Strengthening Australia's water markets
The development of Australia's water markets represents a centrepiece of national water reform.
Trade in various water products has grown substantially in recent years, with the combined value of markets estimated to be $3 billion in 2009-10.
Water markets provide an example of successful national micro-economic reform, ensuring that scarce water resources are most effectively and efficiently allocated amongst competing uses. At the same time, the ability to trade has delivered real benefits to individual water users, water-dependent industries and the environment.
Recognising that there is further scope to extend the benefits of trading, Strengthening Australia's water markets was commissioned to analyse issues that may impede the efficient operation or further development of markets. The recommendations and supporting actions outlined in this report are intended to open up greater access to trading, improve market performance and allow for future growth.
Learning from recent experience in the Murray-Darling Basin, the National Water Commission considers that there are opportunities to implement more coordinated and efficient market fundamentals in developing both existing markets and markets in new areas.
Improved transparency and more timely information and transactions are needed, particularly relating to trade approval processing, price information and disclosure of allocation determinations. Handling of conflicts of interest and the business practices of water market intermediaries also warrant attention to build confidence in the market. Considering the scope for groundwater trading, the Commission urges commitment to identify groundwater areas that would benefit from trade, and to prioritise reform in those areas.
The Commission acknowledges the significant work already undertaken on water market reform, and is aware the reforms suggested in this report will require further effort and resources. Given that strong leadership will be needed to drive these reforms, the support of the Council of Australian Governments will be essential.
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Strengthening Australia's water markets (4.06MB)
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