The federal government will crack down on shonky practices in the trading of water which have undermined farmers’ trust in the market by implementing new rules and more oversight.
The water minister, Tanya Plibersek, will announce today that $12m has been provided to the Australian Competition and Consumer Commission to police and implement the roadmap for water market reform.
A report by the ACCC in 2021 found numerous examples of harmful market conduct including market manipulation, insider trading and a lack of transparency by water brokers, which meant trades in the market and the prices being paid were often not visible to all market participants.
As part of the Murray-Darling Basin reforms, water rights were decoupled from land titles, which meant they could be traded separately.
The advantage of tradable water rights is that water tends to be allocated to the most valuable crops and is used more efficiently, while farmers can make extra money by either selling their surplus water entitlements outright or by buying or selling surplus water during a season.
It also provides a mechanism for the government to buy back water for the environment and address the historical overallocation to irrigation.
But the entry of companies into the fledgling market whose primary business model is buying and selling water, and often speculating in water, has undermined confidence in whether markets were operating fairly.
“Water markets reform will crack down on the cowboys of the system, and make sure it’s a level playing field for those doing the right thing,” Plibersek said. “These reforms will deliver trust and certainty to irrigators and industry.”
“Our investment of $31.8m to deliver water market reform will go a long way to improve integrity [and] prohibit market manipulation, and provides us with avenues to deal with instances of insider trading.”
As well as funds for the ACCC, a further $9.2m over four years will be given to the inspector general of water compliance to regulate market data, as the lack of information was identified as a major barrier to transparency.
There is also $9.6m over four years for the department responsible for water to draft legislation to implement the new scheme.
In addition, the Bureau of Meteorology will receive funding of $1m to scope the development of a national water data hub which will improve national water information to provide industry with quality, timely and consistent data.
The Australian Water Brokers Association said it had actively supported and advocated for positive and proactive change in the regulation of all Australian water markets.
“Increased transparency and increased market confidence for the benefit of all water market participants has been at the core of the AWBA goals,” the organisation said.
