Murray-Darling Basin water markets are flawed and increasingly affected by poor governance and a lack of transparency, an Australian Competition and Consumer Commission interim report has found.
The 544-page report, which was released on Thursday, points to the need for better regulation of the water market, with the ACCC considering its options to improve the operation, transparency, regulation, competitiveness and efficiency of the water markets.
The interim report said water brokers and water-exchange platforms have been operating in a mostly unregulated environment, with minimal rules to guard against conduct aimed at manipulating market prices, and no particular body to monitor the trading activities of market participants.
There were a range of information failures which limit the openness of markets and favour better-resourced and professional traders who can take advantage of opportunities such as inter-valley trade/transfer openings, the report found.
The report also takes aim at the differences in trade processes and water registries between the basin states, which it claims prevent participants from gaining a full, timely and accurate picture of water trade, including price, supply and demand.
The ACCC says its preliminary finding is that more regulation is needed to maintain the integrity of the water market and improve trading.
“There is no institution responsible for, or capable of, gathering the necessary data to effectively monitor trading behaviour in the basin,” the interim report said.
“Better data collection and co-ordination across the basin would be central to better market oversight.
“Basin market architecture is complex and fragmented.”
Southern Riverina Irrigators chief executive officer Sophie Baldwin said the report and the number of submissions received reflected irrigators’ concerns and frustrations.
“With over 110 reports and submissions you don't have to be Einstein to work out something is broken here,” she said.
But VFF Water Council chair Richard Anderson said that did not mean we should go back to the drawing board to fix the issue.
“Tearing down the water market wouldn't be the answer,” he said.
“Trading has been around for a long time and has probably saved dairy farmers who rely on temporary trade.”
Murray-Darling Basin Authority executive director of basin plan regulation Tim Goodes said the authority would thoroughly consider the issues identified in the report.
“It is clear that efforts to increase transparency and improve the regulation of water trading in the basin need to keep pace with the market's increasing sophistication,” he said.
“The water market in the basin is worth $1.5 billion and over the past 10 years it has become an incredibly important way for farm enterprises to manage their business.
“As trade activity grows, we need to ensure market processes within and across state jurisdictions are transparent and open, as required by the basin plan.”
Northern Victorian Irrigation Communities president Dudley Bryant joined the chorus for more transparency and said full transparency needed to be the way forward.
“Until we get genuine transparency, we will never get to the bottom of it,” he said.
But Speak Up chair Shelley Scoullar fears the report will join an ever-growing pile pointing out the failings in water management, and said it would sit on government desks gathering dust.
“As a nation, when are we going to have the tough conversation and make the tough decisions — do we want a water market which creates wealth for people behind a computer screen, or do we want a water market that ensures as a nation we can produce a diverse range of affordable staple foods?,” she said.
“At the moment this is the decision which needs to be made, we don't need any more reports to tell us the sharing and management of water is broken and complex, we just need to have the courage to fix it.”
The government directed the ACCC to conduct the inquiry in August 2019 after concerns were raised over transparency and whether the market was still equitable.
The interim report was due to be delivered to the government on May 31, 2020 but was extended a month later to June 30.
Submissions are open until August 28, with a final report expected by November 30.
● To read the full report or make a submission, visit: accc.gov.au/focus-areas/inquiries-ongoing/murray-darling-basin-water-markets-inquiry