Australian water markets: trends and drivers 2007-08 to 2009-10
Australian water markets: trends and drivers, 2007-08 to 2009-10 is a companion report to the Australian water markets report series.
The annual Australian water markets reports provide statistics that summarise activity in Australian water markets, together with information on water market structures.
The aim of this synthesis report is to analyse trends in market activity (how much water is being traded and where), as well as the drivers influencing market outcomes (why is water being traded). Although the focus is on the southern Murray-Darling Basin where the majority of trade occurs, the report also provides information on trade outside the basin.
This report shows the links between water availability and water allocation trade. Changes in rainfall, inflows and storage levels control allocation levels, and therefore the volume of water available for trade. Water availability and announced allocation levels affect seasonal demand for additional water, which in turn affects the extent and volume of allocation trade. The price of allocation trades is also influenced by water availability, with significant variability in allocation prices over time.
The short-term water needs of different types of agriculture are key drivers of allocation trading. Crops such as rice have greater year-to-year flexibility in their water requirements, while permanent horticultural plantings have water demands that must be met each year. Regional patterns of agriculture have therefore influenced the direction of intervalley trade, especially during dry years. For example, in 2007-08, growers in the Murrumbidgee and the Goulburn valleys with more flexible water needs took advantage of the high price for water allocations, trading water to areas dominated by permanent plantings such as orchards and vines.
This report shows that trading in the water entitlement market, particularly in the southern Murray-Darling Basin, has grown steadily. Unlike the water allocation market, the level of trading in the entitlement market is generally driven by longterm concerns such as business and risk management, and the entry or exit of participants in the irrigated agriculture sector. Changes to policy and regulation (such as water trading rules) can also influence entitlement trading. The Australian Government's purchases of water entitlements for the environment accounted for 0% of trades in 2007-08, 4% in 2008-09, and 36% in 2009-10. Prices for entitlement trades have remained relatively steady for the last three years.