Australia’s water markets are recognised globally as a water reform success story.
Water users can buy or sell their water rights, on a permanent or temporary basis. This encourages the best use of our scarce water resources. Trading encourages efficient water use by allowing it to be used where it’s needed most.
Water market reform
Water markets continue to evolve. At times, reform is needed to keep them efficient and effective.
The Australian Competition and Consumer Commission (ACCC) conducted an inquiry into water rights. They released the Murray–Darling Basin water market inquiry final report in March 2021.
The Minister has engaged an independent Principal Adviser, supported by an advisory group, to consider the ACCC’s recommendations. The Principal Adviser will:
- develop a practical, phased and cost-effective plan for water market reform
- consult with Basin states and key Murray–Darling Basin stakeholders
- seek advice from the advisory group on the proposed roadmap, and the process for developing it.
The Productivity Commission is reviewing the national objectives and principles for water markets. This is part of their review of the implementation of the 2004 National Water Initiative.
How water markets work
Water rights can be traded in various ways. It can be as simple as a change of ownership. Trades may change either the ownership or the location of the water right, or both.
More complex arrangements are needed for different kinds of leases or forward contracts.
A variety of water rights are traded in water markets.
Water access entitlements
These are a permanent or ongoing statutory right to a share of a water resource. Trade of these rights is often called a ‘permanent trade’.
A water allocation is the right to access a volume of water in a water accounting period. This is usually a water year, which is 1 July to 30 June. An allocation is the percentage of a water entitlement that can be taken from a resource in that period.
Trading of water allocations is often called a temporary trade.
An irrigation right is the right to receive water from an irrigation infrastructure operator (IIO). These rights can be traded within an irrigation network.
Water delivery rights
Water delivery rights are increasingly important in managing water delivery. These rights allow water users to adjust their access to water delivery infrastructure as needed. They can be traded and are often known as delivery shares or delivery entitlements.
This video gives an overview on how Australia’s Water markets work.
Benefits of water markets
Water markets create incentive for efficient and productive water usage. This provides benefits for:
- irrigator farmers and other water users
- the environment
- the economy
Water user benefits
Water trading offers flexibility to water users to buy and sell water when they need to. This helps them adjust to changes in:
- agricultural input
- commodity markets
- confidence to invest in and plan for business activities
- increased agricultural production
- helping farmers and communities survive drought.
Water markets provides a mechanism for environmental water holder to sell allocations. If water is surplus to environmental needs, they can sell it to consumptive users.
Trading improves environmental water delivery. It helps environmental water holders to coordinate and move water between catchments. This trading often occurs at a zero price and is sometimes referred to as a ‘transfer’.
Benefits for individuals and businesses translates into benefits for communities and regions. Trading generates billions of dollars for the economy each year.
Water prices are influenced by supply and demand drivers such as:
- water availability
- climate conditions
- demand for agricultural commodities.
Pricing and catchment information
The Bureau of Meteorology’s water markets dashboard publishes current water market data. It includes information on:
- water prices and volume
- water sources, such as surface water and groundwater
- water availability, storage levels allocations made to entitlement classes
- entitlement types, and historical trade data.
Murray–Darling Basin water market prices
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) publishes weekly water market updates. They also produce water market outlooks in March each year.
We published independent monthly water price market reports from 2009 to 2019.
Water markets across Australia
The Murray–Darling Basin has the most developed water markets in Australia. Markets are especially active in the southern Basin.
Water markets are emerging in:
- coastal NSW
- southern Victoria
- southeast South Australia
- parts of Western Australia.
Water markets governance
State and territory governments each set their own water trading rules.
The Water Act 2007 provides water trading and related rules to be made at the Commonwealth level. These rules sit above state and territory rules. They provide a consistent framework across jurisdictions.
These different sets of rules are important to:
- reduce unnecessary barriers to water trade
- enhance transparency
- protect against negative impacts of water trading.
Basin Plan water trading rules
The Basin Plan water trading rules set out the high-level principles and requirements.
The Murray–Darling Basin Authority (MDBA) enforced these rules until 2021. This role now belongs to the Inspector-General of Water Compliance.
Basin state water trading rules
Basin state governments create most of the rules for water trade in the Basin. They develop and maintain the rules on water access and use.
Water market rules and charge rules
The Water Market Rules 2009 helps to transform a user’s irrigation right into water entitlement in their own name. This means they can trade without restrictions imposed by IIOs. The Water Charge Rules ensure pricing transparency. They set limits on water infrastructure operator’s termination fees.
The Australian Competition and Consumer Commission (ACCC) enforces water market and charge rules.
These reports provide details on how water markets operate.
- The Australian Water Market Report is the annual report on water market operations.
- Supply side drivers of water allocation prices. This explains factors affecting allocation prices in the southern Murray–Darling Basin.
- Trends in water entitlement holdings and trade: Analysis of ABARES survey data. This provides an analysis of trends across the southern Murray–Darling Basin.
Foreign ownership of water rights
Foreign owners of Australian water rights must register their details with the Australian Taxation Office.