Report explains why water markets are bogged down

Published 04 November 2008

irrigation.jpg A team of researchers from the University of New England has produced a report explaining why the benefits expected from Australia’s National Water Initiative are not being fully realised.

The Intergovernmental Agreement on a National Water Initiative, signed at a Council of Australian Governments meeting in 2004, committed governments across Australia to a more cohesive national approach to water management.

“The National Water Initiative was designed to achieve environmental and economic goals by freeing up markets for water,” explained Professor Paul Martin, who led the UNE team that included Dr Jacqueline Williams and Christopher Stone. “We spent two years investigating why these benefits are not yet being fully realised.”

Professor Martin, Director of the UNE-based Australian Centre for Agriculture and Law, said the study showed that, “unless water reform is integrated with broader environmental reform and institutional reform, the benefits aren’t likely”.

“With regard to water trading,” he said, “it was expected that the water would go to the most efficient users, or the ones who could produce most value from that water. In Sydney, however, political competition and overlapping planning and environmental laws have meant that the scope for a market to operate has been negligible. And in rural southern Queensland the market hasn’t worked because overlapping requirements and excessive complexity of administration have meant that trading opportunities have not been seized.”

“Many of the farmers who helped us with our research want to demonstrate that they can be excellent environmental stewards, and are frustrated that they can’t get on with things that will achieve that,” said Dr Williams, who conducted the majority of the research.

The results of the study, which was funded by the Cooperative Research Centre for Irrigation Futures, are presented in a report titled “Transaction costs and water reform: the devils hiding in the details”.

“The study demonstrates that, whether our focus is environmental, agricultural or social matters, institutional reform is absolutely essential if we’re to get what we want out of our irrigation systems,” Professor Martin said.

He said that, as a result of the study, he and his team were already working with local, State and Commonwealth government agencies, irrigators, and industry and environmental bodies in pursuit of institutional reform in peri-urban and rural regions. “There’s been a lot of interest in our findings and our proposals for the way forward,” he said.