Directory : Water Directory 2013
Water Directory 2013 PAGE 69 Water Trading (Source: National Water Commission, Australian Water Markets: Trends and Drivers 2007--2008 to 2010--2011, www.nwc.gov.au) Australia is one of a small number of water-scarce countries that has instituted markets for trading water. The National Water Commission (NWC) considers water trading important because it allows this vital resource to be transferred for productive and environmental uses. Trading can occur on a temporary or permanent basis. Temporary transfers, where water entitlements are leased for a specified period of time (usually one year), are the most commonly used methods of trading water in Australia. This market depends mainly on how much rain has fallen and how hot the season has been. The Australian water market is a composite of many separate markets, each defined by water system boundaries and administrative arrangements. Within those markets are segments for different water products such as water access entitlements, water allocations and other forms of entitlement; and different trading transactions such as transfers, leases, amalgamations. The majority of trading occurs in the southern Murray-Darling Basin (MDB). Trade outside the MDB saw a sharp decline in allocation trading, while entitlement trading continued to grow steadily. In many respects, the 2010--2011 water year was an extraordinary one. Near-record high rainfall caused a rapid rebound in water availability in eastern Australia. These conditions provided an opportunity to examine the response of water markets to marked changes in water availability. Patterns that had been established in the years of the millennium drought became weaker, reflecting plentiful supply and lower demand. In contrast, drought conditions persisted in southwest Western Australia. Water's relative abundance in 2010--2011 meant that allocations were traded in large volumes at far lower prices than in previous years. As prices fell, the transaction costs of trading became proportionally more significant for a given volume. This is thought to have contributed to the fact that the average volume of water exchanged with each trade jumped sharply. In 2010--2011, the total trade of entitlements in Australia was 1204GL, a 38% decrease from 2009--2010. The total Australia-wide volume of water allocation trade increased, from 2495GL in 2009--2010 to 3493GL in 2010--2011 (an increase of 40%). There was also a significant shift in water entitlement trade in 2010--2011. Fewer entitlements were traded, and prices were lower. Drivers of those changes included the seasonal conditions, as well as a reduction in purchases by the Australian Government as part of its buyback program. With more water available, it is likely that buyers are taking more time to consider their options before purchasing entitlements.
Water Directory 2014