Trade water report highlights opportunities for growth

29 Mar 2017

DPI Water today announced the first ever in-depth analysis of the water market in NSW – Water markets in New South Wales – highlighting how the market has matured and the opportunities for Government and industry to drive further growth.

DPI Water’s Director Water Information and Insights, Dr Christobel Ferguson, said a robust and transparent water market is critical to our $3.5 billion irrigated agriculture sector and the broader NSW economy, and this report was commissioned as a health-check and to identify what Government and industry can do better.

“The market has grown rapidly since its inception and since the ‘cap and trade’ approach was established through water sharing plans in the 2000s. In that time we have seen a four-fold increase in the volume of water being traded each year,” Dr Ferguson said.

“The market has also become much more sophisticated in recent years, and this makes NSW businesses more resilient and adaptable to change.

“Everyone from family-owned operations through to large corporations can use the water market to better manage risks to their business, such as commodity price fluctuations and of course drought."

Dr Ferguson said while the NSW Government has put in place extensive reforms to improve the operation and effectiveness of the market, there are opportunities for both Government and industry to further develop the market.

“The report points out a range of further opportunities for improvement, including in information provision; education; data; assessments and approvals; groundwater trade; trade rules and facilitating unregulated trade opportunities.”

Water markets in New South Wales, commissioned by DPI Water and completed by water market economists and experts, Aither, is available at NSW Water Availability.

Key report findings:

  • Trade has grown off the back of a range of reforms made by the New South Wales Government, including introduction of Water Sharing Plans.
  • In the Northern basin, the most active surface water entitlement markets are in the Gwydir, Lachlan and Macquarie.
  • In the Southern basin, there is frequently a greater volume of general security entitlement trade than high security, and volumes traded in the Lower Darling are consistently more modest than in the Murray and Murrumbidgee.
  • Over the last 15 years, there have been two extreme wet periods and two extreme dry periods – and the report has found that water markets were successful in managing these extremes and will continue to help water users manage variability, including minimising the impacts of drought.
  • Between 2008 and 2013 entitlements were purchased for the environment, making significant progress towards targets in the Murray Darling Basin Plan. Reduced water available for irrigation has further reinforced the importance of water markets in dealing with this change.

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