Water markets and water trade
The Australian water market is a composite of many separate water market segments, each defined by water system and administrative boundaries, and of varying size, activity, and connectivity with each other. Interstate water trading activities are concentrated in the southern Murray-Darling Basin (MDB).
There are two main forms of water trade:
- permanent trade refers to trade in water access entitlements, the perpetual or ongoing property right to exclusive access to water. Permanent trades are largely driven by longer term business or financial decisions.
- allocation trade (or temporary trade) refers to the trade in seasonal allocations and is largely driven by short-term factors, such as water availability and production decisions in any given year. The distinction between water access entitlements and water allocations is analogous to owning a house as opposed to renting it.
Market mechanisms play an important role in allocating water between competing uses, delivering water to where it is most valued, and encouraging efficient use of water. The water market has been critical in helping farmers and others manage marked reductions in water availability during the most recent, prolonged drought.
The Australian Government is pursuing a number of initiatives to improve the functioning of water markets. This includes working with Basin states to remove barriers to water trade, and develop a National Water Market System that will assist in the efficient management of water registry, transaction and market information functions. Basin states have also agreed to implement, and report on, faster processing of water trades.
The Murray-Darling Basin Plan includes water trading rules. Further information about the Basin Plan is available on the Murray-Darling Basin Authority website .
Water market intermediaries (which include water brokers and exchanges) play an important role in the market by bringing buyers and sellers together, reducing search costs, improving information flows and assisting in obtaining regulatory approvals.
- The Australian Competition and Consumer Commission has guides for water market intermediaries and their customers to assist with understanding fair trading obligations under the Competition and Consumer Act 2010.
- The Council of Australian Governments (COAG) Standing Council on Environment and Water is considering potential regulation of water market intermediaries. A COAG Consultation Regulation Impact Statement is open for comment until COB 7 June 2013.