Corporations in the NSW water market are making a buck at the expense of farmers and regional communities, especially in the Murray-Darling Basin, a parliamentary report has found.
The 80-page report released on Tuesday said that unfair market practices were rife in the precious commodity worth billions of dollars, since water resources were allocated nearly 40 years ago.
"Traders use sophisticated methods to exploit and manipulate markets, making sizeable profits which flow away from regional areas and towards capital cities and even overseas, the report said.
"Meanwhile, water prices are driven up for those who need it to grow our state's food and fibre."
Water trading is intended to incentivise individual irrigators to use water more efficiently. This allows them to generate surplus water entitlements which can be used to expand production or sold to release capital.
The NSW upper house committee heard that brokers in water markets are not subject to the same types of regulations as those in financial markets, for example.
One of the main concerns highlighted in the report was the impact on food security.
Some stakeholders said the growth in crops such as almonds and cotton had led to the decline in staples such as rice, dairy and oranges.
Experts argued that hedge funds were making "hundreds of millions of dollars in trading profits each year", which was a "direct loss" to the Murray-Darling Basin.
They said that instead this money "could be retained to pursue economic, environmental, social and cultural benefits" for the basin and regional Australia.
In their submission to the inquiry, Southern Riverina Irrigators said "we cannot survive on nuts and cotton", emphasising that these would not sustain the population in a difficult period like a pandemic.
The environmental cost of increased volumes of water flowing through the Murray River was also canvassed, with the committee hearing of forest destruction including platypus and kingfisher habitats as well as culturally significant redgum trees.
Among its 10 recommendations, the report said the government needed to establish a public water market register to provide transparency as a key priority.
