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National Water Reform

Draft report

This draft report was released on 15 September 2017.

You were invited to examine the draft report and to make written submissions by 19 October 2017.

The final report will be handed to the Australian Government by 31 December 2017.

The release of the final report by the Government is the final step in the process.

Under the Productivity Commission Act 1998, the Government is required to table the report in each House of the Parliament within 25 sitting days of receipt.

Download the overview

Download the draft report

  • Key points
  • Media release
  • Contents summary
  • It is crucial that Australia manages its water resources well, given our dry and highly variable climate, and the importance of water to our economy.
  • The National Water Initiative (NWI) has made a significant contribution to this objective, over more than a decade.
  • While much of the attention has been on the Murray-Darling Basin, the NWI remains nationally relevant and the principles it contains are sound.
  • There has generally been good progress in implementing the NWI, and its objectives and outcomes have largely been met.
    • Legislative and policy frameworks are in place for water entitlements, planning, trading, accounting and the provision of water for the environment in most jurisdictions. These are the key foundations of water management.
    • Urban water and irrigation infrastructure services have been improved through institutional and pricing reforms.
  • Water reform has delivered significant benefits to irrigators, other water users and the broader community.
    • The expansion of water trading has provided irrigators with greater flexibility to manage change.
    • There is some evidence of improved ecological outcomes from increased environmental flows, but it will take time for the full benefits to be realised.
  • However, there remains further work to do. Governments need to:
    • complete unfinished business from the NWI
    • address gaps and limitations in existing policy settings
    • respond to the challenges posed by population growth, climate change and changing community expectations, including the cultural and economic aspirations of Indigenous people.
  • Reform priorities include:
    • maintaining the key foundations of water management and preventing bad policy habits re-emerging
    • improving national policy settings in areas such as entitlement and planning arrangements for extractive industries, and the water requirements of Indigenous people
    • enhancing national policy settings in:
      • urban water management, including clearer roles and responsibilities for supply augmentation planning, enabling decentralised solutions and more outcomes-focused environmental regulation
      • environmental water management, including better integration with waterway management, strengthening institutional and governance arrangements, and improved monitoring and evaluation for adaptive management
      • new irrigation infrastructure, where the focus needs to be on ensuring environmental sustainability and financial viability before any government resources are committed for construction.
  • Continued guardianship of gains to date and new reform priorities are strong reasons for Australian, State and Territory Governments to recommit to a renewed NWI.

Background information

Leonora Nicol (Media, Publications and Web) 02 6240 3239 / 0417 665 443

National approach needed to prepare for next drought crisis

A renewed national water reform agenda is needed so we are prepared for our next severe drought, said a draft report released by the Productivity Commission today.

The report warns that population growth and impacts of climate change mean there will be substantially more people but less water in future, a simple equation to which the solution is a reinvigorated National Water Initiative (NWI).

'There is no doubt that the National Water Initiative and national water reform has been responsible for many successes, in particular in improving rural water efficiency and addressing environmental sustainability,' Productivity Commission Commissioner Dr Jane Doolan said.

'But the National Water Initiative is now 13 years old and we need to refocus our efforts to ensure we are prepared for some very substantial future challenges and so we don’t make costly decisions about our water supply as we did during the last Millennium Drought,' she said.

Overall, water reform under the NWI has delivered significant benefits to irrigators, other water users and the broader community. Trading has allowed water to be used to keep fruit trees and grapevines alive during times of drought and has become a vital business management tool for irrigators.

Future challenges include population growth particularly in urban areas: by 2050, there is expected to be up to 13 million more people living in Australia’s capital cities than at present. And although greater water efficiency hardly needs an additional argument in support, changes in climate strongly suggest we will have less water in the future.

'Our challenge is more people and less water. So a renewed focus on national water reform is critical if we want affordable services in the future. We need to make sure that all options are on the table when we are making decisions about water supplies and in shaping our suburbs. This includes reuse of stormwater and wastewater where it is cost effective,' Associate Commissioner John Madden said.

It is also important that we learn from history when investing in infrastructure in the irrigated agricultural sector. Governments have to provide firm foundations to support investor confidence.

'Investments in irrigation infrastructure suggested for northern Australia need to provide real benefits to the community or taxpayers will be left to foot the bill for the ongoing costs of poor infrastructure as they have in the past,' Dr Jane Doolan said.

The report on national water reform is a draft report and the Commission encourages interested parties to read the report and make submissions and / or attend upcoming public hearings details of which can be found at .

A separate review on the Murray Darling Basin Plan will be undertaken by the Productivity Commission in 2018.

Background information

Leonora Nicol (Media, Publications and Web) 02 6240 3239 / 0417 665 443

Chapter 1 provides background to the inquiry and how the Commission has approached its task.

Chapter 2 describes the outcomes and benefits of national water reform (including from the implementation of the NWI). It also outlines the future challenges facing the water sector.

In considering future water reform priorities, the Commission based its analysis on three broad areas of the water sector:

  • water resource management: water planning and the system of water entitlements (chapter 3); water trading (chapter 4); and, environmental management (chapter 5)
  • water services which comprises the capture, storage and delivery of water for urban use (chapter 6) and agricultural use (chapter 7)
  • key supporting mechanisms including: water accounting, measurement and compliance; community engagement and consultation; and, the generation of knowledge and water management capacity (chapter 8).

In each of the chapters 3 to 8, the Commission has summarised reform progress to date and the benefits this has yielded. In doing so, areas of unfinished business from the NWI have been identified.

The areas of unfinished business have been considered alongside the current and emerging challenges identified through submissions, consultation and the Commission’s research to form the basis of further reform opportunities analysed in each chapter. On the basis of that analysis, draft findings and recommendations for future policy actions have been made.

In determining draft recommendations, the Commission’s guiding principle was that reforms must advance the efficient and sustainable use of Australia’s water resources and deliver a net benefit to the community. Draft recommendations are based on examination of the likely costs and benefits of any given policy. Where such an examination was not possible, a judgment was made based on the weight of evidence before the Commission.

In the final chapter (chapter 9), the Commission has examined the value of the NWI as a policy vehicle for achieving reform and how the NWI might best be leveraged to progress the reform agenda set out in this draft report.

An overall assessment of progress against the NWI’s objectives and outcomes are detailed in appendix B. Progress against the recommendations of the NWC (2014c) is set out in appendix C.

Printed copies

Printed copies of this report can be purchased from Canprint Communications.