Water market reforms outlined
Experts have spelled out ways to save Australia’s vital water systems.
Earlier this year, the ACCC released a 554-page report detailing a litany of holes and failures in the market for irrigation water.
The ACCC found water market intermediaries like brokers and water-exchange platforms have been running wild in a largely unregulated environment, creating conflicts of interest and opportunities for transactions to be reported improperly.
It spelled out a mismatch between market and physical systems, numerous regulators with fragmented and overlapping roles, inaccurate and inadequate information, improper reporting, conflicts, and professional traders taking advantage.
“Australian water rights have become a financial investment product. As a result, there has been an influx of capital from non-users, for purposes such as speculation and branded water ‘investing’,” say Scott Hamilton form the University of Melbourne and Professor Stuart Kells from La Trobe University in a new opinion piece.
But the two experts say some measures may spell a way forward for water markets reform.
They call for water rights to be redefined as entitlements for water-in-use, so that the water market returns to being an efficient water allocation mechanism, not a financialised market.
They say further external and speculative capital inflows should be restricted, and stronger rules about who can participate in the market need to be established.
Measures to make water trading much more transparent and reliable would help too, the experts say.
They have also proposed phasing out the ‘casino’ element of water trading, requiring non-users to sell down their holdings over time, or to substitute them for new, alternative assets so that the true water price can be tracked.
The expanded use of these new securities could act as a legitimate way to manage risk, potentially hedging exposure to water prices or environmental risks.
Additionally, increased investment in water infrastructure for Australia’s foodbowls may lift the value-in-use of water in rural areas, improving the nation’s place in global food supply chains.
“It is time to acknowledge an unhappy truth. The failure of the Murray Darling Basin Plan has been a failure of politics but also, in large part, a failure of market design. Bad policy has turned the allocation of our most valuable resource into a gambling pit,” they write.