Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

My question is to the Minister for Climate Change and Water. I refer to the report in the Age newspaper yesterday based on a leaked commercial-in-confidence report from Hyder Consulting for your department which details the adverse impact the Victorian government’s four per cent cap on water trading is having on Victoria’s job market, economy and embattled northern rivers, costing cash-strapped farmers $19 million, as well as being a ‘severe constraint’ on the ability of the federal government and others to purchase water for the rivers and wetlands of the southern Murray-Darling Basin. Does the minister accept that this independent report directly contradicts public claims by Victorian Premier Brumby that he must keep the four per cent cap in place to protect his state’s interests? Further, does the minister agree with the conclusions outlined in the report?

Penny Wong (SA, Australian Labor Party, Minister for Climate Change and Water) Share this | Link to this | Hansard source

As the Senate is probably aware, there is currently a four per cent limit on permanent trade out of water irrigation areas, which was agreed to by all states and, I believe, the then Commonwealth government—the previous government—in the context of the National Water Initiative. One of the issues in terms of water reform is looking at the gradual lifting of that cap, and this issue has been discussed at the COAG meetings between the Prime Minister and the premiers. As Senator Xenophon may be aware, it is the Commonwealth government’s view that water markets and those who rely on them—that means irrigators as well as other users—are best served if the markets enable water to go to where it is most valued. However, we do recognise that there are significant concerns in certain communities about the four per cent. Certainly we have received representations from the Victorian Farmers Federation and others, some of whom do raise concerns about any lifting of the four per cent cap.

At the most recent COAG meeting it was agreed by first ministers that governments would look to raise the cap to six per cent next year as an ambition. Obviously there are issues there which are being worked through. Senator Xenophon may recall that after the cabinet meeting in Adelaide on 14 August, when the cabinet received a briefing on the situation in the Murray-Darling Basin, the Prime Minister indicated that the Commonwealth would continue to actively pursue reforms that were necessary to ensure the lifting of the cap and its implementation on a consistent basis.

If I could just interpose there on that point, one of the issues on which we do need to try and move forward is that of the cap not being applied consistently across states, and we are keen to see that reform progressed. As I said, we do recognise that there are some concerns amongst regional communities about the four per cent cap being lifted. Of course, this reform is being considered in the context of a very difficult time for our irrigation communities—whether they be in South Australia, Victoria, New South Wales or elsewhere—and obviously the discussion about the four per cent cap is being dealt with in that context.

My advice is that consultations are being held in relation to the staged lifting of the cap and have been held in Berri, Griffith, Deniliquin, Mildura, Shepparton and Swan Hill. We do take seriously the need to engage with regional communities on this issue. As I said, though, our view as the Commonwealth government is that we do believe that communities will ultimately be best served if water is able to be traded to where it has most value. I again reiterate the Prime Minister’s indication after the 14 August cabinet meeting that the Commonwealth will continue to actively pursue reforms necessary to ensure the lifting of the cap and its implementation on a consistent basis.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. Has the minister sought advice as to the legality of the four per cent cap in the context of section 92 of the Constitution—that trade within the Commonwealth shall be absolutely free?

Penny Wong (SA, Australian Labor Party, Minister for Climate Change and Water) Share this | Link to this | Hansard source

I should have acknowledged before: I think this was Senator Xenophon’s first question so I apologise, Senator, for not having acknowledged that.

Alan Ferguson (SA, Deputy-President) Share this | Link to this | Hansard source

It is his second one.

Penny Wong (SA, Australian Labor Party, Minister for Climate Change and Water) Share this | Link to this | Hansard source

The previous one was the first—thank you, Senator Ferguson—and this is now the second. If I can just refer you first to the provisions of the Water Act, which obviously contains things such as the water market rules and a process for creating the water market and water trading rules, I would also just make the point that there is a lot of discussion in this place and other places about legal advice, constitutional bases and all of these issues. I refer the senator to what was released yesterday by the Murray-Darling Basin Commission, and also to the submission to the committee. We can have a long discussion about rules but ultimately the problem in the Murray-Darling Basin is lack of availability of water. (Time expired)