23 Mar 2015
The long-term issues surrounding the Murray Darling Basin provide an excellent case study with which to review federalism in Australia. This paper will explore the history of the Murray Darling Basin management, the relationships it has fostered and examine why success has been achieved where other national issues have failed.
Federalism in Australia
To provide context for this case study it is useful to define and summarise federalism and how it has shaped modern Australia. Generally, federalism is the name given to a type of government that unites different political bodies or regions within a single national system whilst providing each its independence. In 1901 Australia created the Federal Parliament giving six states independence but also providing the Federal Government key national powers. Australian federalism can be broken down in a number of ways:
The structure of the Senate. The chamber comprises of an equal number of senators from each State. Hence, Tasmania and New South Wales have the same number of Senators even though the populations vary enormously. The role of the senate is to approve legislation sought from the House of Representatives.
The division of powers. The Australian Constitution of 1901 established the Commonwealth of Australia which vested legislative power in a Federal Parliament. The Constitution provides for a wide range of responsibilities for the Federal Government which are detailed in Section 51. Those powers not detailed in Section 51 are known as "residual powers" as they are the responsibility of the States. The term "division of powers" lies at the heart of federalism and describes the division of responsibilities and power between state and the Commonwealth. In reality there are huge crossovers between the two layers of Government. Competition between these two layers of Government is a formative element to the history of Australia and the federation.
Individual State Constitutions. Every State has a defined local constitution and maintains its own Government managed by a Parliament. The Parliament may take any form afforded by the state's constitution.
Fiscal arrangements. From the very outset the Australian federation was characterised by fiscal imbalance which has worsened overtime (Griffiths and Saunders 2002). Vertical fiscal imbalance (VFI) describes when central governments collect more revenue than regional governments, with Australia having among the highest VFI of any federal nation in the world (Warren 2006 pxxi). The introduction of Special Purpose Payments (SPPs) in 1923 along with the Uniform Tax Case (1942) moved the Commonwealth to a strong centralist position, way beyond that described in the Constitution. VFI has generally brought about detrimental changes to the federation. Overtime VFI has led to a decrease in accountability and increased layers of administration. Further it has led to a dependency by smaller states for core funding creating irresponsibility and inefficiencies (Walsh 2005).
The original framers of the Constitution would be pleased to see that federalism has allowed for: competition; regionalisation of policies; innovation; experimentation; choice and diversity (Twomey and Withers 2007). Federalism is at the heart of Australia's resilience and vigour. However, in the years since the inception of the Australian Constitution in 1901, small but fundamental policy and legislative changes have altered the style of the federation. Overtime a federal system has developed that does not reflect current world realities or the changing dynamics of a modern society. It is often argued that the model has never adequately defined roles or responsibilities, that duplication and inefficiencies are inherent and that historic fiscal arrangements are damaging (Wilkins 2004).
The Murray Darling Basin
Management of the Murray Darling Basin (MDB) highlights how federalism can work over extended timescales and provides the first example of cooperative federalism in Australia. Discussions surrounding the MDB are far from new with the birth of federalism in Australia emerging in part due to disputes associated with the water catchment area. A 1902 Royal Commission notes:
"The Murray and its tributaries must be looked at as one. An administrative and technical response is needed for jurisdictional disputations, environmental challenges and economic opportunities within a maturing Federal system"
Corowa Water Conference and Interstate Royal Commission 1902
The large scale of the MDB is surprising in terms of geography, financial contribution to the economy and importance to water resource development. The MDB catchment area covers over one million square kilometres and accounts for 14% of the Australian landmass, an area larger than France and Spain combined:
Source ABS 2008
The basin is of crucial importance not only to the region but to the entire nation as it accounts for around $4.8 billion or 39% of Australia's total agricultural output. The importance of food production encompassed by the MDB is broken down at the highest level as follows:
Agricultural Crop / Livestock
Percentage of Total Australian Production
Source ABS 2008
Further the MDB is the major source of water for Adelaide and northern Spencer Gulf cities in addition to settlements along the rivers and in the watersheds that feed them (Hawke Research Unit 2008). Water irrigated from the MDB accounts for approximately 75% of all the water irrigated in Australia.
As water has long played a crucial role in the formation of white Australia, there are many dates and eventsÂ through which inter-governmental management of the MDB evolved:
NSW passed their Constitution Act 1855 which gave the state possession of River Murray waters from the Rivers headwater to the SA border.
Political wrangles leading to conferences of the Colonies (1857 and 1863). Three separate Royal Commissions in VIC, NSW and SA.
Corowa Conference on Trade - beginnings of Federation and agreements on river management. Water management entwined with Federation.
Corowa Community Conference sees local groups take over the debate.
Establishment of the River Murray Waters Agreement. NSW and Vic agreed to limit their Constitutional powers to manage the waters of the River Murray as they saw fit, and to provide SA with a share of those resources.Â The Commonwealth Government played a strong facilitation role in reaching this agreement.
Collaboration between NSW, Vic, SA and the Commonwealth sees the construction of three major water storages and 16 weirs. The current value of these assets is around $2 billion.
The first Murray-Darling Basin Agreement reached between four governments.
Appointment of Murray-Darling Basin Ministerial Council
Establishment of the Murray Darling Basin Commission
Enactment of the Murray Darling Basin Act 1993
Cap on water restrictions ratified by all members of Murray-Darling Basin Agreement
Council of Australian Governments (COAG) noted a $500 million fund over five years to restore the health of the River Murray.
Additional $500 million announced to support MDB regeneration. The Commonwealth flagged its intention to take a lead role in management of the MDB.
Enactment of the Water Act 2007 and establishment of the Murray Darling Basin Authority. A further $10 billion investment promised by Commonwealth
Agreement on Murray-Darling Basin Reform signed by all Basin States and the Commonwealth Government
Changes to the Water Act 2007 transferred power to the Murray Darling Basin Authority
Release of the Guide to the Proposed Murray-Darling Basin Plan. Concerns from farmers and communities lead to a 12 month delay of the final release.
Within the last 20 years the basin has been under enormous stress as a result of over-allocation, prolonged drought, natural climate variability and climate change. A lack of water has played havoc with rivers, wetlands, forests and floodplains with blame resting with State governments for allowing too much water to be taken out of the system.
The Long Road to Cooperative Federalism
The success of the MDB management is surprising given the resource joins four States, a territory government, a federal government and hundreds of water catchment boards and local governments. The majority of serious issues in managing the system have always reached resolution and as a showcase for water resource management the MDB is highly regarded internationally. So how has the MDB become a showcase for cooperative federalism and avoided stagnation with other national issues?
One important reason for the success in the MDB lies in the types of relationships fostered through communities, local governments, states and the Commonwealth. The prevailing characteristics of Australian federalism are of rivalry and coercion leading to undesirable behaviour by governments (Walsh 2005). However management of the MDB has produced major reform across all levels of government resulting in a "greater good" approach by stakeholders. There are few examples since 1901 where a unified approach to a national issue, not enforceable by a Commonwealth government, has been so resolutely enacted with such cross-border respect. The strong identity invested by individuals, bureaucrats and politicians alike meant the evolution of a sense of bioregionalism and identification with the Murray-Darling Basin could develop over time (Powell 1993).
Further, from 1916-1980 Vic, NSW, SA and the Commonwealth worked together in a fair and equitable way on the construction of major water infrastructure. Â Facing considerable challenges and significant disputesÂ the 1982 River Murray Waters Agreement became the forerunner of the Murray Darling Basin Initiative and is sighted as the very first example of cooperative federalism (Freebairn 2005). The success of the River Murray Waters Agreement was due to the clarity of roles and responsibilities across three levels of government. As Australia still wrestles with its model of federalism and searches for a new and meaningful style of government (Twoomey and Withers 2007) the MDB is an excellent example of where cross border activities and regional priorities have been unified through a common approach.
Facilitating the move towards cooperative federalism have been the fiscal arrangements surrounding the MDB. The Commonwealth, without having Constitutional control but plenty of cash, has incentivised reform via payments on performance. For example the introduction of the National Competition Policy in 1995 allowed a series of "tranche payments" to motivate States in achieving key water reform goals. In 2004, the National Water Initiative was introduced to overcome property rights issues, resulting in an agreed public-private cost-sharing arrangement if environmental flows were to be increased (Freebairn 2005). Investment by the Commonwealth has been substantial and, as Freebairn notes, is considered the glue holding together MDB reforms. Where national reforms to housing, education and health languish due to arguments on horizontal fiscal equalisation the MDB has neatly sidestepped such issues. It is reasonable to suggest that the fiscal arrangements have been the keystone in all reforms to the MDB and that the cooperative nature of arrangements have been underpinned by the direct and indirect cash injections by the Commonwealth.
The substantial public investment made from 1990-1996 also incurred criticism. Throughout this period there was limited empirical evidence of real improvements to the MDB system. The 'feel good' perception of the general public may well have been misplaced in relation to tangible on the ground achievements (Ancev and Vervoort 2007). However data does not sell newspapers or create political careers. The high level political messages issued at the time brushed over realities and allowed for continued poor policy setting. It is interesting to note that during this period all parties remained committed to flawed policies which later exacerbated problems within the MDB.
The success of MDB management is also attributed to the centralist strategy encapsulated in the Murray-Darling Basin Agreement. The Agreement of 1988 can be understood in light of the effective management of what is an enormously complex and pressing issue. The Commonwealth in this context acted as the broker between State interests, operating outside of particular jurisdictional claims and difficulties. It was a clever, pragmatic and subtle role, one which the original writers of the Constitution would have imagined the Commonwealth playing more frequently. Combined with the financial contributions previously described, the Commonwealth have been able to lead from behind and manoeuvre local and regional issues within a national context.
A Trickle Becomes a River
The role of the Council of Australian Governments (COAG) in assisting reform is not to be underestimated. Whilst COAG has been underutilised by some Governments, its ability to decide on matters of national importance has been crucial in advancing management of the MDB. For example the COAG endorsed reforms for water allocations and cross boarder trading provided clear direction and set deadlines for action that no single state could command. In addition the Water Management Partnerships agreed by COAG in 2008 provided national agreement at a crucial time in the basin's history, with long-term drought reducing flows to their lowest levels on record. It was a critical time for leadership and decision making and one in which COAG was able to fully exercise its role and responsibility.
The swearing in of the Labour Government of 2007 bought with it a wave of cooperative federalism supported by a political alignment of all States and Commonwealth for the first time since 1969. Almost immediately progress was made on revolutionising MDB management with a cash injection of $10bn and the creation of Murray Darling Basin Authority. The Authority replaced the previous Murray Darling Commission and provided the Commonwealth with a closer link to water reform for the region. In the history of the cooperative federalism in Australia this was another milestone. By creating an independent statutory authority the basin states were clear on the roles and responsibilities of water management for the region.
The suggestions at the time that the Commonwealth should take total control over the Murray-Darling Basin were constitutionally impossible and environmentally short-sighted. Federalism can't make it rain. If the Commonwealth had been running the Murray-Darling before the drought the basin would still be in dire straits (Wanna 2009). However although the Murray Darling Basin Authority operates as a statutory authority it reports directly to the Commonwealth through the Minister for Sustainability, Environment, Water, Population and Communities. The relationship is another step toward Commonwealth control without Constitutional reform.
From Now to Where?
We have seen that through cooperative federalism MDB management has enabled significant long-term investment on a national scale. The MDB case study emphasises how cross boarder agreements can succeed in supporting the needs of three levels of government and local communities. We have also seen how the financial arrangements for MDB reform have sidestepped major federation fiscal issues that engulf national issues within education and health. Finally the case study has highlighted the importance of COAG and how, when performing at its best COAG can provide leadership, facilitate long-term national change and supporting varying regional priorities.
Whilst the Australian federation has moved forward and in part failed to develop (Twoomey and Withers 2007) the MDB has remained a central focus for basin states, local governments and communities alike. Ongoing wrangling over water allocations will continue and serious droughts may well occur again, however, clearly defined roles and responsibilities provide a solid foundation upon which the Murray Darling Basin Authority now operates. Through cooperative federalism, pragmatic leadership and simplified investment the future of the Murray Darling Basin is more assured than at any time in its history.
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