payments from the Federal government. As an illustration of the rise of national and collective decision-making, almost half of the projects embodied in the 2004 NWI required national action or a heavily coordinated response from state jurisdictions (McKay 2008: 55). However, the primary mechanism for achieving this cooperation was the $2 billion to be allocated by the National Water Commission as part of the Australian Water Fund.

These arrangements changed markedly in 2007 when the then Prime Minister announced his intentions to legislate a National Plan for Water Security. At the time, the Prime Minister expressed exasperation about the slow progress on reform and proclaimed that ‘the tyranny of incrementalism and the lowest common denominator must end’ (Howard 2007: 1). Similarly, Prime Minister Howard decreed that national intervention was required to solve the problems of the Murray-Darling Basin and argued that ‘as long as integrated water systems are being managed piecemeal by governments with competing interests, the execution of even the best national agreements will remain challenging and contentious’. National decision-making was espoused as the solution to water management in the Basin.

To give effect to the National Plan for Water Security Prime Minister Howard sought the referral of state powers from Basin jurisdictions. In return the Commonwealth committed about $10 billion over 10 years to address environmental degradation and over-allocation. The largest portion of the funding ($6 billion) was to be allocated towards engineering solutions to enhance the ‘efficiency’ of irrigated agriculture. This ‘modernisation’ of irrigation was claimed to deliver ‘water savings’ which could then be used to underpin environmental sustainability.

The National Plan for Water Security was both hurriedly prepared and ambitious. Given the government’s standing in the electorate at that time, the formulation of the National Plan was arguably more an act of political desperation than it was a response to concerns about deficiencies in water-resource management. As Watson (2007: 1) noted, the authors of The Plan were ‘not claiming spurious accuracy for their major proposals. As subsequently emerged, the ten-point Plan to spend $10 billion over ten years was prepared in haste, well away from the troublesome gaze of Treasury and Finance officials and the experienced eye of the Murray-Darling Basin Commission.’

Regardless of the financial inducements on offer, the Victorian government refused to sign up to the National Plan for Water Security and the then Federal government proposed the Water Bill 2007 without the complete referral of powers it had sought. The Explanatory Memorandum (p.2) that accompanied the Bill argued that Commonwealth control and decision-making would ‘enable water resources in the Murray-Darling Basin to be managed in the national interest, optimising environmental, economic and social outcomes’. The Memorandum simultaneously signalled that this would be accomplished by four main funding targets: namely, ‘modernising Australia’s irrigation infrastructure; addressing over-allocation in the Murray-Darling Basin; reforming management of the Murray-Darling Basin; and new investments in water information’.

The Howard government was defeated and the Federal Labor government took power in November 2007. In April 2008 the Minister for Climate Change and Water released a broad outline of the new government’s water policy in the form of Water for the Future. This document generally mirrors the former government’s approach insomuch as non-trivial public funds have been earmarked for the purpose of ‘modernising irrigation’ whilst a lesser but significant emphasis has been placed on restoring balance by buying back water-access rights. In the context of ‘modernising irrigation’, the federal government specifically undertook to sponsor the renovation of irrigation infrastructure in Victoria to the tune of about $1 billion, bringing the total commitment from State and Commonwealth governments to $2 billion. Some commentators have viewed the generosity of the Federal government as a reward to the Victorian government for its resistance to earlier calls by the Howard government’s request for referral of powers (see, for example, Milne 2008).

Federal support for ‘modernising’ Victoria’s irrigation was subsequently ratified at the CoAG meeting in July 2008 when a further $103 million was committed to assist with upgrading irrigation infrastructure in the north west of the state under the guise of the ‘Sunraysia Modernisation Project’. New South Wales was also offered $1.358 billion mostly for ‘water saving’ initiatives in irrigation, some of which were described as being ‘at the conceptual planning stage’ (CoAG 2008b). A total of $610 million was offered to South Australia, mostly for projects that purportedly ‘upgrade irrigation infrastructure’, whilst Queensland is expected to receive $510 million for water projects. In the case of Queensland, $350 million is set aside for purchasing water entitlements from willing sellers but most of the remaining funding is to assist with the ‘roll-out [of] community level irrigation planning and infrastructure investment’ (CoAG 2008b). By the completion of the CoAG meeting in July, the Federal government had committed about $4.3 billion to projects across the Basin, the majority focusing on water infrastructure projects. The espoused view of CoAG was that ‘[t]hese measures will reduce water loss and return water to the environment to help restore the sustainability of the resource and enable a long-term future for the communities of the Basin’ (CoAG 2008b).

An important caveat was added to most of these funding initiatives; that projects would be ‘subject to due diligence’ (CoAG 2008b). Regrettably, this is not defined with precision but presumably it is likely to be politically difficult to reverse such commitments should the projects actually prove deficient.

Setting aside the financial and political dimensions to these decisions for the moment, there must now be serious concerns about the capacity of a national water Ministry to deliver efficacious outcomes at a basin-wide scale. Of particular concern is the continuing naïve support for the view that ‘modernising irrigation’ or investing in ‘water-use efficiency’ can generate substantial and fungible ‘water savings’ at a basin level. A brief review of these critical concepts is presented in the following section.