Howard's bold move on water

The Howard Government's proposal to give the Commonwealth control of the Murray-Darling River system is welcome news. The government will spend $1.5 million paying farmers to reduce their water usage - $500 million to reduce evaporation and seepage, about $500 million on improving river flows and $500 million will be given to the Bureau of Meteorology to do a national water audit.

The Murray-Darling system crosses four Australian states, including the three most densely populated states. State government control of these major rivers is inefficient because it has primarily reflected state interests and ignored the effects of individual state water comnsumption decisions on other states. A review of the issues is here.

The South Australian and Victorian Governments have already protested the moves. The Victorian dills want ‘co-operation’not a takeover while the South Australians are worried that the Howard Government is the pocket of industry interests. South Australia has the most to gain from this reform so Mike Rann’s comments are particularly foolish, if predictable. I have not yet seen a response from the other states but can take a good guess what the brainless, grinning, toothy, media-tart Beattie will have to say. My guess is populist fluff that appeals to a parochial interests but which leaves us all worse-off. The States are governed by Labor and will put party-political interests ahead of the national interest.

While the states have constitutional control over water the Howard Government is confident it can achieve a takeover. I hope so. It is a bold move and good news.

Update: (26/1/07). Things move a long way in a day. The bill for the projected water reforms has gone up to $10 billion over 10 years and the political response of the states has been muted and in the case of NSW positive. Kevin Rudd has endorsed the plan. This is a surprising but very welcome outcome. Only rightist ideologues could criticize this plan as overly centralist – how can any solution to the Murray-Darling problem not be centralist given that 4 state governments are involved?

There is some criticism of the ‘handout’ component to the scheme because water rights to farmers will be purchased. It is important to understand that current water usage in the Murray Darling is inefficient. This means that the total money value of the water benefits from the MD are less than they could be. Buying out water rights involve transfers that, ignoring deadweight losses of taxes used to fund them, are not losses to society as a whole. If the final water allocations drive water into higher-valued uses we benefit from these transfers.