Over 20 years since the 2004 Intergovernmental Agreement on a National Water Initiative (NWI) was first agreed between the States and Territories, the Australian Government has set the course for an overhaul of the NWI - Australia's 'blueprint' for water reform.

Australian water ministers affirmed their commitment to a renewed NWI in June 2024 and most recently, following multiple rounds of consultation, a draft national water agreement (NWA) was published by the Commonwealth Department of Climate Change, Energy, the Environment and Water (Department).

In line with the findings from the Productivity Commission's (Commission) 2024 National Water Reform Inquiry, the NWA has a modernised focus, including to better reflect climate change and First Nations' influence in water resource management.

In this article we outline the Commission's findings and recommendations for reform, their role in shaping a refreshed NWA and the proposed steps for finalising and implementing the new agreement.

History

Reform of the Australian water sector has been a focus of successive governments over several decades with water management remaining a critical pillar of our country's environmental, social, economic and cultural policy. A coordinated approach to water reform first started in 1994 through the historic COAG water reform framework and has continued through subsequent initiatives including the NWI (2004), Commonwealth Water Act (2007) and Murray-Darling Basin Plan (2012).

In its original form, the NWI sought to:

• establish a nationally-compatible market, regulatory and planning based system of managing surface and groundwater resources for rural and urban use that optimises economic, social and environmental outcomes; and
• provide greater certainty for investment and the environment, and to underpin the capacity of Australia’s water management regimes to deal with change responsively and fairly.

Two previous Commission inquiries (one in 2017 and the other in 2021) found that through the NWI all Australian governments have made good progress in improving the way Australia manages its water resources. However, they also found that while the NWI’s fundamental principles remain sound, the NWI should be renewed and modernised to better reflect the contemporary context and its challenges and to address certain gaps that remain in NWI compliance.

Key findings and recommendations for reform

The Commission's 2024 National Water Reform Inquiry found that while the NWI has served Australia well as a foundation for water management, it now falls short in addressing contemporary issues like climate change adaptation, the trade-offs between environmental and economic objectives for water use and management and the need for more robust governance structures.

Consistent with its 2021 advice, the Commission's view is that the best way forward is to build on the foundations of the NWI, rather than to start again from scratch.

The Commission noted that a recommitment to the core principles of the NWI will provide a consistent authorising environment for jurisdictions to implement and continue to improve on best-practice.

"A key risk of an erosion of the authorising environment for implementation is backsliding… A renewed NWI weaker than the existing one would leave no driver for jurisdictions that have not yet met their NWI commitments 20 years on, to do so in the future."

While there seems to be consensus that the broad structure of the NWI remains appropriate and should be retained, the Commission considers that there is a need for a modernised overarching goal (referencing climate change and First Nations people) and updated objectives and elements.

The Commission has encouraged the NWI parties to agree to the following principles and to apply them across all key areas of water policy, planning and operations in order to achieve the stated objectives:

1. Capacity to contend with droughts, floods and shocks, and to adapt to a changing climate, is strong;
2. Regulation, governance and management are fit for purpose;
3. All decisions are based on the best available evidence and information;
4. Innovation and continuous improvement are encouraged and adaptive management is required;
5. Communities are engaged effectively before decisions that impact them are made; and
6. Communities are provided with sufficient information to enable effective engagement.

Some of the key areas for enhancement identified by the Commission include:

• Greater emphasis on water service provision - where the NWI focuses predominantly on water resource management, the Commission has highlighted that a renewed NWI should include an elevated emphasis on water service provision, an aspect it says has been largely overlooked and needs to be prioritised;

• Strengthened governance arrangements – the Commission sights the need for clear and transparent governance arrangements including:

• ongoing leadership by ministers;
• jurisdiction-specific, publicly available action plans; and
• the incorporation of First Nations' interests into the NWI governance structure (e.g. through the continued participation of the Committee for Aboriginal and Torres Strait Islander Water Interests);

• Prioritising water security in recognition of a changing climate – the Commission recommends that a renewed NWI address both the water supply and water demand issues associated with climate change management including with respect to:

• a shared understanding of water security priorities based on a common definition of water security that recognises that risks to water security will differ between and within jurisdictions;
• all forms of extreme weather events in water planning for climate change (not only drought) noting the increase in such events over the past decade and the propensity for disruption to water supply and damage to infrastructure; and
• the impact of the transition to net zero carbon emissions on water usage across Australia;

• First Nations cultural connection and involvement in water management – the Commission supports a greater focus on cultural outcomes and the importance of and connection to water in the lives of First Nations peoples together with:

• more meaningful engagement with First Nations communities including to ensure that water plans incorporate social, spiritual and customary objectives and strategies for achieving these objectives; and
• governance arrangements for water development in partnership with First Nations communities.

These findings and recommendations for reform have laid a comprehensive foundation for a refreshed NWA and have played a pivotal role in shaping the new agreement as we discuss below.

The proposed new National Water Agreement

The NWA, as published in December 2024, comprises 7 objectives, 40 outcomes, 143 principles and 6 schedules. The Department has underlined that, as a result of consultation conducted to date, the NWA principles and outcomes have been simplified, the content shortened by removing repetitive provisions and other revisions have been made to better respond to stakeholder feedback and improve clarity.

Aligned with the Commission's recommendations, the 7 high-level NWA objectives to which all governments are to work towards as key priorities for water reform and management are:

1. Safe and secure supply of sufficient water quality and quantity to sustain communities, culture, natural environments and economic prosperity;
2. Investment in major water infrastructure that is effective, strategic and transparent;
3. Water management that recognises and protects Aboriginal and Torres Strait Islander water interests and values;
4. Evidence-based decision making in water management that is underpinned by robust and coordinated use of science, data and cultural knowledge;
5. Sustained community trust and confidence in government, water agencies, water managers and water users;
6. Environmentally sustainable water planning and management that is interconnected, adaptive and responsive to climate change and other circumstances; and
7. Water management frameworks that facilitate judicious and efficient use of water.  

These high-level objectives are underpinned by the outcomes and principles detailed in the NWA which give more colour to the changes that need to occur to achieve the objectives.

Implementation of the new National Water Agreement

As intergovernmental agreements, neither the NWI nor the proposed new NWA are legally binding on the parties. Consequently, without legislative action, any new agreement will not affect existing water resource management legislation and subordinate water planning instruments.

The NWA is intended to operate as a platform for nationally consistent water reform, one that seeks to provide best-practice guidance to jurisdictions on water planning, management and decision making. Existing regulatory frameworks in each jurisdiction will then provide the forum for any new or revised policy and legislation consistent with jurisdiction-specific action plans. All jurisdictions, including the Commonwealth, will have up to 2 years to develop actions plans, which are then to be updated at least once every 5 years.

According to the Department, these action plans will:

1. reflect the circumstances of each jurisdiction;
2. outline the jurisdictions' water policy priorities for the five-year cycle;
3. include policies, programs and initiatives that progress the NWA objectives and outcomes;
4. be developed and delivered having regard to the principles in the NWA;
5. describe the proposed delivery timeline, process, funding source and key parties in development and delivery of relevant actions; and
6. be provided to the Water Ministerial Council and made publicly available.

Importantly, the current draft of the NWA is not the final agreement and the Department has stated that it is appropriate that the work to settle the agreement is conducted between governments. To date, there has been no indication from the Department as to the timeline for finalising the NWA.

Next steps

While the proposed new NWA represents a significant step forward in addressing Australia's water management challenges, there is inevitably work to be done to ensure that the 'vision' created by the NWA is capable of practical application through the policy and legislative settings of its signatory jurisdictions. Further, given the protracted passage of water reform, our variable climate, environmental risks, changing economic drivers and the need for adaptive and equitable management, it will be critical that the final agreement is capable of weathering the test of time. Finalising the new NWA and effective implementation will require the continued collective effort of governments, industry, communities and legal and policy professionals. The momentum achieved through these recent reform developments will hopefully make this a smooth and timely process.

Contact us to find out more about how the New National Water Agreement may impact your organisation.