Return to search

Investors in Australian water and cotton ‘not at risk’ following Murray-Darling Basin report

Cotton Australia condemns a ‘dangerous political stunt’ from a South Australia senator proposing a banning on cotton exports.

Industry peak body Cotton Australia has fought back against attacks on the sector while a fund manager has reassured investors they are “not at risk,” following a scathing report into the Murray-Darling Basin Plan.

The South Australian Royal Commission last week made 44 recommendations calling for an overhaul of how the Basin Plan operates, including allocating more water for the environment and less for irrigation. Commissioner Bret Walker also questioned the legal validity of the MDB Plan itself and accused the Murray-Darling Basin Authority, set up to oversee the implementation of the plan, of being “unwilling or incapable of acting lawfully.”

The MDBA rejected those assertions and said the plan had been created “lawfully and is based on best available science.”

Irrigators and cotton producers have come under fire from politicians and the Australian media in recent weeks, accused of taking too much water out of the system and contributing to dry conditions and other events, including a recent mass fish kill in the New South Wales town of Menindee.

However, Walker said in his report that the cotton industry had “almost been demonized” and that the characterization of cotton as a “thirsty crop” was inaccurate.

Cotton Australia CEO Adam Kay welcomed Walker’s comments, but sounded caution about the commissioner’s broader recommendations.

“This very detailed report compiled by the commissioner is long and intricate, and it will take time to fully assess the potential impact of the recommendations,” Kay said.

“This validity issue is a matter that will need to be resolved through appropriate processes, [and] we note that solicitor-general advice at the time maintains a different view”
Fiona Simson

“What is clear is that the findings and recommendations are based off a complex legal interpretation of the Water Act, and that the commissioner views the environment as taking absolute precedence in the plan. Our industry continues to support the plan’s aim of providing balance for the environment, communities, and the economy.

“The aim of the plan was never to return the Murray-Darling Basin’s environment to a pristine state. The commissioner’s legal interpretation of the plan may or may not be correct, but if it is, it is the Water Act that needs to be amended, not the core approach of the plan.”

The Water Act was passed in 2007 and committed A$10 billion over 10 years to reach agreement on water use in the basin, resulting in the Murray-Darling Basin Plan signed in 2012.

‘Envy of the world’

One fund manager who invests in water entitlements and wished to remain anonymous, told Agri Investor that Australia’s water regulatory system was “the envy of the world” and that the royal commission was the latest in a “long, long line of reviews” into that system and how it functions.

“That’s a good thing, as we do need to continue to revisit the framework and make sure it’s robust – but I don’t think any fundamental changes will come out of this review and there’s still bipartisan support for what we’ve put in place,” he said.

“It’s well known that we have a very variable climate in Australia – we get lots of droughts, and then a flood to break it, and people need to keep that in perspective. We can talk about average flows or an average diversion of water from the system, but the figure [actually allocated each year] is never the average.

“None of the irrigators want a situation where the rivers become more saline or have more blue-green algae blooms, which makes the water impossible to use. We’ve all built industries on sustainable amounts of water.”

The fund manager said holders of low-security entitlements in some parts of the Murray River system have received allocations of less than 10 per cent of their entitlement, or even zero, showing that in times of drought, less water is extracted from the system.

He also reassured investors with exposure to Australian water entitlements, saying they were “not at risk” of the federal government taking them back “at the stroke of a pen” and re-allocating them to environmental flows.

“That used to be a risk before [the Water Act was passed in] 2004, but after that we separated these water licenses to become perpetual titles at law that can’t be taken off the holder. It’s exactly the same as your land titles in Australia – the government might want it to build a new road, but they have to buy it from you at a market rate,” he said.

National Farmers’ Federation president Fiona Simson said the report was focused on the plan’s legal validity and was “unnervingly emotive, not what would normally be expected from a royal commission.”

“This validity issue is a matter that will need to be resolved through appropriate processes, [and] we note that solicitor-general advice at the time maintains a different view,” Simson said.

“The presumption that the plan is not legally valid flows through to a number of recommendations, which cannot be progressed until or if the validity is resolved.”

Compromise

She said the plan had “always been a compromise.” The NFF noted that the MDB Plan has been subject to at least 35 reviews, 14 of which were independent, since it was implemented less than seven years ago in 2012.

Cotton Australia also responded to an announcement by Centre Alliance senator Rex Patrick that he would move legislation to ban cotton exports in response to the drought and the commission’s findings.

Kay called the move by Patrick “a dangerous political stunt.”

“Once again we are seeing some politicians, mainly those from South Australia where no cotton is grown, kick our hardworking growers in an attempt to score easy political points. These farmers are enduring one of the toughest droughts in our nation’s history and do not deserve to be targeted so unfairly. It must stop,” he said.

“To ban the export of cotton based on its water use would set a dangerous precedent for the fate of other agricultural industries that use water. It must be pointed out that, based on hectares, over 50 per cent of this year’s cotton crop is either dryland cotton or is being grown outside the Murray-Darling Basin.”