Major change needed in Murray-Darling water trading: ACCC

The ACCC has slammed governance of the $1.5bn Murray-Darling water market, but rejected calls to bar independent traders.

A new flow replenishes a section of the Darling River after rains in February. In dry times, irrigation is a major issue for river communities. Picture: Getty Images

The Australian Competition and Consumer Commission has slammed governance arrangements for the $1.5 billion Murray-Darling water trading market, but rejected calls by some growers to bar independent traders.

In an interim report for the water markets inquiry, the watchdog says water markets have outgrown the frameworks that govern them, and “major” change is needed to achieve fair and efficient trading that benefits water users, communities and the economy.

The ACCC says in its report it is still investigating claims some traders had manipulated the rules in a way which impeded efficient operation.

But it made clear the activity did not breach existing rules.

The problem may be the rules.

The recommendations are subject to further consultation before a final report is released in December.

The ACCC has put the value of water entitlements at $22.7 billion.

Among those to have amassed water rights are ASX-listed South Australian water company Duxton Water, and the former Patrick boss Chris Corrigan.

The ACCC has rejected calls by some, like Boundary Bend’s Rob McGavin, to block non-landowning traders from the water market.

The report concludes “the governance, regulatory and operational frameworks supporting water markets have not developed to accommodate the market and are no longer adequate”.

It said “water market intermediaries such as brokers and water-exchange platforms operate in a mostly unregulated environment, allowing conflicts of interest to arise, and opportunities for transactions to be reported improperly”.

In practical terms “there is a disconnect between the rules of the trading system and the physical characteristics of the river system”.

This included on-river delivery capacity scarcity, conveyance losses and adverse environmental impacts.

The report also noted “there may be opportunities for some market participants to engage in conduct that is detrimental to the efficiency and fairness of the market. This includes conduct that is unlikely to be illegal under current regulations”.

The ACCC said it’s clear Murray-Darling water markets need “decisive and comprehensive reform”.

But dismantling existing water markets was not the answer.

“This would mean farmers, communities and the Australian economy would miss out on the substantial benefits these markets provide.

“It would also significantly diminish the value of water entitlements, which make up a substantial proportion of the assets owned by irrigation farmers.” the ACCC added.

The ACCC is continuing to investigate these concerns and other trading activities observed in trading data.

The report said: “The ACCC’s preliminary view is that market integrity regulation needs to be improved for water rights trading.

“This regulation could be limited to brokers, or could cover other market participants such as investors and IIOs. In the case of water brokers, the ACCC’s preliminary view is that regulation should be introduced.”