Not confused enough in your life? Need a headache? Looking for something to send your eyes spinning in your head?

Then get into Australia’s water regulation framework — guaranteed to reduce even the toughest to tears of bewilderment.

The first national water markets report is a tough read. But it’s not the complexity of water trading that’s the problem — the differences between water allocations and water entitlements, between entitlements linked to properties and those not linked, between permanent and temporary transfers, between high security and low security entitlements, and so on and so forth. It’s that each state has its own entirely different system for administering water trading. The break-of-gauge lives on in water rights.

How’s this for a federation over a century after its establishment, in one of its most crucial industries:

  • SA, NSW and Queensland all have registers of water licences, on which trades must be listed before they’re legal. But each records different information. Queensland’s is publicly searchable and there is also a database for works authorisations, development approvals, conditions for authorisations and management plans. But Victoria doesn’t have any equivalent. Oversight of water trading has been delegated to rural water authorities.
  • Unlike everywhere else, SA currently “bundles” water licences so there’s no distinction between water allocations and water entitlements, and licences are “attached” to land. Legislation has been passed to convert to the same licensing structure as everywhere else, but it won’t commence until late next year and then only in the south-east of the state.
  • The states can’t even agree on common terminology for water rights.
  • The states don’t distinguish between actual water trades and the movement of entitlements and allocation between different parts of the same owner, meaning water trade data is hopelessly corrupted.
  • Each state has entirely different governance structures for its water markets. In NSW, Victoria and SA, trade is directly governed by local water authorities or irrigation trusts, which can prevent trades based on criteria such as the volume of water already traded out of an area.

No surprise, then, that only 14% of water allocation trades in 2007-08 were interstate in nature, and that only one — one — interstate trade of water entitlements occurred.

This is straight-out obstruction of legitimate commerce. The states have no incentive to encourage interstate trade, because it might reduce the amount of water they control. Therefore, they continue to impose significant regulatory impediments that prevent irrigators and farmers from moving water to where it will be used most productively. In fact, there’s really no interstate water market to speak of — certainly not in water entitlements. And that’s during a period when drought made water trading critical to a number of industries.

And all of this is in addition to Victoria’s continuing, iniquitous anti-competitive 4% trading cap that artificially inflates the price of water and prevents environmental purchases.

We now have a Murray-Darling Basin Authority to manage — within very definite limits — our most crucial river system. But we still have nothing like a unitary regulatory framework for the system, meaning irrigators and farmers who want to buy water struggle to obtain it from owners further upriver who are willing to sell.

Media coverage of regulatory harmonisation is, unsurprisingly, patchy at the best of times. It’s hardly the most glamorous of topics. And the absurdities of the interstate water market are doubly out of view since the main victims are rural communities and industries, whose concerns rarely get picked up in the metropolitan-based media. But rarely has there been such a clear example of why we need a massive program of regulatory harmonisation between the States. Fortunately the Rudd Government is investing in one, but the dolts running these jurisdictions will only cooperate if bribed, and there’s little in the way of budget surpluses to keep them happy anymore.

You couldn’t have designed a worse federal structure if you tried.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey

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