Murray Darling Basin

The Murray Darling Basin (the Basin) is the largest and most complex river system in Australia. It runs from Queensland, through New South Wales and the Australian Capital Territory, Victoria and South Australia, spanning 77,000 kilometres of rivers, many of which are connected.

In 2018–19, dairy farmers in the Basin produced 20% of the nation’s milk supply — some 1,782 million litres of milk from 1,162 dairy farms with a farmgate value of approximately $885 million, much of which is returned directly into local regional economies. There are also approximately 24 processors across the region. Significant private and public funds have been invested in local irrigation schemes to improve efficiencies over the last 20 years.

The Australian dairy industry is operating in a changed and challenging environment, including in the Basin, where dry conditions, climate change, reduced water availability and increasing water prices have significantly changed the way dairy farmers run their businesses.

Dairy farmers in the Basin have significantly increased their water use efficiency thanks to technology adoption, infrastructure investment and evolving farming systems. The Basin water market is critical to dairy farmers, providing opportunities for growth, but also poses large challenges to manage risk and consistency of profitability and production.

The dairy industry in the Basin is heavily reliant on the temporary water market. Approximately 60% of water used by dairy is sourced from the temporary trade market annually.

The Murray Darling Basin Agreement

The arrangements for building works and sharing the water of the Murray River were agreed by the Commonwealth, Victoria, New South Wales and South Australia in 1915. Following this, the River Murray Commission commenced in 1917.

The general principle agreed for the ownership of water in the River Murray system was that NSW and Victoria each receive 50% of the flow upstream of Albury (such as inflows to Hume, Dartmouth and from the Kiewa) and 50% of inflows to Menindee Lakes.

Other inflows to the River Murray are credited to the state from which they originate. For example, flow in the Goulburn River at McCoys Bridge is credited to Victoria and the Murrumbidgee River at Balranald is credited to NSW. South Australia owns all of the water in the River Murray within South Australia.

During dry periods, special accounting rules apply to ensure the available water is shared equally between the states.

The water needed to keep the river running, including the water that is lost to evaporation and to seepage (called conveyance water), and a reserve for the following year are set aside before water allocations to the states are made.

NSW and Victoria have to equally supply conveyance water and South Australia’s entitlement flows as defined in the Agreement.

The River Murray Commission, now the Murray Darling Basin Authority, does not own any water. The responsibility of the Authority is to manage water in the River Murray in accordance with the Agreement.

Since 2009, the water sharing agreement has operated as Schedule 1 under the Commonwealth Water Act.

The Murray–Darling Basin Ministerial Council can change the Agreement at any time with the agreement of all parties.

The Murray Darling Basin Plan

The Murray–Darling Basin Plan (the Plan) was signed into law by then-prime minister Julia Gillard on November 22, 2012, after the Commonwealth reached an accord with each of the Basin states: Queensland, New South Wales, Victoria, South Australia and the Australian Capital Territory.

The Plan is separate from and does not change the water sharing arrangements in the Murray–Darling Basin Agreement.

The Plan aims to address environmental degradation resulting from historic water over-allocation for irrigation and other uses. The Plan articulates high-level policy objectives for the Basin's water resources, including the introduction of new, legally enforceable overall limits on water extraction, called the Sustainable Diversion Limit (SDL).

SDLs are set at Basin-wide, catchment and aquifer scales. The Authority has estimated the Basin-wide SDL for surface water is 10,945 gigalitres per year (GL/y). At the catchment scale, SDLs are implemented through Basin states’ water resource plans.

River users have historically extracted more water than is now allowed under the SDL. The Plan sets a target to recover 2,750GL of water from consumptive use to comply with the SDL set by the Plan. Measures to recover this water include direct buy-backs of water from irrigators, supply projects which aim to achieve equivalent environmental outcomes with less water, efficiency projects which aim to change water use and save some for the environment and constraints projects which aim to overcome physical barriers to deliver, including physical features, operating practices or rules.

Any water savings are transferred to the environment.

Water recovery in the Basin

In January 2018, amendments were made to the Basin Plan which reduced the Basin-wide water recovery target (the SDL) by 605GL.

The Basin Plan target for water recovery was reduced to 2,075 GL/y but a target of up to an additional 450 GL/y of water recovery for enhanced environmental outcomes – subject to neutral or positive socioeconomic outcomes – was adopted. The accounting is set out in Table 1. Water recovery is to be achieved by 2024, although the Productivity Commission doubts this target is achievable.

Table 1: Summary of the Water Accounting

Sustainable Diversion Limit Adjustment Mechanism (SDLAM)

The Authority has assessed and agreed to implement 39 SDL supply, efficiency and constraints projects that achieve equivalent environmental outcomes with less water. The MDBA assessed the projects using the Sustainable Diversion Limit Adjustment Mechanism and determined that when these projects were implemented, the environmental outcomes of the Plan can be met with 2,145GL of water recovery rather than 2,750GL, a reduction of 605GL.

SDL offset projects include works to enable wetlands to be watered and constraints projects to enable river operators to run the rivers above bank full, but below minor flood level, to deliver environmental flows and water to low-lying areas of the floodplain. Some private land would be inundated.

Enhanced environmental outcomes

The Basin Plan allows for a Commonwealth program for enhanced environmental outcomes, over and above what is to be achieved by the original target of 2,750GL, by recovering an additional 450GL per year of environmental water above the 2,750GL target.

The efficiency projects to recover this additional water must have a neural or positive socioeconomic impact. The Ministerial Council agreed to the criteria to determine if proposed projects have a neutral or positive socioeconomic impacts in December 2018.

The recovery of the additional 450GL for enhanced environmental outcomes is controversial as it was a late addition to the original legislation and it involves taking further water from the consumptive pool.

Progress on recovering water under the various components of the Plan can be tracked through the Murray–Darling Basin Authority website.

The water market

Water in the Murray–Darling Basin can be bought and sold, either permanently or temporarily. This water is traded on markets within catchments, between catchments (where possible) or along river systems. This form of trading allows water users to buy and sell water in response to their individual needs.

Water trading has become a vital business tool for many irrigators, providing a means to manage risk from year to year by allowing water to be bought and sold when needed. However, it has also added significant complexity to both business and production management and many farm businesses are exposed to an extremely volatile market.

Different states have different systems for operating water markets, with different types of entitlements and different management regimes, including the use of carryover and the way water determinations are made.

Further detail about water markets is available through the Murray–Darling Basin Authority website, or by contacting Dairy Australia.

In late 2020, Dairy Australia commissioned a short survey to collect qualitative data about dairy farmers’ attitudes to, and participation in water markets. The Dairy Farmers and the Water Survey Stakeholder Report outlining results of this survey is available below in the Downloads section.

Dairy in the Murray Darling Basin

Dairy Australia and RDP support for farmers

Dairy Australia's water research and development programs support dairy farmers to adapt to changing conditions in the Basin, including climate, implementation of the Basin Plan and the water market.

Regional programs have a broad range of investments to support dairy businesses navigate a changing operating environment in the Basin. Programs are available to support transformative changes in feedbase systems, risk management and business planning. There are also programs available for seasonal outlooks, including forecasts for water availability, and agronomy options and linkages to a range of technical advisory services. These include field days and other extension opportunities to learn about research findings and advances in farm system planning and technologies, business risk management and technical advisory services. Murray Dairy also partners with many organisations to support strategic planning and investment in the region.

Dairy industry response

The Australian Dairy Industry Council (ADIC) is leading dairy industry water policy and comprises representation from Australian Dairy Farmers (ADF), the Australian Dairy Products Federation (ADPF) and Dairy Australia.

The ADIC works in conjunction with state dairy farming bodies and in partnership with the National Farmers' Federation and other commodity and irrigation industry peak bodies. The ADIC provides briefings on and submissions to many reviews and inquiries underway across the Basin.

For more information, contact the peak body Australian Dairy Farmers, 03 8621 4200.

Reviews and inquiries

A list of current and completed reviews and inquiries is available on the Interim Inspector-General of Murray–Darling Basin Water Resources website.

The ADIC has provided briefings and submissions to many of these reviews, including:

• Productivity Commission MDB Plan 5-Year Assessment (2019)
  • ADIC Submission
• MDB Ministerial Council review of socio-economic criteria (2018)
• Australian Competition and Consumer Commission Murray Darling Basin Water Markets Inquiry (Final Report due end 2021)
  • ADIC Submission to the Interim Report (November 2020)
  • ADIC Submission to the Issues Paper (November 2019)
• Independent Assessment of Social and Economic Conditions in the Basin (2020)
  • ADIC Response to the Draft TOR and Assessment Framework (2019)
  • ADIC Response to the Draft Report (April 2020)
• Review of Water for the Environment Special Account (2019)
  • ADIC Submission on Draft Terms of Reference

Downloads

The full technical report and summary covering all commodities in the GMID is available here