About water markets

Agricultural irrigation sprinklers, Victoria, © Alison Pouliot
Agricultural irrigation sprinklers, Victoria, © Alison Pouliot

Participants in Australia's water markets trade water entitlements and allocations within and between connected water resource systems for urban, rural and environmental uses.

Although Australia's water markets have a relatively short history they have grown rapidly in the past 30 years. Today Australia is considered a world leader in the use of market-based mechanisms for water management.

Water trades are transactions to buy, sell or lease a water right, in whole or in part. They can take several forms:

  • entitlement trades include the permanent trade and leasing of water entitlements. A water entitlement is a right to exclusive access to a share of water
  • seasonal water allocation trades are the sale of a specific volume of water allocated to a water access entitlement in a given water year.

Entitlement and allocation trade prices are determined by the value placed on water by buyers and sellers in response to many factors such as the purpose of water use, weather patterns, available allocations, storage volumes, jurisdictional legislative arrangements and commodity market conditions.

Frequently asked questions

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What is the Australian Water Market?

The Australian water market involves the buying and selling of water. Water trading enables increasingly scarce water resources to be allocated according to the highest valued use.

It is made up of a number of water markets, differentiated by water system or administrative boundaries. The scale of Australia's water markets varies greatly: from small, unconnected water markets; to extensive, connected systems such as the southern Murray-Darling Basin, the largest water trading area in Australia.

Legislative and administrative aspects of water rights and water trading are the responsibility of State and Territory jurisdictions.

Australia's water market allows the trading of a variety of water rights (termed as water products) within and between separate water resources. Water products generally fall into the broad categories of:

  • Water access entitlement – A perpetual or ongoing entitlement to exclusive access to a share of water from a specified consumptive pool as defined in the relevant water plan, and
  • Water allocation – The specific volume of water allocated to water access entitlements in a given water year or allocated as specified within a water resource plan.

(Source: Schedule B(ii) NWI)

What water rights or products are tradable?

In a water market, water rights can be traded with or without land. There are typically three types of tradeable water rights:

  1. Water access right – The right to hold water from a water resource or take water from a water resource (some components within water access rights may not be tradeable).
  2. Water delivery right – The right to have water delivered by an irrigation infrastructure operator.
  3. Irrigation right – The right to receive water from an irrigation infrastructure operator, which is not a water access or delivery right.

Notes:

  • Trades in water delivery rights are not represented in the water market reporting on this website.
  • Trades in irrigation rights are reported in the water market reporting on this website where data has been supplied.

A water right is conferred by or under State law to take or hold water from a water resource. Also referred to as water products, water rights are based on State and Territory legislation. The diagram below provides an overview of water rights in Australia.

Water rights, based on the Water Act 2007


Water rights in Australia
Right Description Tradability
Water access entitlement

The National Water Initiative definition of water access entitlement is:

A perpetual or ongoing entitlement to exclusive access to a share of water from a specified consumptive pool as defined in the relevant water plan.

The volume of water available to a water access entitlement may change if the amount of water available in a water management area changes. This may occur due to changes in climate or other environmental factors, and will ensure that over-allocation of water does not occur.

A water access entitlement can be represented on a water instrument.

Tradeable with land in a bundled system, and without land in an unbundled system.
Water allocation

The National Water Initiative definition of water allocation is:

The specific volume of water allocated to water access entitlements in a given season, defined according to rules established in the relevant water plan.

A water allocation is announced for water access entitlements on a seasonal basis, dependent on how much available water exists in the water resource from which the allocation is drawn. This announcement is made by the jurisdictional government, or the water authority acting on behalf of the jurisdictional government. Water allocations will usually be announced as a percentage of the total share to which each water access entitlement holder is entitled.

Tradeable without land.
Riparian right A riparian right is a water right held by rural landowners for domestic, on-farm purposes. Riparian rights allow landowners whose property is adjoining to a body of water to make reasonable use of it, for purposes such as drinking water, domestic use and fishing. Generally tradeable with land, although in some jurisdictions the right may be extinguished when land is sold. Not tradeable without land.
Stock and domestic right A stock and domestic right is a water right to use water for domestic consumption (e.g. drinking, cooking, washing, watering household gardens, filling swimming pools associated with domestic premises) and to water stock on a property. It does not include water used for irrigating crops that will be sold, bartered or used for stock fodder, for washing down machinery sheds, or for intensive livestock operations. Generally tradeable with land, although in some jurisdictions the right may be extinguished when land is sold. Not tradeable without land.
Water delivery right A right to have water delivered by an infrastructure operator. May be tradeable within delivery systems.
Irrigation right A right that: (a) a person has against an irrigation infrastructure operator to receive water and (b) is not a water access right or a water delivery right.

May be tradeable within the irrigation district.

An irrigation right can be transformed into a tradeable water access entitlement.

Native Title Anyone who holds Native Title with respect to water, as determined under the Commonwealth Native Title Act 1993, can take and use water for a range of personal, domestic and non-commercial purposes. This right is granted to a specific person or group of people for a designated location or locations. Not tradeable

What are attributes of water products?

The bulk of water products traded in Australia are water access entitlements and water allocations. They are the focus of the information published on this website.

Individual water products differ in each State and Territory, however they are divided up in a similar manner across jurisdictions. Water products are categorised according to whether they:

  1. are bundled or unbundled. For example, bundled water products aggregate several individual rights into a single right. These might include, but are not limited to, land property title, water access entitlement, water allocations, water use rights, delivery rights, irrigation rights and works approvals
  2. come from surface water or groundwater
  3. come from regulated or unregulated water resources
  4. are high or low reliability. (National Water Commission 2014, Australian water markets: trends and drivers, 2007-08 to 2012-13).

The diagram below outlines the attributes which can apply to individual water products:

Water product attributes, adapted from National Water Commission (2014), Australian water markets: trends and drivers, (2007-08 to 2012-13)
Adapted from National Water Commission (2014), Australian water markets: trends and drivers, (2007-08 to 2012-13).


How is water managed in Australia?

Water management in Australia is a complex process and responsibilities are shared by different levels of government. The Australian Government has a regulatory and policy role. However, ownership and control of water is vested in the States and Territories who are primarily responsible for the planning and management of water. Information about water management in each of the States and Territories can be found on the relevant agency websites.

Each state and territory has different terms for water products, trading of these products and even the spatial area in which the trading takes place. The Bureau has adopted nationally consistent terminology to allow water trading information to be aggregated and compared across Australia.

What are nationally equivalent terms for water products?

The major water products in each State and Territory are listed below. More information is available on individual water products in the water resource plans for each jurisdiction.

Nationally equivalent terms for water products
National term Water access entitlement type (unbundled) Water access entitlement type (bundled) Water allocation Water resource type (surface) Water resource type (ground) Water access entitlement reliability (for unbundled only)
 

NSW


Water access licence (Water Management Act 2000)


Water licence (Water Act 1912)


Water allocation

Regulated river (Regulated surface water for water licence 1912)


Unregulated river (Unregulated surface water for water licence 1912)


Groundwater


Category


(e.g. high, general, supplementary for regulated; unregulated river, aquifer for groundwater)

VIC


Water share


Approval for underground disposal

Bulk entitlement

Private right

Registration licence

Supply by agreement

Take and Use licence

Water allowance


Water allocation

Drainage diversion

Regulated surface water

Unregulated surface water

(waterway, spring or runoff)



Groundwater

Managed aquifer recharge (MAR)


Reliability class for unbundled (high, low, spill) plus other bundled classes

QLD


Water allocation


Interim water allocation

Water licence


Seasonal water assignment

Supplemented surface water

Unsupplemented surface water


Supplemented groundwater

Unsupplemented groundwater


Priority group for supplemented (e.g. high, high A1, high A2, high A, high B, medium, medium A) plus other unsupplemented classes

SA


Water access entitlement


Water allocation (taking and holding)


Water allocation

Prescribed/non-prescribed surface water

Prescribed/non-prescribed watercourse water


Prescribed/non-prescribed underground water


Classes 1-9 for River Murray

WA


N/A


Water licence


Water allocation

Surface water


Groundwater


N/A

TAS


Water licence


N/A


Water allocation

Surface water


Groundwater


Surety level 1-8 (1 is highest priority)

NT


N/A


Water extraction licence


Water allocation

Unregulated surface water


Unregulated groundwater


Security class (e.g. high, medium, low)

ACT


Water access entitlement (Water Resources Act 2007)


Water access entitlement
(Water Resources Act 1998)


Water allocation

Unregulated surface water


Unregulated groundwater


N/A

Adapted from NWC Australian water markets report 2012-13 and terms provided by data suppliers for the water market reports.


What are nationally equivalent terms for water trading?

The terminology used to describe the trading of water access entitlements and water allocations also differs across the jurisdictions. The table below provides a State and Territory mapping for trading terms.

Trade type State/Territory State/Territory term

Water access entitlement trade (lease)

A transaction to transfer a water access entitlement from one legal entity to another, with or without a change in location, perpetually or for a specified term (i.e. lease)



(Source: Schedule B(ii) NWI)


ACT


Trade for limited period


NSW


Term transfer (similar to lease)


NT


Temporary trade


QLD


Lease


SA


Temporary transfer


TAS


Limited period transfer or temporary transfer


VIC


Limited term transfer (unbundled) or temporary transfer (bundled)


WA


Water licence agreement

Water access entitlement trade (permanent/ongoing)

A perpetual or ongoing entitlement to exclusive access to a share of water from a specified consumptive pool as defined in the relevant water plan.



(Source: Schedule B(ii) NWI)


ACT, NT


Water access entitlement trade


NSW


Transfer or assign share component


QLD


Transfer of water licence or water allocation

Permanent transfer of interim water allocation


SA


Permanent transfer


TAS


Absolute transfer


VIC, WA


Transfer

Water allocation trade

A transaction to transfer a water allocation from one legal entity to another, with or without a change in location, for the remaining water year (by default) or for a specified term that may be less than the end of the water year or carried over to subsequent years (i.e. lease).



(Source: Schedule B(ii) NWI)


ACT, NT, VIC


Water allocation trade


NSW


Assign water allocation


QLD


Seasonal water assignment


SA


Water allocation trade (for unbundled) or transfer water allocation - taking and holding (for bundled)


TAS


Absolute transfer or limited period transfer


VIC, WA


Temporary transfer or seasonal water assignment (for Harvey Water)

Adapted from NWC Australian water markets report 2012–13 and terms provided by data suppliers for the water market reports.


What are nationally equivalent terms for reporting water trading spatial areas?

The terminology used to describe the spatial areas where water trading occurs differs across the jurisdictions. The table below provides a State and Territory mapping for spatial areas to nationally equivalent terms used by the Bureau.

National Term for reporting purposes ACT NSW NT QLD SA TAS VIC WA
Water system Catchment Catchment/Valley Water Control district Catchment/Basin Region Region Water system/Basin Water management area
Water Resource Plan Area (WRPA) /Trading zone Water management area/sub–catchment Water management area/water source Water allocation plan/water management zone Supply scheme/water management area Prescribed area/trading zone Water management area (catchment) Trading zone Water management subarea/Resource (surface water)/Aquifer (groundwater)

For further information on market governance, administration and institutional arrangements, refer to the archived NWC Australian water market report series.


What are water systems and trading zones?

A water system is an area that is hydrologically connected and described at the level desired for management purposes (e.g. sub–catchment, catchment, basin or drainage division and/or groundwater management unit, sub–aquifer, aquifer, groundwater basin).

Trading Zones were established to simplify administration of a trade by setting out the known supply source or management arrangements and the physical realities of relevant supply systems within the zone.

A trading zone profile defines the physical boundaries to, from or within which water may be traded. It contains maps, zone boundaries, zone rules, exchange rates (dependent on location and reliability class, although these are now rare) and products that may be traded within a zone. Trading zones can be defined for different classes of water resources, i.e. unregulated streams, regulated streams, supplemented streams, groundwater systems and licensed runoff harvesting dams.


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