Food and the Battle Over Our Shrinking Water Supplies: How will Our Law-Makers and Key Players Resolve the Conflicts?

by Joe Lederman © November 2006
BALDWINS – FoodLegal
Australian Food Lawyers & Consultants

As drought-affected farmers know, Australia is a dry land. In early November 2006, the Prime Minister called State ministers to Canberra for a water summit to discuss responses to what was being called ‘the worst drought in 100 years’. This 3,000-word article analyses the issues facing governments and food producers in relation to water resources, examines the competing demands in relation to food production, and raises other issues that ought to be addressed by key players.

Who Uses Water in Australia?

In a July 2006    Water Policy Update, the Australian Government described water management as the ‘key national conservation challenge of our age’. Accurate figures listing key users by industry-type or class (industrial, agricultural or urban) are hard to come by, but the 2000-2001 study by the Australian Bureau of Statistics showed that “Agriculture” was by far the biggest user on a sector-by-sector basis, as shown in the following Table I (measured annually, in gigalitres):

Table I – Water Use in Australia by Industry
Source: ABS Water Account 2000-2001

This    recent data from the Australian Bureau of Statistics (“ABS”), from the 2004 Corrigendum to the 2000-2001 Water Account, showed that the vast majority of water was used by agriculture (16,660,381 mega-litres). By contrast, water supply for urban use including sewerage and drainage, which has been the focus of unprecedented levels of State government    advertising to save water and to bear water    restrictions - was a relatively modest 1,793,953 mega-litres. The manufacturing sector (excluding mining but including the food and beverage industry) used only 866,061 mega-litres.

The ABS    data summarised the position:

“Agriculture consumed the largest volume of water with 16,660 GL, representing 67% of water consumption in Australia in 2000-01. The largest consumers of water within the Agriculture industry were Livestock, pasture, grains and other agriculture (5,568 GL), Cotton (2,908 GL), Dairy farming (2,834 GL) and Rice (1,951 GL) industries.”

Is Cotton Good Value for Money?

What stands out in these figures is that Cotton farming, which is a non-food water user within agriculture (although some scientists have    recently found that cotton    can be genetically modified to produce edible seeds), used more than three times the total of all water used by the entire Australian manufacturing sector, including the food and beverage industry. Interestingly, Australia no longer possesses any significant domestic processing industry in the textile and fibre sector. This fact raises additional questions as to whether the cotton growing industry can justify its existence in a water-thirsty Australia.

Pressure on Agriculture

While the manufacturing industry (including the food and beverage industry), in contrast, used only four percent of the nation’s water resources, the ABS figures    found that it contributed 1,101,669 jobs to the economy compared with the 369,379 jobs provided in the agricultural sector. Using the    Industry Gross Value Added (“IGVA”) model to compare relative contributions to the economy, the manufacturing industry was found to have delivered $73 billion per annum to the Australian economy, almost three and a half times the $20 billion per annum contributed by the irrigated agricultural sector.

The Dairy Industry

On the other hand, some food-related agricultural sectors such as Wheat, Beef and Dairy and Lamb/Sheep livestock generate very high export returns for Australia. For example, the Dairy Australia    Industry in Focus 2005    report showed the export value of dairy products from Australia at approximately $2.6 billion in 2004/05, representing an 8.5% increase in export returns while the domestic market was valued at $3.7 billion, making it the third largest in agriculture behind those other major food-related farming sectors: wheat and beef. Although dairy processing is a manufacturing industry, it is reliant on agricultural inputs so that water usage by dairy farms should not be viewed in isolation from the income generated for Australia from the dairy manufacturing sector.

Conflict between Rural/Agricultural, Urban and Industrial Use

In a climate of scarce water resources, competition between stakeholders is becoming more intense. There have    already been reports that Snowy Hydro has been limiting its supply of water to farmers in order to conserve sufficient water to generate electricity to supply the summer electricity demand.

Plans for a water pipeline to connect the Victorian town of Ballarat to the Goulburn Valley river system via Bendigo demonstrate this point. The eventual allocation of the redirected flow, which supporters claim could secure water supplies for Bendigo and Ballarat for up to fifty years, might have a potentially significant    impact on orchardists and dairy industry activities based in the Goulburn Valley.

Shifting Sympathies

As population growth is greater in urban areas (and a voting majority resides in urban areas), voting demographics will likely give legislators more reason over time to pressure farmers to sacrifice their livelihoods by making water more expensive for irrigation farmers. Some citrus farmers in the South West of the State of New South Wales are already experiencing    severe cuts in water allocations. Smart farmers will need to examine improved water-feed and drip systems (such as those that have been developed by some Israeli companies) to cope with reduced water allocations.

Shifting Allegiances

Farming organisations that produce differing food types will need to consider new alliances. In relation to water usage policies,  they may not necessarily find the same level of support that they previously shared or gained from other established farming groups, especially having regard to competing constituencies between those made up of farms engaged in the more water intensive activities against those that are not.

Laws of Water

The use, storage and re-use of water in Australia are all governed by a collection of State, Federal and Municipal laws and regulations. However, the Federal influence, at least on a legislative level to date, has not been substantial. Despite calls for changes, the States still retain control of water in Australia.

Overview of Water Laws in Victoria and NSW


In the Australian State of Victoria, water is treated as a vital part of the common resources held by the Crown on behalf of the whole community. At this stage, water resources are not open to radical private ownership. Instead, water authorities receive    entitlements from the State Government to harvest water from rivers, catchments, groundwater and other sources which are then sold on to suppliers (see Part 4 of the Victorian    Water Act 1989). Suppliers, or water businesses, can purchase    licences to buy and sell this water to private users (domestic, industrial and for irrigation – see section 51 of the Victorian    Water Act 1989).  Unfortunately, this process may have been subject to poor management practices, with some private users having managed to secure private bargains to the detriment of the majority of water-users.

Distribution of Water Entitlements

Sections 49-64 of the    Water Act 1989 (Vic) facilitate private users to bypass the water authorities by purchasing licences directly from the State Government. Such licences have allowed users to collect water and use it for various purposes. Some farms and some food and beverage businesses, especially those located close to available water resources, or those selling bottled water, have secured water licences directly from the Victorian Government on the pretext that the direct issue of a licence will ensure better quality and consistency of supply or to cut down on extra costs associated with dealing with third-party water businesses. Some such arrangements could be scrutinised in a more critical fashion.

Water Licences

Private users can obtain rights to water as either ‘groundwater’ (water obtained from or occurring in an aquifer – see section 3 of the Victorian    Water Act 1989) or ‘surface water’ which is water from rivers, streams, dams, etc. (see section 51 of the Victorian    Water Act 1989).

Bottled Water

In a rare fillip for a food or beverage manufacturing industry, some bottled water manufacturers with direct water licences have been able to pay very low prices for mineral water extraction. These were set at 1.5 cents per litre in section 56(1)(b) of the Victorian    Water Act  or    around $2.40 per million litres, compared with the usual $960 per million litres paid by urban-dwellers or $45 per million litres being paid by farmers, respectively, when buying water from third party suppliers.

New Regime

Food and beverage businesses operating in Victoria, especially those intending to make use of newly declared water systems, need to pay heed to the    Water (Resource Management) Act 2005 (Vic) which created a framework for water shares and trading (Part    3A) including: a Water Register of all rights, entitlements and allocations (Part    5A), an application/registration process and associated fees for water-use licences (Part    4B), and new arrangements for irrigation and water allocation (Part    11). The Act does not apply to previously declared systems and water users, and under some circumstances, some users can choose to operate under either this 2005 Act or under the    Water Act 1989 provisions discussed above.


Similar legislation exists in the State of New South Wales. However, the 1912    Water Act NSW is gradually being phased out and replaced by the    Water Management Act 2000 NSW.


Key provisions relating to water licences (see section 10 of the NSW    Water Act 1912 or section 61 of the NSW    Water Management Act 2000) apply on a case by case basis, where determining which legislation applies depends on whether or not a    water sharing plan has been approved for the area. If a water sharing plan has been approved and gazetted, food producers and other waters users will need to apply under the    Water Management Act 2000.


Under the old scheme, water users could (and if a water sharing plan had not been approved for the area, still can) apply for three main types of licence:


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