Integrated Water Resource Management in Australia: Case studies - Water reforms

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Department of the Environment and Heritage, 2004

Australia's Water Reforms

As the driest continent after Antarctica, Australia must use its limited water resources wisely. Water reforms aim to achieve the sustainable use of Australia's water resources for the long term.

Unique characteristics

Australians consume more than 24,000 gigalitres of water a year. More than 70 per cent of this is used for irrigation while a further 21 per cent goes to urban and industrial uses. The rest is used in other rural activities.

Water is crucial to Australia's natural and economic wealth. It is the basis of one of our largest industries, accounting for about AUD$90 billion of infrastructure investment and contributing over AUD$7 billion to annual revenues through irrigated agricultural production (about 25 per cent of Australia's agricultural production).

Many of Australia's rivers have highly variable flows. Droughts and floods are common. The flow variations have led us to extensively develop our rivers and groundwater resources for irrigated agriculture and domestic water supplies. Indeed, our rivers and groundwater resources were vital in Australia's early settlement and development, often determining the location and viability of population centres and areas of agricultural production.

However, inefficient water use has created problems of national significance, such as salinity in rivers and soil.

Water reform framework

In 1994, the Council of Australian Governments, consisting of the Prime Minister, state Premiers, territory Chief Ministers and the President of the Australian Local Government Association, agreed to implement a strategic framework to achieve an efficient and sustainable water industry.

The Australian water reform framework recognises action is needed to halt the widespread degradation of our natural resources and minimise unsustainable use of our precious water resources.

The framework takes into account the unique characteristics of Australia's water resources and their contribution to the economic, social and environmental life of Australia. The reforms comprise diverse but interrelated requirements to generate an economically viable and environmentally sustainable urban and rural water industry.

Main elements of water reforms

Due to be fully implemented by 2005, the framework includes provisions for water entitlements and trading, environmental requirements, institutional reform, water pricing, research and public consultation and education. The main elements are as follows:

  • All water pricing is to be based on the principles of consumption-based pricing, full cost recovery and transparency of cross subsidies. For urban water services, charges include an access and usage component. For metropolitan bulk-water suppliers, charges are on a volumetric basis to recover all costs.
  • Any future new investment in irrigation schemes, or extensions to existing schemes, is to be undertaken after an appraisal indicates it is economically viable and ecologically sustainable.
  • State and territory governments are to implement comprehensive water allocation or entitlement systems, which are to be backed by the separation of water property rights from land. These should include clear specification of entitlements in terms of ownership, volume, reliability, transferability and, if appropriate, quality.
  • The formal determination of water allocations or entitlements includes allocations for the environment as a legitimate user of water.
  • Trading (including across state and territory borders) of water allocations and entitlements is to be within the social or physical and ecological constraints of catchments.
  • As far as possible, resource management and the regulatory roles of government should be separated from water service provision.
  • There should be an integrated catchment management approach to water resources and greater local-level responsibility for water resource management.
  • There should be greater public education about water use and consultation in implementing water reforms.
  • More research into water use efficiency technologies and related areas is to be conducted.

The principles behind the development of water markets (the definition of property rights to water, the separation of land and water assets) are critical if Australia is to manage its water resources on a sustainable basis and improve the efficiency of water use.