Priority 5

Greater certainty for regional businesses to invest and create jobs

As more businesses seek to expand their operations in regional NSW and new industries emerge, the NSW Government is taking steps to ensure that water access and security is not an impediment to investment and economic growth.

Water is an essential input for many regional economies and access to long-term, affordable water supplies is required to give many businesses the certainty they need to invest or expand. This may impact thousands of jobs in agriculture, food processing and manufacturing, resources and other industries. These sectors understand that water is a valuable and finite resource dependent on rainfall. Across much of NSW, the water markets provide a mechanism for high value industries to secure access at the level of availability and risk that they are willing to bear. Smarter and more efficient ways of reusing and creating rainfall independent water supplies, and managing water consumption, also provide some industries with cost effective options, mitigating the risk to business operations on a year to year and long-term basis.

Support industry to enhance water efficiency through R&D and technology

Because the amount of water that can be extracted is capped (long term average annual extraction limits and sustainable diversion limits), NSW needs to harness technology and innovation to ‘do more with less’ and increase water efficiency and productivity. Innovation and research are critical to achieving these outcomes.

Research and development (R&D) will help water users to make informed decisions about how they can best adapt to future climate change and variability. Department of Primary Industries has investigated the potential impacts that increasing climate variability and climate extremes will have on primary industries. They have also developed programs to support continued productivity, including crop breeding for increased drought and heat tolerance, improved water use efficiency, enhanced drought monitoring, long-term water supply planning, drought resilience programs and biosecurity risk management programs. The department will continue to deliver these vital R&D programs.

Mines continue to invest significantly in water efficiency and recycling measures and typically recycle about 50% of water used on site. The mining industry also finds opportunities to use alternative lower quality sources of water, encouraging and adopting advancements in water treatment technologies.

R&D, greater innovation, and technology take- up are all important contributors to businesses developing best-practice adaptation strategies to prepare for and manage changes in water variability, including drought. Research is also essential to inform ways in which the NSW water sector can support existing and developing agribusinesses to lift their productivity.

Ensure the water market is working effectively

Water markets have continued to expand since the separation of land and water rights under the National Water Initiative, which created a free market for water rights. Water markets are now four times the size they were before these rights were separated.

There are significant price fluctuations based on supply and demand for water. In general, the trade market in the Murray-Darling Basin has a value in excess of $1.5 billion per year.

Although this means, in theory, that water is moving to its highest value use, there are serious and increasing concerns that the market is not working efficiently and is significantly distorted due to lack of transparency and problems with its design.

The NSW Government supports an open, fair, efficient and sustainable water market characterised by integrity, transparency and accountability. We are committed to ensuring our water markets facilitate economic and social benefits to people, businesses, communities and industries, while also protecting our river systems and the environment.

The Australian Competition and Consumer Commission has conducted an inquiry into water markets in the Murray-Darling Basin. This represents a significant opportunity to review existing frameworks and undertake reform.

The NSW Government is considering further reforms to the water market following the Commission’s final report, delivered in March 2021. We will ensure that any future reforms to the water market:

• protect our rivers and other water-dependent environmental assets
• maintain the core foundations of water management
• recognise the value of water to the state’s regional economies
• support the Government’s water market objectives
• do not erode previous hard-won reforms
• include genuine engagement with stakeholders
• address important issues for NSW, such as the increasing pressure on physical systems constraints like the Barmah Choke
• provide sufficient economic, social and environmental benefits to water users, industry, communities or the environment to justify change
• appropriately consider the interconnected nature of the water market and the potential for wide-ranging impacts.

The Independent Assessment of Social and Economic Conditions in the Murray-Darling Basin found that previous water market reforms have had uneven impacts, and that ‘sustained trading of water into a region increases economic activity in that region and leads to reductions in economic activity in regions from which the water is traded’ (Panel for Independent Assessment of Social and Economic Conditions in the Murray-Darling Basin 2020, Final Report). Any future reforms to the water market must also consider potential socio-economic impacts for communities.

Investigate and invest in infrastructure to improve resilience

The NSW Government is developing 12 regional water strategies and two metropolitan water strategies to improve the resilience of our water resources for cities, towns and communities, the environment, Aboriginal communities and industry. The strategies will integrate and shape future planning and policies to deliver improved water outcomes, and will propose a mix of infrastructure, policy and operations options focused on maximising water security benefits that are distributed for the best economic and community outcomes.

Diversification of water sources to improve town water security is an emerging theme to address the current vulnerability of towns to drought, systems failure and poor water quality events.

Portfolios of complementary infrastructure and non-infrastructure measures will be subject to economic, environmental and cultural evaluation to maximise the benefits and ensure the best outcomes of any infrastructure investments.

Water also has an important role to play in NSW’s energy future. The NSW Electricity Infrastructure Roadmap outlines the opportunities for pumped hydro in NSW as an important form of energy storage to complement renewables like wind and solar energy, while also stimulating regional NSW economies through construction and operation, supporting jobs and attracting new industries.

Water availability in the Murrumbidgee and Murray valleys

The NSW Government acknowledges community concern over the collective impacts of climate and policy changes to the reliability of water supply, which has been reflected in the MDBA report Trends in Water Use (2020). This report highlighted an average reduction in water availability of 375 GL per annum across the NSW Murrumbidgee (100GL) and Murray (40GL) and the Victorian Murray and Goulburn (235GL) valleys. The report highlighted four possible reasons for this gap between the agreed limit and the water available for use. These include:

• changes in climatic conditions reducing inflows into the Southern Connected Basin
• more conservative water user behaviour
• decision making around allocations
• inaccuracies in modelling practices.

More work is required to better understand the apparent underuse volumes, in particular in the Murrumbidgee. The Commonwealth Government has established a working group to further investigate and address this issue. It includes representatives from NSW and Commonwealth governments, irrigation stakeholders, Ricegrowers and NSW Irrigators Council.

The NSW Government is committed to making the allocation process more transparent and is working to provide clear information for each regulated valley in NSW.