Wall Street Journal on Australia’s Drought

The Journal has a not-too-bad page one story on Australia’s drought and the government efforts to address it, but it’s wrong enough so as to merit comment. I lived in Australia for a couple of years not too long ago and have met Malcolm Turnbull, who is now the environmental minister for Australia.

The story sets up a libertarian picture, taking the viewpoint of a farming community and presenting the Federal government’s plan to manage the country’s water resources as a threat to their livelihood.

What the story doesn’t make clear is:

Australia’s drought is no garden variety drought. It had gone on for the last six years, and climate specialists looking at long historical records said that Australia in the past had had droughts as long as 50 years in duration. Many farmers have already gone bankrupt and suicides among farmers are at an all time high. If there had not been heavy rains this May, farm irrigation would have been halted to preserve enough water for the population. So the farmers were at risk of losing their livelihood, government action or not. The rains alleviated the crisis, but it’s far from over.

Australia is the just about the only economy I can think of that exports its scarcest resource, water. By contrast, the Gulf States export oil. China exports cheap labor via its manufactured goods. Italians export style. 75% of Australia’s water use is for agriculture, and a prestigious applied research think tank, CSIRO (the Commonwealth Scientific and Industrial Research Organisation) determined that Australia was inadequately compensated for the value of the water in its agriculture. And since all its agricultural exports, save wine, are commodities, it doesn’t have pricing power (Australia is a big exporter of wheat, beef, wine, milk, cotton and rice).

Australia’s ruling party, the Liberal Party, is philosophically opposed to regulation and intervention, and it’s not very green either. Australia, despite its intense blue skies, has one of the highest greenhouse gas emission levels per capita and has not signed the Kyoto protocols. It’s the last bunch you’d expect to be embarking on a program like this. They clearly regarded the situation as a national crisis and felt they had to act.

The article compares this initiative to “having Washington regulate the Mississippi River.” Can anyone read a map? Canberra, the capital of Australia, happens to be in the Murray-Darling river basin.

From the Wall Street Journal:

This tiny town thrived for the past few decades as a center of Australia’s burgeoning cotton industry, while the country became one of the world’s largest exporters. With government encouragement, farmers moved in across the country’s biggest river system to grow the thirsty crop.

Now Australia is staggering through one of its worst-ever droughts, and cotton production has plummeted. In Wee Waa, the Cotton Fields Motel that once was busy with seasonal workers now struggles to fill rooms. Elsewhere in the flat basin, kangaroos hop along dry levees, and the ends of giant water-transport pipes poke out over empty reservoirs.

Australian leaders spent decades building reservoir systems to try to turn vast expanses of marginal cropland in its harsh interior into an agricultural mecca. But recent years have brought record drought — and predictions that climate changes from global warming could make Australia’s interior even drier. That has the government looking to change course, while farmers protest that the droughts haven’t gotten worse — only the politics surrounding them.

In the U.S., farmers and policy makers squabble over how to keep dwindling water resources like the Ogallala Aquifer from disappearing. In China, Beijing is struggling to keep the Yellow River — known as the cradle of Chinese civilization — from drying out. The Australian government’s proposal to preserve its Murray-Darling river basin is one of the most far-reaching anywhere. It calls for taking over management of water rights from the local jurisdictions that share the basin, something akin to Washington taking over the Mississippi River.

The government proposes buying out farmers from areas with too little water, and upgrading irrigation systems to reduce waste from leaching channels or leaking pipes. In all, the budget is $8.6 billion , a significant sum in a nation of only 20 million people.

The man in charge of selling the plan is Malcolm Turnbull, a former Goldman Sachs banker turned politician. A policy wonk who taught himself into an expert on water-conservation issues, Australia’s minister of environment and water resources has succeeded in persuading three states and the capital territory that includes Canberra to endorse the program. But he is struggling with the last state that shares the basin region, Victoria. Officials there are due to propose demands for a compromise tomorrow.

The Murray-Darling river system spreads across one-seventh of Australia’s land and accounts for more than 40% of the country’s agricultural production. In aboriginal tales, some of its waterways are said to have been laid out through the country’s southeastern corner by a mythological fish that dragged river channels across the parched outback. Its agricultural tradition — which includes wheat and vegetable farming — looms large in the Australian psyche, which celebrates the rugged individualism of frontier living though agriculture forms only 3% of the economy.

Communities like Wee Waa are surrounded by vast, nearly desolate spaces covered in reddish soil and dotted with rocks, small shrubs, and occasional eucalyptus trees. At certain times of the year, cotton lint litters the dusty roadways near farms. Large rectangles of cotton pressed into the size and shape of freight containers punctuate the landscape, as do ghost-town remnants of previous farming booms and busts.

Australia’s states have fought over the river basin’s unpredictable flows ever since they banded together to form a commonwealth in the early 1900s. They eventually formed a regional body, now known as the Murray-Darling Basin Commission, to help oversee water planning. But individual states can veto its policy initiatives, making it difficult for the body to reach consensus on water disputes.

From the 1930s to the 1960s, the Australian government built huge reservoirs to make the water supply more predictable, and promoted cotton growing to help distribute the country’s population more evenly across Australia’s desolate interior.

Farmers’ access to the water was regulated by “entitlements” that state governments issued. Many water officials now say Australian states handed out too many entitlements in a bid to draw in more people, and often states have had to limit them. Residents at the bottom of the basin also suspect farmers upstream take more water than they are supposed to under the rules.

Paul Kahl, a farmer who emigrated from Merced, Calif., to Wee Waa with his family in the 1960s, arrived when the local grocery stores had no refrigeration and vegetables were sold from the back of a neighbor’s truck. The Kahls and their cotton farm prospered. Other growers flocked to the region, where the soil and sunny weather were generally good for growing cotton — when water was available.

Wee Waa grew from about 900 people in the 1960s to more than 2,000 in recent years and became Australia’s self-described “cotton capital.” By 2001, Australia was producing more than three million bales of cotton a year on 1.3 million acres. For a time the third-largest exporter — far behind the U.S. at No. 1 — it has since slipped to sixth, at about a third of its peak production.

Drought Worsened

Below-average rains the past several years failed to refill the reservoirs, and then the drought worsened. Last year, rainfall in the Murray-Darling region averaged just about 11 inches, the third-lowest level since 1900. In some parts of southern Australia, rainfall levels were only a fraction of their all-time lows. Prime Minister John Howard recently suggested residents “pray for rain.” Although some areas have received heavy rainfall in recent months — suggesting to farmers the drought may be ending — so far it has done little to reduce the longer-term shortages.

On Wee Waa’s main thoroughfare, an auto-parts dealer, a livestock company and several other businesses are boarded up. Seed companies are selling only a fifth of their peak seed volume. Mr. Kahl’s farm — now run by his son James, a lean 56-year-old — produced just 1,100 bales of cotton last year compared with 6,000 normally. Some of his fields have been empty the past two years, and a riverbed that runs through the property is reduced to a few stagnant pools.

James Kahl doesn’t doubt officials handed out too many water entitlements over the years, but he doesn’t think the federal government will necessarily manage water any better. He says his family’s first 20 years on the farm were unusually wet, and now, the area is probably coming to the end of a 20-year dry period. Driving across his property in a white SUV, he points out areas where huge floods swept across the farm’s black fields in past years.

Bureaucrats may ignore such cycles, he says, and simply push to drive farmers out. “There are people who really think we shouldn’t make anything off these rivers,” Mr. Kahl said one recent afternoon as white cockatoos squawked around him and emus gathered on his empty fields. They’d like “to let it all go back to kangaroos and wild pigs, and then the world will be a happy place.”

Three hours’ drive to the north, the reservoirs at 240,000-acre Cubbie Station are empty except for dried logs and other debris. The farm grew cotton on just 2% of its land last year. Its owners say their operation was designed to withstand fallow years. At the farm’s headquarters in a low-rise country house, the walls are covered with maps showing rainfall back to the early 1900s — including decadelong stretches of dry weather.

Mr. Turnbull, the 52-year-old environment minister, grew up in Sydney and was a Rhodes scholar. In the 1980s he served as an adviser to the late Kerry Packer, once Australia’s richest man. He then started his own investment bank, and made a fortune now estimated at about $85 million or more, in part by selling an Internet service provider he co-founded. Meanwhile, in the early 1990s he led a group that tried to remove the Queen of England as Australia’s titular head of state and make Australia a republic — a bid that failed but gave Mr. Turnbull a high profile.

Mr. Turnbull was managing director of Goldman Sachs Australia from 1997 until 2001. Then in 2004, he was elected to Australia’s Parliament as a member of the Liberal Party of Mr. Howard, an ally of President Bush. Mr. Turnbull, a man with a patrician air and conservative suits, represents a wealthy section of Sydney and is often cited as a possible future prime minister.

He has long spoken out about climate change and Australia’s water challenges, peppering his speeches with references to Thomas Malthus, an economist from the 1700s who predicted the world would be unable to sustain its population growth. He also has a cattle and sheep farm north of Sydney where he says water levels have dropped distressingly low in wells and dams that serve the area.

Mr. Howard tapped Mr. Turnbull to become a special secretary for water issues and later promoted him to his current cabinet-level post. As Australia’s drought worsened toward the end of last year, the government came under increasing pressure to act. One issue it had to deal with was whether the drought was being caused by global warming.

Rainfall Patterns

Studies by climate-change experts have suggested that some areas, such as Southeast Asia, will get wetter from changing dynamics connected to global warming, but the interior of Australia will get drier as weather patterns dump more rain elsewhere — though rainfall patterns also are expected to become more varied and unpredictable.

Mr. Howard had long played down the idea of climate change. But Mr. Turnbull was convinced it was real. “The scientists will tell you that it’s hard to unpick how much is natural climate variability and how much is global warming,” Mr. Turnbull says in an interview in the cramped office in a shopping mall where he meets constituents. He adds: “There’s lot more of us now. There’s a lot more hectares of irrigated agriculture, there’s a lot more people in the cities, and the amount of water availability hasn’t increased.”

Mr. Howard, too, started to talk of himself as a “climate-change realist,” suggesting he believed Australia should consider steps now in case global warming proved to be a bigger problem later.

The idea of taking control of Murray-Darling had long held favor in Canberra. Politicians figured it would be too difficult to wrest power from the states, but in private meetings last year, Messrs. Howard, Turnbull and others concluded the drought situation was dire enough that Australians would support tough changes. It helped that the federal government was flush with money, allowing it to spend on investments that would appeal to state leaders.

In January the government proposed replacing the basin commission with a new body that would answer to the federal government, giving Canberra power to settle disputes over water allocations. The plan also includes a top-to-bottom assessment of the river system’s status to find where it is overtaxed and where steps could be taken to ease the burden. That could be achieved by buying out farmers or improving the infrastructure — for instance, lining irrigation canals with concrete to prevent seepage.

Columnists and academics praised the plan’s audacity, but it drew harsh criticism from farmers and state leaders who said they weren’t consulted. Some feared buying out farmers would effectively dismantle parts of Australia’s agricultural economy. One editorial cartoonist portrayed Mr. Turnbull in a safari outfit — similar to the one worn by deceased wildlife personality Steve Irwin — and expensive lace-up dress shoes.

Mr. Turnbull went on the offensive. In one interview, he compared a state premier who opposed the plan to a “drowning man” who rejects a life jacket because “it doesn’t match the color of his tie.” But he also began to soften his stance, making clear he would accept revisions, including strengthening an independent panel of experts that would oversee the federal government’s water management. Victoria officials are expected to demand more, such as retaining local rights to build dams or take other steps to secure more water.

In Wee Waa, some farmers are preparing for change. Cotton grower Will Kirkby, 33, uses high-tech probes to measure soil moisture, increasingly common to help farmers be more selective about irrigating. But he’s also exploring other crops that might offer a better return on the water he’s using, just in case — like olives. “We might not be cotton farmers forever,” he says.

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  1. Anonymous

    I really don’t understand your point. I’ve lived in Australia all my life and havent met the ‘environmental minister'(sic) – I think you mean the Minister for the Environment.
    I thought the Wall Street J article was okay – it paints a picture as understood by Some farmers. Yes you’re right – we export a scarce resource; but this in itself doesn’t convince me either (I am an Environmental Biologist) that the Feds will do a better job than the states. This is a very complex issue – as the whole idea of farmers’ losing their livelihood demonstrates. The National Party (read the farmers’ party) has close affiliations with the federal govt – they form a coalition, which means the present govt COULD not keep power without the favour of this party. This party is dying – as is the agricultural future of this country )lucky we’ve still got lots of stuff IN the ground we haven’t completely stuffed up yet. This, non-qualified Environment Minister (as you point out) thinks maybe we should just move all our agriculture north (where there may be more seasonal ‘water’ but which doesnt actually have almost any of the other factors that agriculture demands; small unimportant things like sustainable soil structure for one. It is to such a govt – who still has a prime minister who still cant wrap his head around the implications of climate change and global warming you would give 10 billion dollars of OUR money to squander on a plan that was never put to the Cabinet nor to even the Treasury . Australians are a sceptical lot and thank goodness we often don’t believe our politicians, particlularly in an election year. Thank goodness at least ONE state has the nous and courage to ask about the details of the plan BEFORE it signs away its rights. But it probably wont matter – in Australia, the Feds have constitutional power to overide the states in any thing it can persuade the High Court that comes under it’s Corporations – Head of Power in the Constitution. They have already overridden the states in Industrial Laws. This Fed govt is turning into a clever dictatorship that simply does not want to give up its power by losing an election.
    I simply dont trust it. Yes the experts’ panel is a good idea – but there are legal ways to undermine the power of an experts’ panel -all govts can do it if they really want to.
    The Victorian govt doesnt want to just give away its rights for money that it will have no say on how it is spent. This seems to me be a cautious, pragmatic and thoughtful view. I uphold their right to know more about this “Plan”. I dont care that this is an election year and the govt is keen to reverse it’s green credentials quickly. Everybody needs to see this Plan, the costings, the goals etc etc before it becomes a fait accompli. The govts ties to the ‘farmer’s party’ is suspect – they WILL look after their constituents first and stuff the environment. I’m not saying the states are much better, but that is the reason we need checks and balances on this system. The Feds should have an equal respresentation with the 4 states involved (which represent most of Australia) and perhaps decisions (and they will be very hard decisions)could be taken on majority vote.
    Leave the environmental future to a Govt SO out of step with current scientific thinking – I definitely do not think so.

  2. GT

    Malcolm Turnbull is a hack. He was desperate to be Straya’s Thomas Jefferson, but he is just a hack.

    I notice that the article doesn’t mention the VAST amounts of water wasted growing (of all things) RICE in and around Berrigan (near Cobram on the NSW-Vic border – as dry as hellhole as you’ll ever see)… and the same government that allocates free water to farmers growing a crop better suited to, oh, a MONSOON climate, put up signs telling us to put a brick in the dunny and shower with a friend.

    Anyhow – I like your eclectic collection of material, and your finance stuff is pretty good. I’ve sticky taped al ink to my Rants, which you might also find interesting.



    (I lived in Berrigan for two years during a shocking drought a couple of years ago… the rice farming started a a pilot scheme in the 1960s and grew like Kudzu as it is government funded and the Nationals own the seat.)

    Please, for the love of Collingwood, send me some pies.

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