This article is more than 1 year old

This article is more than 1 year old

The agency in charge of Australia’s most important and complex river system should be broken up as part of a major overhaul to protect the Murray-Darling basin and save taxpayers hundreds of millions of dollars, the Productivity Commission says.

The government released the Productivity Commission’s five-year review of the management of the Murray-Darling basin late on Friday afternoon. The report warned of serious risks in Australia’s long-term $13bn plan for the basin, which is designed to reset the balance between the environment and consumptive uses through to mid-2024.

It said the dual roles of the Murray-Darling Basin Authority – a manager of the basin plan, on the one hand, and a regulator that enforces compliance on the other – were often in conflict. Those conflicts would only worsen in the next five years, the commission said.

“The MDBA will continue to be critical in driving collaboration between, and providing technical support to, basin governments to help them to implement the basin plan,” the commission said.

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“However, the MDBA is also the regulator of the basin plan. It is required to make final judgments on the success or otherwise of its own coordinated activity (for example, supply projects) and to manage breach or non-compliance of all aspects of the plan.”

“At times it may have to call out states (or indeed itself) when they are non-compliant.

“Being the agent of, and funded by, those same governments (a role that involves providing collaborative leadership, advice and technical capability) compromises the MDBA’s ability to be an impartial regulator.”

The risk to the implementation of the plan was so great, the commission said, that responsibility for administering it should be transferred away from the MDBA to the basin governments.

“In the commission’s view, the significant risks to implementation cannot be managed effectively under current institutional and governance arrangements. Reform is required,” the report said. “Basin governments (not the MDBA) should take responsibility for leading implementation.

“The MDBA has conflicting roles. It supports basin governments (as their agent) to implement the plan and is also required to ensure compliance with the plan. These conflicts will intensify in the next five years. The MDBA should be split into two separate institutions – the Murray-Darling Basin Agency and the Basin Plan Regulator.”

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The $13bn basin plan is split into two five-year phases. The commission said the first had made significant progress in helping supply more water to the environment. About 20% of the water available for consumption 10 years ago is now dedicated to the environment. Two-thousand gigalitres of water has been recovered using $6.7bn in funds.

But the Productivity Commission warned Australia’s next five-year phase – for which about $4.5bn is available – would be more challenging. It aimed to achieve the same environmental releases as the first phase using 605 gigalitres less water recovery. The Productivity Commission described this as “highly ambitious”.

“Failure of key projects would delay environmental benefits and could cost taxpayers about half a billion dollars for further water recovery,” the commission warned. “To manage the risks, basin governments need sound governance arrangements for integrated delivery. Before implementation, projects need to be independently reviewed to give confidence that they will deliver the predicted environmental outcomes and offer value for money.

“For some key projects, realistic implementation timeframes are likely to extend beyond 2024.”

The report found the development and accreditation of water resource plans, which set rules on how much water can be taken from the system, is behind schedule.

It recommends basin governments agree to the 2019 deadline for complex plans that need changes.

“Failing to act will be costly for the environment and taxpayers, and undermine confidence that the basin plan has been worthwhile.”

The National Farmers’ Federation water task force chair, Les Gordon, said the commission’s report was a key plank of implementing the plan.

“As is the case with all things plan-related, not everyone will be happy with all of the recommendations, but this should not detract from the report’s independence and probity value,” Gordon said.

The Greens senator Sarah Hanson-Young said the report was “damning” and showed the serious mismanagement of the basin plan. Hanson-Young said the report clearly showed the $13bn was not going where it was intended.

She said political interference had also undermined the independence of the MDBA, and accused the government of burying the report by releasing it on the Friday before Australia Day.

“It shows that the original purpose of the plan to restore the health of the river has been undermined and the money spent is going not to the environmental outcomes but instead filling then pockets of irrigators,” Hanson-Young said.

The agriculture minister, David Littleproud, welcomed the findings of significant progress in the first phase.

“The assessment also states there are challenges going forward as we continue to deliver the plan,” he said. “There is no doubt there is a lot more work to be done by the commonwealth, the basin states and the MDBA.”