The federal government is paving the way for a blistering showdown with farmers, rural communities and the eastern states, with last night's budget revealing the Commonwealth plans to buy back water from irrigators for the first time in almost a decade.
The Albanese government will also abandon dam projects and prioritise town water supplies, in a clear rebuff of National Party priorities.
Despite $13 billion already committed to the Murray-Darling Basin Plan, the budget allocates an undisclosed sum of money to meet environmental water targets.
The amount was not published for fears it could distort the water market.
It would involve taxpayer funds being used to buy water entitlements from farmers willing to sell their right to access water from the basin, this financial year.
The basin plan was legislated by the last Labor government in 2012 and sets out how water in Australia's largest river system must be shared between farmers, communities and the environment.
In return for South Australia's support for the original plan, an additional 450 gigalitre (GL) carve-out for the environment was promised — almost the equivalent of the volume of water in Sydney Harbour.
Conservationists say that water is vital for restoring health to the entire river system, including wetlands, flood plains and native habitats.
The federal Nationals unsuccessfully tried to scrap the 450GL commitment, but before this year's federal election, Labor doubled down.
In 2018, state and federal water ministers agreed to strict criteria about how water could be recovered toward the 450GL target, to ensure no economic or social harm to basin communities.
So far only 2GL has been recovered toward it — but that is not the whole picture.
Stage set for ministers' meeting
Under the basin plan more than 2100GL of water has been reallocated from farming to the environment.
That water has mostly come from infrastructure upgrades and water buybacks.
A further 605GL must be recovered by state-run water infrastructure projects by 2024 but these projects are running well behind schedule.
An independent report earlier this year suggested it could cost up to $11 billion to meet the 450GL target if the 2024 deadline was removed.
Following the budget, federal water minister Tanya Plibersek said "action backed by spending is urgently needed to get the plan back on track".
But Victoria, New South Wales and the federal opposition are vehemently opposed to buybacks, arguing they destroy rural communities by luring money and people away from regions.
Farm groups including the National Farmers' Federation and National Irrigators' Council also oppose water buybacks.
The budget states that measures to meet the environmental water saving target would be partially offset by redirecting funding from within the Climate Change, Energy, the Environment and Water portfolio.
This could include almost $100 million committed to the Water-Supporting the Murray-Darling Basin program in the March budget, which includes uncommitted funding from the Healthy Rivers, Healthy Communities program.
It is unclear if any legislative changes could be required for the Commonwealth to re-enter the water market or if such a move requires the support of the states.
The funding allocation sets up a showdown for when water ministers meet in February.
Hells Gate bites the dust
The budget shows Labor will scrap Barnaby Joyce's $5.4 billion Hells Gate Dam project in north Queensland and defer funding for several other water infrastructure initiatives, in what the federal treasurer has described as a more "responsible" approach.
Almost $900 million for the Emu Swamp dam, Dungowan dam and pipeline, Hughenden Irrigation Scheme and Wyangala Dam wall-raising projects have been put on hold.
The budget stated these projects would be "reconsidered" once business cases and "viable pathways to delivery" are completed and assessed.
As was indicated before the election, the government will also claw back funding to the tune of $1.173 billion from the National Water Grid Fund.
The National Water Grid was established under the former Coalition government to research and fund water infrastructure across the country and so far has typically funded pipelines, weirs and feasibility studies for dams.
Now the Water Grid's remit is expanding to include town water projects.
That move will please communities that suffered through severe or extreme water restrictions during the recent drought, with some forced to truck in water.
Cairns and Mount Morgan in Queensland will be the first beneficiaries of this change, with commitments to fund new town water supply projects.
Treasurer Jim Chalmers told the ABC the budget showed a sensible approach to spending on water.
"We won't be proceeding with Hells Gate but some of the other big projects have just been re-profiled," Dr Chalmers said.
"We've got a big investment in water, we've got a big investment in the Murray-Darling Plan, but we've tried to come at it in a more responsible way."
