The Australian water market is composed of several separate water markets, differentiated by water system or administrative boundaries. The scale of Australia's water markets varies greatly, from small unconnected water markets to extensive connected systems such as the Murray–Darling Basin, the largest water trading area in Australia.
Australia's water market involves the trading of a variety of water products within and between separate water resources. These water products generally fall into the broad categories of water access entitlements A perpetual or ongoing entitlement to exclusive access to a share of water from a specified consumptive pool as defined in the relevant water plan.
Source: Schedule B(ii) NWI and water allocations The specific volume of water allocated to water access entitlements in a given water year or allocated as specified within a water resource plan.
Source: Adapted from Water Act 2007 . Water trading provides opportunities for water resources to be allocated between competing uses.
Each State and Territory has responsibility for the legislative and administrative arrangements for water rights and water trading.
Water market participants include:
- users/owners — irrigators, farmers, rural water utilities, irrigation infrastructure operators, industry, urban water utilities and environmental groups
- intermediaries — brokers, conveyancers, solicitors, banks, money lenders and valuers
- researchers — environmentalists, scientists, economists and hydrologists
- government — Australian Government, State and Local government and trade approval authorities
- public — investors, community groups and general public.
An efficient water market depends on:
- establishing clear water rights
- an ability to undertake transactions in relation to those water rights
- access to relevant market information.
Each State and Territory government has a water register for recording water access entitlements, including ownership details and transactions. Water trading relies on an efficient water register system in the same way that the property market relies on an efficient land titles register and the Australian Stock Exchange relies on an accurate share register. Efficient, accurate and comprehensive water registers are critical to a flourishing water market.
Legislation governing water trade in Australia is currently going through a reform process at the national and State/Territory levels. Guided by the principles outlined in the National Water Initiative (NWI), the aim of this reform process is to remove barriers to water trade, thus reducing market distortions and facilitating a freer trading process. Some of the key reform processes are outlined below.
Murray–Darling Basin Plan
The Basin Plan provides an integrated and strategic framework for water reform, consistent with the requirements of the Water Act. The independent Murray–Darling Basin Authority developed the Murray–Darling Basin Plan. Go to the Authority's website to view the plan. The plan includes water trading rules that commenced on 1 July 2014, which aim to make it easier for water market participants to trade and ensure they have the same rights regardless of where they are trading.
The Water Market Rules 2009 came into force on 1 January 2010 and Water Charge (Termination Fees) Rules 2009 came into force on 1 September 2009.
The Water Market Rules 2009 regulate a process known as 'transformation'. In areas where an irrigation infrastructure operator (IIO) holds a bulk water entitlement, the water market rules prohibit actions of an IIO that prevent or unreasonably delay irrigators from transforming all or part of their irrigation rights into separate statutory water access entitlements. This separate entitlement can then be traded outside the irrigation district. Transforming an irrigation right into a water access entitlement does not extinguish the irrigator's water delivery right, nor the associated obligations, including the requirement to pay network access fees and charges to the IIO.
The Water Charge (Termination Fees) Rules 2009 cap the termination fee that may be imposed by IIOs when an irrigator chooses to terminate their access to the IIO's irrigation network. Rules covering other regulated water charges are still under development.
These rules were made by the Environment Minister following advice from the Australian Competition and Consumer Commission (ACCC). The ACCC have produced guides that explain the details for both irrigators and IIOs. See the ACCC's water page for more information about water rules.
Historically, most States and Territories bundledThe aggregation of individual rights into a single right. These might include, but are not limited to, land property title, water access entitlement, water allocations, water use rights, delivery rights, irrigation rights and works approvals. land property titles and associated water entitlements together. One of the National Water Initiative's objectives is to have a system in which water entitlements can be traded independently of land. This separation is known as unbundlingThe separating of historic water entitlements which bundled water, land, water use, delivery and works approvals, into separate entitlements or licences. land and water entitlements. Unbundling of land and water rights has been completed in many jurisdictions.
Several jurisdictions are currently going through the process of unbundling water instruments. This means that water rights are unbundled from each other, as well as being unbundled from land. A bundled water instrument may contain a combination of water access entitlements, water supply works rights and water use rights. An unbundled water instrument has only one water right. When trading water, it is important to note that unbundling of water rights is still being progressively implemented in some jurisdictions.