Institutional Overview from an Australian Perspective –With Particular Reference to the Murray-Darling Basin - Water and Agriculture: Sustainability, Markets and Policies - page 315

managing risks to water allocations, expanding water trade, improved water accounting,
pricing reforms and urban water reforms. The MDBC role is mainly focused on
coordinating the overarching reforms in the basin and the CoAG Inter-Governmental
Agreement on implementing the Living Murray.
Water trading
With the implementation of the cap, any water to be used for new developments has
to be sourced from existing uses. Water markets provide an opportunity for new
investment in high value added agriculture despite resource constraints, moving the water
to a higher value, more sustainable use. In enhancing water trade on an inter- and intra-
state basis, governments recognise that rights to access and use water are valuable assets
and that the users of those assets are best placed to decide their most productive use.
Water markets provide the opportunity for new investment in high value added
agriculture despite resource constraints. Trade provides the opportunity to make the most
of water availability and helps individual irrigators to manage risk. Key requirements for
water trade are an agreed transfer mechanisms, a set of trading rules (to account for the
varying “denominations” in differing “currencies” of water entitlements, environmental
and salinity clearances), managing outlying irrigation areas and having a robust
accounting mechanism.
Unofficial water trade has existed in the basin since the 1940s and it was in the early
1990s that legislative change facilitated trade. In 1995, the Murray-Darling Basin
Ministerial Council agreed to establish a permanent interstate water trading trial.
Arrangements were made under the Murray- Darling Agreement, with a pilot permanent
interstate trading scheme beginning in 1997.
Responsibility for the use of water after it has been diverted from the river lies with
the relevant jurisdiction. Each jurisdiction has different arrangements of water
entitlements, management and distribution. Victoria has statutory water authorities with
individual irrigator water rights and licences. New South Wales has irrigator shareholders
in private irrigation companies. South Australia has irrigation trusts and irrigator licences
with a separate state water plan and regional plans. Queensland has a government-owned
water corporation with individual licences converted to individual water allocations.
These different access rights, policies and administration can make water accounting and
trading a challenge. Risk management options vary between the jurisdictions.
Risks to shared water resources
In 2004, the Murray-Darling Basin Ministerial Council considered six risks, which, if
not addressed, could affect the water quantity and quality in the Murray-Darling Basin.
The six identified factors are:
increased groundwater use;
bushfire impacts;
climate change;
reforestation;
hillside farm dams, and
reduced return flows from irrigation.