Improve transparency and reliability of water market information to increase market participation by water licence holders and enhance consumer confidence in Australia’s water markets.
Status: The funding round closed on 30 November 2016. Grant applications are no longer being accepted.
Enhancing water market transparency will improve community confidence in Australia’s markets and thus contribute to sustainable management of scarce water resources. The transparency problem is multi-faceted, some of the issues affecting it include:
- The market is not a single one, but made up of a relatively large number of small markets. This is mainly because water systems are not physically connected.
- There is no uniform legislation across jurisdictions. States are responsible for direct water management including allocating water among users, water licensing, water extraction conditions, water trading conditions and water monitoring.
- Consequently, there is a large number of regulators: economic, environmental, public health at state, Commonwealth and catchment level. There are multiple levels of legislation. For example Commonwealth Water Act 2007 (and subordinate legislation including water trading rules, water market rules and water charge rules) and water acts in each of the jurisdictions (with subordinate legislations of their own such as rules defined at specific water plan level by water plans, etc.)
- There are no uniform trading rules, but a number of rules applying at specific-water system level. Trading rules differ across water systems because they are designed to respond to the inherent peculiarities of each system.
- Trade charges are different across jurisdictions.
- Some sectors of the market are not captured in public systems. For example, information on trade within the networks of irrigation infrastructure operators is not open to the public and is controlled by the operators themselves (in NSW and SA).
There are dispersed information systems relating to entitlements and allocation trade (including prices) and water availability. This information is in:
- Public state systems: authoritative but incomplete (e.g. irrigation rights not captured) and not real time.
- Private commercial systems (e.g. water brokers and water exchanges): more user-friendly than public systems, but incomplete – only include data for trades in which they are involved.
- Systems by irrigation infrastructure operators: only include information relating to their areas of operation and not available to the public and therefore there is less scrutiny on its quality. Prices from some of these trades are less reliable, which undermines confidence in the market.
- Market participants, particularly farmers, complain that it is too difficult for them to navigate the myriad of systems, regulations and rules. They have to seek expert advice from water brokers and therefore incur additional costs in doing so.
- Concerns about potential market manipulation as many of the rural water platforms are managed by companies offering services to water licence holders and are also trading on their own behalf as investors.
- The information in systems is never up to date because there are varied delays between when transfers take place and when they are entered into registers. As a result of these delays transfer prices do not reflect current market prices.
- Data is of variable quality. There are many transactions with unrealistically high or low prices, which shows that there is limited data quality control.
- Environmental transfers are not specifically identified.
- Concerns that activity by some market participants, e.g. investors, and particularly foreign investors with no connection to land, are distorting the market and driving prices to unaffordable levels; leading to suggestions that there should be restrictions on market participation.
- Concerns among irrigators about potential misconduct and calls for regulation of intermediaries.
- Concerns about the legal status of irrigation rights and their ability to be used as security for loans.
What are the desired outcomes?
Solving these transparency problems would boost confidence in Australia’s water markets, leading to increased market participation. The increase in participation would lead to stakeholders engaging in voluntary exchanges of information to manage water availability risks. It would also increase participants’ flexibility in their water and production decisions. Australia is a global leader in using markets as a form of water management and any successes would draw positive attention from water resource managers from around the world.
Deliverables at the end of the proof of concept phase would be the identification of a viable solution for technical development at the next stage, which would be capable of being tested using real ‘case studies’ or prototypes.
Ultimately success will be measured by the degree of increased market participation by water licence holders and consumer confidence in Australia’s water markets.
Missed the information sessions held around the country? View the Improve transparency and reliability of water market information slide pack and read the FAQs.
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- complete the online application at the I’m ready to apply tab
- provide all the information required for us to assess your application
- address all eligibility and merit criteria
- include all mandatory attachments.