Making best use of water — our competitive advantage

The short-term economic message is that the economy has begun to point less steeply down. The long-term message is: water.

The slowing of the economic decline presages recovery next year, provided the international economy doesn’t tank. That should somewhat lighten households’ gloom about their financial prospects.

That is some comfort to Labour approaching the election. Nothing short of a sunburst of economic confidence would eliminate National’s thumping lead so late in the electoral cycle. But less gloom might well alter the balance of the risk for Labour between going down and going up from its current 35 per cent poll average.

But once the election and immediate economic cycles have run their course, what then?

The “what then” is water. Water is our competitive advantage. In a water-constrained world we have more of it in the right places, falling on the right soil and warmed by the right amount of sun than almost any other country. It delivers top food and drink. Our advantage will apply through the early stages of global warming if the physicists are right.

It may not feel like a competitive advantage after this year’s drought in the countryside and after shivering and splashing through this frigid, globally-warmed winter. It would surely be more enriching to have a continent of highly sought-after metals as Australia has.

Yes. But water comes a good second best and maybe in time a first best.

Australia faces huge infrastructure issues connected with water. Its cities are planning huge electricity-guzzling desalination plants. Its winegrowers face wipeout.

China has serious looming problems for both food and industry. So does India, fed on a food revolution from aquifers now rapidly being depleted. Worldwide, industry faces shortages.

The lesson rich and developing countries alike are learning is that water is a critical part of their infrastructure.

And that goes even for water-abundant New Zealand.

Michael Cullen recognised this in 2003. When he formed an infrastructure group of ministers he put water on its agenda. Out of that came, laboriously, a “sustainable water programme of action”.

There has been some action. Environmental standards emerged for drinking water quality in 2007 and this year for measurement of water actually taken in permits. Lakes Rotorua and Taupo and the Waikato river are to be cleaned up. In July a national policy statement on freshwater appeared, to give guidance — in the fullness of consultative time — to regional councils, which issue consents to take water and permits for discharges of pollutants into waterways.

But critics from across the spectrum reckon it a programme of inaction rather than action. New Zealand doesn’t even do enough research to guide decisions and action.

The result: the bureaucratic “take” permit system, which is on a first-in-first-served basis, has led to over-allocation in many catchments. By 2012 most critical catchments will be fully or over-allocated.

This is not as dire as it sounds, since water use falls short, at times far short, of the allocated “take”. But the system limits others’ access to the unused water, since reassigning it is difficult and cumbersome except within irrigation systems.

Result: we are using our water inefficiently — very inefficiently, a sobering and detailed report by the Business Council for Sustainable Development (BCSD) will say this week.

In short, we are squandering our competitive advantage. That is odd, especially given our sagging earnings and wealth ranking in the OECD and against Australia. It constrains our capacity to climb back up the table.

The current system may also, perversely, be attending suboptimally to environmental, recreational, cultural and heritage needs.

So water is a big infrastructure question for after the election. As policy issues go, they don’t come much bigger.

It is no accident that Bill English has followed Cullen’s lead and made water a core infrastructure issue — though in the pre-election cacophony you will hear a lot more about roads, electricity supply, broadband and skills.

Water is one of six matters environment spokesman Nick Smith has on the agenda for a second-phase rewrite of the Resource Management Act. Smith last week pulled together interest groups ranging from environmentalists to water-gulping dairy farmers who right now don’t pay for what they use. He is digesting the input.

No economic logic would say a valuable resource should be “free”. The BCSD report will advocate a calibrated mix of administrative and market mechanisms: rigorous planning to apportion water among public, ecological and economic uses; proportional instead of absolute “take” rights for economic use and tradable “use” rights so water is used for the greatest economic benefit; and a cap-and-trade regime for polluters.

The BCSD report lays a challenge to politicians to be clearsighted, longsighted and courageous. It is your competitive advantage they have in their hands.