Reforming Australia's water market to bring trust and transparency to the system
In advance of tomorrow’s Murray-Darling Basin Ministerial Council, the Australian Government today released the Water Market Reform: Final Roadmap Report.
This report was provided to the Minister for the Environment and Water by independent Principal Adviser, Mr Daryl Quinlivan AO.
The Federal Labor Government will support implementation of all 23 recommendations that have been set out in the roadmap. The Government will seek the support of states and territories to implement the shared recommendations at the Murray-Darling Basin Ministerial Council.
Unlike Australia’s financial markets, water markets are poorly regulated and lack the features that make comparable trading markets work effectively and transparently. For example, unlike in financial markets, there is no regulation around broker behaviour, no prohibitions against market misconduct, and few reporting obligations.
A lack of regulation, transparency and data means that farmers and irrigators are unable to be sure that they are dealing with brokers who are acting in their best interests.
The Australian Government will introduce legislation and a mandatory code of conduct to deliver integrity safeguards, and lift conduct standards, comparable with other markets. There will be penalties for brokers who do not comply with the mandatory code of conduct.
Under the Government’s reforms, market conduct will be regulated by the ACCC, building on their expertise and experience with water markets.
Quotes attributable to the Minister for the Environment and Water the Hon Tanya Plibersek MP:
“Water is one of our country’s most precious resources. Many Australians aren’t aware that a large amount of it is bought and traded on the water market every day.
“Currently, our water markets are poorly regulated, lack data and accountability and are difficult to navigate for everyday farmers and irrigators. This has to change. Unlike in financial markets, for example, brokers do not have to abide by mandatory codes of conduct or integrity standards. These reforms will fix this – introducing trust to the system.
“We want to ensure that the markets are fair for buyers and sellers, that there is clear information, and that water is going where it should be – that the market is not dominated by speculators buying up water in the hope of making a quick buck.
“Most water trading occurs in the southern Basin. In the 2021–22 water year the value of this trade was $1.8 billion.
“It is imperative that trust and transparency are restored to the management and delivery of water market information.
“Today, I have accepted Mr Quinlivan’s final roadmap report and recommendations in full, recognising the enormous effort all Basin governments made to support its development.
“Taking these fundamental steps demonstrates that the Government is serious about meeting our commitment to restore transparency, integrity and confidence in water markets and water management.
“There has already been good progress from Basin state governments, but we need to do more.
“We all need to play our part in ensuring these important reforms can be fully implemented.
“I extend my thanks to Mr Quinlivan for delivering a roadmap that provides a phased, practical and cost-effective plan for water market reform."
Quotes attributable to the independent Principal Adviser Mr Daryl Quinlivan AO:
“The ACCC’s report provided the basis for developing a modern regulatory system that is now required for this market that is so important for producers, communities and the environment in the Basin. This is now widely understood and we have drawn from the lesson of other trading markets (finance, housing and land, etc) to propose critical improvements to support the integrity and transparency of water markets.
“In my consultation with Basin states, the Advisory Group and affected stakeholders, the reforms were broadly supported, despite the adjustments that will be needed.
“Implementing them will improve the functioning and governance of water markets, improving confidence and the information available for improved decision making.
“I would like to acknowledge the significant role of the Basin states, the Advisory Group, the Department of Climate Change, Energy, the Environment and Water as secretariat, and other interested stakeholders who have invested considerable time and effort into contributing to the report."