institutions, summarized in the following section, provided for: the management of water distribution through the issuance of water use licenses; the allocation of Murray River flows among the States of South Australia, New South Wales, and Victoria; the construction and operation of water storage facilities to conserve and regulate river flows; and in the latter decades of the century, moratoriums on the issuance of water licenses, and ultimately a cap on diversions from the Murray-Darling system.

A second (though related) major Basin management issue is salinity. For climatological and geological reasons, much of Australia’s soils store quantities of salt. In many irrigated areas, the application of water to the soil has elevated the concentration of salts in the underground water table and in surface water channels draining irrigated land. Compared with this irrigation-related salinity, however, a much larger and more difficult challenge is “dryland salinity.” A European model of land clearing for agricultural development was followed in Australia in the late 19<sup>th</sup> and 20<sup>th</sup> centuries. It has been estimated that 15 billion trees, which used to transpire the saline water their roots drew from the aquifers, were removed from the Murray-Darling Basin alone. Saline groundwater levels in these areas have risen closer to the surface, sterilizing productive land in some places and boosting river salinities through surface runoff pathways. Currently it is estimated that 7 million hectares of Australia are affected by dryland salinity, and the National Land & Water Resources Audit projects that without intervention this will rise to around 17 million hectares by the year 2050.

There are other aspects of water quality deterioration in the Basin. Awareness of the impaired status of aquatic and riparian species and habitat in much of the Basin has risen since the 1970s and reached a level of concern in the outset of the 21<sup>st</sup> century that nearly matches that for water scarcity. In response to growing evidence of a decline in river health, the Murray-Darling Basin Commission sponsored work to bring together current studies and knowledge and to inform the debate on restoration of river health. The results (Norris et al 2001) showed, among other things, that:

- 38 percent of the river length assessed had biota that was significantly impaired;

- 10 per cent of the river length was found to be severely impaired, having lost at least 50 percent of the types of aquatic invertebrates expected to occur there;

- Over 95 percent of the river length assessed in the Murray-Darling Basin has an environmental condition that is degraded and 30 per cent is substantially modified from the original condition.

This has set the scene for what the Basin Commission has termed the Living Murray initiative, which is a concerted attack on the issue of failing river health of the Murray River. The States were already addressing environmental flows in other streams in the Basin, but were slower to address the Murray itself because its highly regulated nature as a transboundary river limits the options for modifying flows. Susbstantial reductions of water diversions for consumptive uses are expected to be necessary in order to achieve the meaningful ecological restoration envisioned by the Living Murray initiative. Currently, there is a major focus of debate in Australia concerning the need to recover a proportion of water now allocated to agriculture and to re-assign it to the 7