The Australian Competition and Consumer Commission today issued its first Water Monitoring Report, which provides information about the impact of reforms on the water industry in the Murray Darling Basin.


“In the past 20 years governments have undertaken substantial reforms, including capping water extractions, clarifying water rights and the development of interstate water trade,” ACCC chairman Graeme Samuel said.


“The Water Act 2007 built on these reforms with measures to improve the operation of water markets in the Murray Darling Basin. The ACCC has played a key role in the market reforms by developing and implementing water market and water charge rules.”


“If they work well, water markets are an effective way of allocating scarce water resources to highly valued end uses. This report provides information on the market’s performance.”


“Since the reforms were introduced, we have observed an expansion in the size of water markets and an increased capacity for market participants to engage in trade,” Mr Samuel said.


“The effect of the rules is most clearly seen in the fall in termination fees, significant transformation of irrigation right and significant termination of water delivery right during the course of the year. These indicators suggest that irrigation infrastructure operator-imposed barriers to trade have been reduced.”


While there was considerable transformation and termination, the report notes that many irrigators who sold water maintained an involvement with their infrastructure operator and continued irrigated agricultural production.


“In many cases, irrigators are responding to price signals by using water more effectively, including trading water both permanently and on a temporary and as needs basis, as appropriate for their particular circumstances,” Mr Samuel said.


Compliance with the new rules was generally good. However, the ACCC has conducted investigations and taken enforcement action where necessary. This includes action against Murray Irrigation Limited and Murrumbidgee Irrigation for the overcharging of termination fees during 2009-10.


The report also examined water charges levied by infrastructure operators in the Murray Darling Basin, observing that the level and structure of charges varied across service providers. There are a number of possible reasons for the variations including differences in the type of infrastructure and in operator efficiency. Future reports will provide additional information on the differences.


The report can be found here.