AUSTRALIAN WATER MARKETS REPORT 2007–2008 MARKETS REPORT WATER AUSTRALIAN National Water Commission Australian Water Markets Report 2007–2008 National Water Commission Australian Water Markets Report 2007–2008 © Commonwealth of Australia 2008 This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and enquiries concerning reproduction and rights should be addressed to the Commonwealth Copyright Administration, Attorney General’s Department, Robert Garran Offices, National Circuit, Barton ACT 2600 or posted at www.ag.gov.au/cca. ISBN 978-1-921107-70-2 Australian Water Markets Report 2007–2008, December 2008 Published by the National Water Commission 95 Northbourne Avenue Canberra ACT 2600 Tel: 02 6102 6000 Email: [email protected] Date of publication: December 2008 Design by Spectrum Graphics sg.com.au Printed on Dalton Revive Silk and ENVI Silk Printed by Canprint An appropriate citation for this publication is: National Water Commission 2008, Australian Water Markets Report 2007–2008, NWC, Canberra E N H O E U S National Water Commission R E G uses Greenhouse Friendly™ F R Y I E N D L ENVI Carbon Neutral Paper ENVI is an Australian Government CONSUMER certified Greenhouse Friendly™ Pr oduct. Revive Silk Cover is made from 25% post consumer and 25% pre consumer recycled fibre. It also contains elemental chlorine free pulp derived from sustainably managed forests and non-controversial sources. It is manufactured by an ISO 14001 certified mill. ENVI Coated is made from elemental chlorine free pulp derived from sustainably managed forests and non controversial sources. It is certified carbon neutral and Australian Paper is ISO 14001 certified. National Water Commission • Australian Water Markets Report 2007–2008 Foreword by the Chair and Chief As well as providing an overall summary of the various water markets in operation around Australia, the report includes Executive Officer specific sections on each jurisdiction. Aside from the trading Water trading is a centrepiece of national water reform data, the report includes information about terminology, under the National Water Initiative (NWI). The National trade processes, governance arrangements and other aspects Water Commission (Commission) has strongly promoted the of Australia’s water markets. development of water markets in Australia. In doing so, it has Therefore, in addition to its role as a statement of activity, identified the need to improve market performance through the report also stands as an important information the provision of better information. resource, describing administrative/trading arrangements The production of the inaugural National Water Commission in each jurisdiction. Australian Water Markets Report 2007–2008 (Australian Looking to the future of the Australian Water Markets Water Markets Report) has been a twelve month project, Report, the Commission has collaborated with the Bureau funded through the Raising National Water Standards of Meteorology throughout this project, as the Bureau is program. It is anticipated that following the publication of expected to commence the collection of water trading data this inaugural report for the 2007–08 water year, further under the Water Act 2007 (Cwth) in 2009. This data will be a reports will be produced at the end of each successive water foundation for the production of the Australian Water Markets year and therefore progressively build an on-going source of Report 2008–2009. In the 2008–09 water year and future market information. years, the Commission intends to begin trend analysis. Production of the Australian Water The Commission would welcome feedback on the report. Markets Report Ken Matthews AO Before the production of the Australian Water Markets Report, Chair and Chief Executive Officer there was no consolidated, annual, nation-wide report on 17 December 2008 water trading around Australia. Mindful of the disparate sources of market information required to compile the report, the Commission engaged the Allen Consulting Group to assist with data collection and analysis in this inaugural year of publication. The Bureau of Rural Sciences was also engaged to produce maps for the report. The Commission acknowledges the assistance of the states and territories for providing water trading information for the Australian Water Markets Report. A number of private organisations also assisted in the provision of market information. Even so, the collection of trading data and other related water information remains very challenging. The Commission is pleased that new ground has been broken to establish a valuable new data resource for Australia. Content of the Australian Water Markets Report The Australian Water Markets Report is a statement of past activity for the 2007–08 water year. It is therefore not intended to be a guide to inform market participants for the future, but rather highlights trends and market activity over the course of an entire water year (and subsequent water years as it is reproduced annually). National Water Commission • Australian Water Markets Report 2007–2008 iii Table of contents Foreword iii Explanatory notes xi Section 1—Executive summary—market highlights 1 Introduction Water supply Trading activity Legislative and administrative developments Environmental purchases Market performance issues Section 2—Overview of water markets 9 Summary Market resources Irrigation infrastructure operators and trading zones Principal mechanisms of trade Section 3—National summary of trading activity 21 Summary Water access entitlement markets Water allocation markets Estimated market turnover Government environmental water purchasing programs Urban water markets Section 4.1—Trading summary—Queensland 31 Summary Market operation Water supply conditions Queensland water allocation markets Queensland seasonal assignment markets Value of market turnover Section 4.2—Trading summary—Victoria 51 Summary Market operation Water supply conditions Victorian water share markets Victorian water allocation markets Value of market turnover iv National Water Commission • Australian Water Markets Report 2007–2008 National Water Commission • Australian Water Markets Report 2007–2008 Table of contents continued Section 4.3—Trading summary—South Australia 73 Summary Market operation Water supply conditions South Australian water licence markets South Australian water allocation markets Value of market turnover Section 4.4—Trading summary—New South Wales 85 Summary Market operations Water supply conditions New South Wales water access licence markets New South Wales water allocation markets Value of market turnover Section 4.5—Trading summary—Western Australia 105 Summary Market operation Water supply conditions Western Australian water licence markets Western Australian water allocation markets Section 4.6—Trading summaries—Northern Territory, 113 Australian Capital Territory and Tasmania Summary Northern Territory Australian Capital Territory Tasmania Section 5—Market performance 119 Summary Transaction times for water access entitlement transfers Transaction times for water allocation trades Processing times in each jurisdiction Market depth indicators Other market indicators Appendix A 127 National Water Commission • Australian Water Markets Report 2007–2008 National Water Commission • Australian Water Markets Report 2007–2008 v List of figures and tables Figure 1.1: National rainfall in the 2007–08 water year relative to long-term average 3 Figure 1.2: Murray-Darling Basin rainfall in the 2007–08 water year relative to long-term average 4 Figure 1.3: Storage levels for major water systems—Australia (as at 1 July 2008) 5 Figure 1.4: Water allocation announcements for selected supply schemes in the Murray-Darling Basin 6 during the 2007–08 water year Figure 1.5: Environmental water purchases in the 2007–08 water year 8 Figure 2.1: Principal water systems where trading is operational 10 Figure 2.2: Interstate trading zones in the connected Murray-Darling Basin system 16 Figure 3.1: Water access entitlement trading in each state and territory as a volume share of national total 22 Figure 3.2: Water access entitlement price differentials across water systems 23 Figure 3.3: Water allocation trading in each state and territory as a volume share of national total 24 Figure 3.4: Water allocation price differentials across water systems 25 Figure 3.5: Net change in water allocation volumes in Murray-Darling Basin trading zones due to 26 interstate water allocation trading Figure 3.6: Interstate trade of water allocations 28 Figure 3.7: Commonwealth buy-back program—purchases by water system 29 Figure 4.1.1: Water levels in key Queensland storages supplying the market 37 Figure 4.1.2: Water allocation trading volumes and prices for Mareeba-Dimbulah supply scheme 42 Figure 4.1.3: Water allocation trading volumes and prices for Bundaberg supply scheme 43 Figure 4.1.4: Water allocation trading intensity 44 Figure 4.1.5: Weekly trading volumes of seasonal assignments 47 Figure 4.1.6: Seasonal assignments trading intensity 48 Figure 4.2.1: Water levels in key Victorian storages supplying the market 57 Figure 4.2.2: Water share trading intensity 62 Figure 4.2.3: Water share volumes traded and average prices—Northern Victoria 63 Figure 4.2.4: Water share volumes traded and averages prices—Greater Goulburn 64 Figure 4.2.5: Water share volumes traded and averages prices—Victorian Murray