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water politics: more subsidies « Previous | |Next »
January 30, 2007

Andrew Macintosh, a deputy director of the Australia Institute, has a succinct account of the environmental strategy of the Howard Government, that puts its big water plan into a political perspective. This is a plan which, as John Quiggin points out, places the emphasis on enginneering solutions--the lining and piping of the open irrigation channels from the river to the farmer's property. What played second fiddle was the market purchases of water entitlements. Full-cost water pricing was never mentioned.

Macintosh says that:

The Government's solution to water problems has largely involved providing public money for water infrastructure, much of which has appeared in the form of subsidies to the agricultural sector. Thursday's announcement of the $10 billion water package signalled that this policy is unlikely to change. The Government's plan states that the bulk of the money will be directed to farmers to improve water efficiency and irrigation infrastructure. The lion's share of the money is intended to provide further subsidies to what is already probably the most subsidised industry in Australia.

What is firmly rejected is the neo-liberal or free market approach that involves a buy back of water licences for the environment, apply full-cost water pricing, establish tradeable water rights, reduce agricultural subsidies and then allow the market to do its thing subject to appropriate environmental restrictions.

All you hear on the radio these days is subsidies for the agricultural sector, which undercuts its public image of being the least subsidized agricultural sector in the develped world. Macintosh d goes on to say that because of the Government's ties with irrigators:

it has (for the most part) refused to buy back water for the environment, does not support full-cost water pricing, opposes environmental regulations and has provided an unprecedented level of subsidies to the agricultural sector. Under the new plan, it appears these subsidies will continue to flow and buy backs will remain a last resort. The same approach has been adopted to greenhouse policy. Enormous subsidies have been provided to the fossil fuel sector in the name of growth. Then to solve the problems caused by burning fossil fuels, the Government has provided more subsidies.

He says that it is unlikely that Turnbull will be given the scope by the Prime Minister to radically alter the direction of environment policy: he will be given his running orders from Howard and he will be expected to follow them. Hence it is unlikely that Turnbull will push the argument that free markets are the best means of determining the allocation of scarce resources, and that government's role should be confined to supporting rather than directing market forces.

| Posted by Gary Sauer-Thompson at 10:28 AM |