Profiteering from water

As a result of the Water Act 2007 taking effect on March 3, 2008 the Minister for Water, Senator Penny Wong, has referred the issue of the sale of water and trading in water licences in the Murray Darling Basin (MDB) to the ACCC (PDF 305KB). Submissions from interested parties have been called for.

The process being entered into by the Minister and the ACCC implies that there is no alternative to trading in water and that it is both desirable and sustainable. I would argue that this is not so.

Water is a vital and increasingly rare commodity. It is essential for the maintenance of life which includes cities, towns, small communities, agriculture and industry.

Ownership should be controlled by the state for equitable distribution and use by all on a sustainable basis. This process should be controlled by and answerable to the democratic process. It is the right of all citizens to have access to a life sustaining supply of potable water.

How will trading in water and water licences achieve this?

Climate change has steadily reduced the flow of water into the MDB. Over the past few years 15 per cent of irrigated vines and trees have been taken out of production in the MIA (Murray Irrigation Area) due to the reduced amount of water available.

Trading in water licences came about from a perceived economic advantage in artificially increasing the availability of water in areas short of water. The greed and lack of commonsense which drove this so called reform was compounded by the over allocation of water licences.

Even as this is being written major banks and irrigation conglomerates are buying up water licences. They are moving to corner the market on water. The intention of the major irrigators is to get enough licences to ensure a minimum supply of water in times of shortage.

They also plan to spread their holdings in order to increase access to commercial and tradeable quantities of water. Any excess in any one year will be available for sale.

Smaller producers are more likely to sell their licences and this will be to the major irrigators and banks because they will pay more than the government. Buying licences from smaller producers will make available cheap land to bigger producers, which they can lease back to skilled but cash strapped smaller producers, buy the shareholder crop and by so doing not only reduce their own risk but also ensure a return from the lease. If the crop fails it will be the leaseholder and not the owner who takes the risk.

Alternatively, or in conjunction with the above, land holdings will get bigger which will have the effect of shrinking towns and reducing services, particularly in the areas of health and education.

Investors and speculators hope to create a profitable market in water. For banks the acquisition of water licences represents an investment against which they can borrow, lend and trade. Controlling water will confer power.