Victoria is on another collision course with the Commonwealth over water reform, with the Brumby Government vowing to stand up for local farmers in the face of the Federal Government's latest attempt to abolish water trading rules.
Victorian Water Minister Tim Holding was "surprised" by Federal counterpart Penny Wong's decision to impose conditions on financial incentives for small-scale farmers to stop irrigating.
Mr Holding accused Senator Wong of belatedly changing the terms of an agreement, but environmentalists have blamed the Victorian Government's "recalcitrance" for creating the impasse.
Senator Wong has declared the grants — worth up to $150,000 for each farmer — would be paid only to farmers whose home state had abolished certain barriers to water trading.
The surprise condition means Victorian farmers who would be eligible — those farming less than 15 hectares and willing to cease irrigating — will not get the money until the Brumby Government agrees to axe certain water trading rules.
Mr Holding was defiant, saying the Brumby Government would continue to "stand up for Victorian farmers on water issues".
"We were surprised to learn that the Commonwealth Government is seeking to use grants for stressed Victorian farmers to renegotiate agreements that were made at the July COAG (Council of Australian Governments) meeting," he said.
"I will be raising this matter with the Commonwealth Government."
The Rudd Government is particularly keen on removing two barriers to water trading in Victoria:
• A limit that prevents more than 4pc of water being traded outside an irrigation district.
• A limit that prevents non-landholders such as the Federal Government buying more than 10pc of water entitlements in a system.
The Federal Government wants the rules removed so they do not hinder the Commonwealth's buy-back of irrigation water for the Murray-Darling river system.
Senator Wong told a Senate committee last month that a Victorian farmer seeking to sell millions of litres of water to the Commonwealth was prevented by the 4pc trading rule.
Australian Conservation Foundation spokeswoman Dr Arlene Buchan said any measure that removed barriers to water trading was a good thing, and the Victorian Government was to blame for farmers becoming caught in the middle.
"Victoria has been absolutely recalcitrant through this whole process and has left the Commonwealth with little choice but to take action like this, which in the short term will increase the stress on those irrigators," she said.
But the Brumby Government has support from the Victorian Farmers Federation, with the federation's Richard Anderson saying it was upsetting that irrigators were being used as pawns.
"Either you are going to help these irrigators or you aren't. These irrigators can't influence the State Government … there are other methods through COAG for the states and feds to sort these things without using the irrigators," he said.
Federation president Simon Ramsay discussed the exit grants with Senator Wong last month and said yesterday she had led him to believe no such conditions would be attached.
One of Australia's biggest water brokers, Waterfind, released its review of the financial year to June, saying the year was typified by extreme price volatility.
Waterfind said prices in the southern Murray-Darling Basin varied by $900 a megalitre in just three months as a result of water availability and allocation announcements.
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