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Special report on water - Simon Lancaster writes for The Australian. "Opportunities to prepare for a long-term framework"
18 October 2007

"A silver lining in the cloudless sky?” Could it be that the severe pain Australia is now experiencing might deliver some unexpected gains? Certainly the water situation has never looked grimmer – either way it’s the ‘1-in-a-1000 year’ drought or the start of a new status quo. But Australia’s experiences with other industry transformations over the last 30 years point to the wealth-generating opportunities inherent in the very crisis we now face. The challenge for governments is to step up and provide the long-term framework and planning within which our most affected industries and communities can seize the moment and transform themselves.

The question of ‘classification’ – arguing about whether the current drought is temporary or the harbinger of a new, permanently drier reality – is in some ways a furphy. Yes, a much deeper understanding of our changing rainfall and inflow patterns is critical to our broader understanding of the effects of climate change. But a consensus is now emerging: given what we’ve seen and what we know already, can this nation afford not to at least prepare for the worst? It’s only prudent that we now adopt a risk management approach, by actively planning to meet the long-term challenges, while also recognising the opportunities presented.

Over the last five years, there have been marked shifts in both community and governments’ attitudes to water. No longer is water seen as an abundant good, with no real value. Who’d be seen hosing leaves off their driveway now? Since water is quite clearly a constrained – and precious – good, wasteful practices like that have almost completely disappeared. Agriculture and industry are similarly driving out any remaining inefficient water practices. For example, major manufacturers are updating perfectly functional but old technology in internal water treatment and recycling plants – recognising that the future of water pricing and availability demands they reach maximum efficiency.

And even if our current water crisis does turn out to be temporary, the benefits of these enforced efficiency improvements are likely to remain. Remember the OPEC oil shocks of the 1970s? After the initial crisis, the oil supply (and price) returned to more ‘normal’ levels – but the efficiency gains the crisis drove, in the form of more fuel-efficient cars, continued for years.

However, there are more fundamental opportunities for Australia which should represent a source of hope in our current tribulations. We have the chance to radically transform whole sectors of our economy by researching, driving and adopting new technologies and approaches - and we’ve seen it before. The tariff reductions initiated in the 1970s and accelerated during the Hawke / Keating governments had a huge impact on sectors such as the automotive and textile, clothing and footwear industries. Indeed, parts of those industries disappeared entirely from Australia. But an enforced process of ‘filtering’ took place – we found out what we’re best at and where we add real value, and even developed whole new areas of expertise. Twenty years on, the modern versions of those Australian industries are higher up the value chain, and much more specialised, productive and efficient.

We should consciously design to enable these transformations to take place. Governments need to think about a vision for industries and communities for the future, and start fostering a sense of what is possible. The signs of transformation will already be emerging, and governments need to pick up on and contribute to the signals.

For example, there are signs that agriculture may move to become even more of a ‘portfolio’ type industry, where farmers adjust their business flexibly, opportunistically selecting crops on the basis of water availability, rather than thinking of themselves as a ‘rice’ farmer, or vegetable grower. Some farmers are doing so already; many more are likely to in the future.

However, there is no denying the short-term pain for individuals, industries and communities. The effectiveness of markets in driving efficiencies and highest value use is well known. But governments have a clear responsibility to ameliorate the unintended consequences of market forces, and help ease the pain of transition, as well as shape the policy objectives that markets are not well placed to achieve: equipping individuals for a changed environment, managing the impact on local communities of a rapidly changing industry mix, the broader public policy desirability of population dispersal and our ultimate dependence on a healthy environment.

So governments have to make policy decisions – and interventions – that ensure the community’s broader objectives are met. Short-term measures like drought relief are understandable in a political sense, but in the longer-term they can exacerbate both land degradation and human suffering. Governments need to be thinking about the next few decades, not the next few months – and not just in terms of securing greater water supplies (desalination plants & co) or compliance with water allocations. Instead, we need to think hard about what a sustainable distribution of populations and industries might look like under a radically different water scenario (which could include more floods as well as drought, in a climate change scenario). Structural and social adjustment policy settings are long-term and only work with significant input and consultation.

Governments and communities need to work together to develop a shared vision of future directions and how we can best position ourselves in a new reality. Otherwise, we may look back on the ‘big dry’ as a big opportunity lost.

Simon Lancaster is a senior consultant at management consulting firm The Nous Group. Simon provides consulting services to the water, natural resources, environment and energy sectors.

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