Australian Water Management Review Vol 1 2010 | Page 12

away from, arguing that the quicker we
complete the needed reforms, the sooner
certainty will return.
All water entitlements should be backed
by the law. They should be clearly
defined, registered, protected and not
linked to land. They should specify who
bears the risks from any future changes
in water availability. They should be
tradeable. This combination will give
holders much greater control of their own
destinies, the NWC says.
Most Australian jurisdictions are fairly
well advanced with these measures,
though the Commission has told Western
Australia and the Northern Territory to
hurry up. In New South Wales, Victoria and
South Australia there have been efforts
to improve the flexibility of entitlements
to better manage the risk of low water
availability – and the Commission
encourages this, along with being up-front
with users about how water shortages are
to be handled.

Trading water

Since the reforms began large volumes
of water have been bought and sold both
within and outside the Murray-Darling
Basin as water users grow accustomed to
a new era in which water can flow from
one use to another according to its value.
This water market remains the centrepiece
of national water reform.
“Significant benefits are flowing to
buyers and sellers ...movements in water
have facilitated industry adjustment and
economic development,” the Commission
finds. Water allocations and entitlements
are the most widely-traded products,
though others may emerge to suit the
needs of different kinds of users. It noted
that the length of time taken to process
water trades and transfer entitlements
– mostly a month but up to a year in
extreme cases, is a big cost on users and
a brake on the market, though there are
signs this is improving.
However, the 4 per cent limit on water
being traded out of certain irrigation areas
in a year has “impeded the use of buyback
programs, unfairly and arbitrarily penalised
willing sellers...distorted patterns of water
trade...inhibited structural change and
complicated interstate collaboration”. It
should be axed, the Commission states.
It found that while the link between
water entitlements and land has now

Water Management Review 2010

been generally severed, further progress
is required. The delay in bringing in
water plans to 40 per cent of Australia’s
jurisdiction has also hindered efficient
trade. The NWC wants a close eye kept
on ‘market intermediaries’ – middlemen
– to ensure they do not undermine public
confidence in a fair water market, and it
wants water users to be better informed
of their rights.

Pricing water

It is essential that the price of water
encourages its efficient use and sound
investment, the NWC says. The right price
signals will encourage innovation, wise
infrastructure spending, efficient industries
and household use. This, it adds, is a
better system than imposing water
restrictions (which have hidden costs)
because prices are out in the open and
everyone can see what water really costs.
NWI consistent water pricing does not
yet apply everywhere in Australia. The
Commission is concerned that state and
local governments are sometimes still
hiding the real costs of water from their
urban consumers by subsidising the cost
of new infrastructure projects. It wants to
discourage the use of grants and subsidies
that distort the signals reaching all users.
Progress in meeting the National Water
Initiative’s goals for recovery of the costs
of water management has been very
limited, the Commission warns, especially
in Queensland, Western Australia, Victoria
and South Australia. It urges a far more
rigorous economic approach to water.
And while most states have had success
in curbing householder use of water
through restrictions, they would do better
to employ price signals too.
For irrigators especially it is important that
future charges for water be transparent,
especially in cases where there is big
spending on upgrading infrastructure.

Who bears the risks?

In a drying, drought-prone climate,
there is always the risk that water will
not be available in the future to fulfil an
entitlement or meet one of the major
economic, social or environmental goals of
the NWI.
While water plans and water markets
can give users greater certainty and
more options, they cannot guarantee

future supplies. To provide users with
greater certainty over how changes in
water availability will be dealt with, the
NWI sets out a formula for sharing the
risks between water users, government
and the environment in a known and
predictable way - and most users see
this as absolutely vital. But this is not yet
happening, the Commission says.
“There is widespread debate and
uncert ainty about the best approach to risk
assignment....in the Commission’s view it
is important to address that uncertainty in
order to provide entitlement holders with
greater planning and investment certainty
over how changes in water availability will
be dealt with.”
It calls for all water jurisdictions to clarify
how risk will be shared in the event of
shortages, and the decision to be clearly
explained to the public and users.

Adjustment

Structural adjustment is the natural
process of change in sectors of the
economy. It is pivotal to water reform.
In the irrigation industries and irrigationdependent communities there are bound
to be winners and losers from the changed
circumstances, but it is important they
have the freedom to make their own best
choices, for example to sell water or to
buy it, quickly and easily.
The Commission argue strongly that
all artificial barriers, impediments and
subsidies that interfere with this process
must be removed, as they only protract
the pain and delay the arrival of a truly
sustainable water system and viable
regional economies. . If the barriers to
water trade are removed, users will make
their own best decisions whether and
when to buy or sell water, it argues.
The unavoidable fact for Australia’s
irrigation industry is that, due to drying
and the need to ensure an environmental
share, there will probably be a lot less
water available in future for irrigated
agriculture: in northern Victoria, for
example, in the order of 30 per cent less.
It is vital for irrigators in all areas to know
what they are facing, so they can make
plans accordingly. “Until we remove
the current obstacles to trade in water,
farmers and farming communities will
not be able to see their future clearly, or
invest with confidence. They will remain