NATIONAL WATER COMMISSION MARKETS REPORT 2007-08

The National Water Commission has, today, released it's first 'Australian Water Markets Report' relating to the 2007-08 water year. In releasing the Report the Chair of the NWC, Ken Matthews commented:

‘Water trading is a centrepiece of national water reform under the National Water Initiative. Now that basic water trading mechanisms have been established in Australia, it is vital that we work to improve market performance.

‘We can do this by building confidence in water markets through more transparent and readily available information on prices, volumes and movements of water, as well as by minimising transaction costs and fast-tracking approval processes.

‘This report provides the first ever consolidated national summary of water markets. It extends beyond the Murray-Darling Basin and features trading summaries for each state and territory, as well as information about their various operational practices, pricing and governance arrangements.’

This report, accessable at: www.nwc.gov.au.

Key findings are outlined as follows:

•The overall value of the water market transactions for the year was approximately $1.68 billion with most trading activity occurring in the Murray-Darling states.

•Activity in the water trading market has been driven in large part by the variable rainfall around Australia and the continuing severe drought in the southern Murray-Darling Basin.

•The total trade volumes are 921GL (water access entitlement) + 1594 (water allocation) = 2515GL in total.

•A key aspect of the report’s findings is that water owners on-sold 1 594 GL of water allocations during the year and 14 per cent of that trading occurred across state borders.

•Approximately 148 GL of water allocation was traded into South Australia, with two-thirds coming from New South Wales (100 GL) and the rest from Victoria (48 GL).

•Approximately 3% of the tradeable water access entitlements on offer, 921 GL were traded but there was negligible interstate entitlement trade.

•There was only one interstate water access entitlement trade this year (200 ML), which occurred from Victoria to NSW.

•Water purchased for the environment made up approximately 8% of the total water access entitlements traded.

•There was very limited trading activity in Western Australia, Tasmania, Northern Territory and the Australian Capital Territory-in comparison with the Basin states.

•The price of the water allocations traded varied greatly throughout the year, for example the price for Murrumbidgee High Security water ranged from $150 per ML to $1100 per ML, with an average price of approximately $540 per ML.

•The prices for water access entitlements were less volatile, but still ranged from $1000 to $2500 per ML in the Basin, with an average of approximately $1400 per ML.

Some very interesting reading, which I will make comments on over the next few editions!!

WEEKLY WRAP UP

Increased allocations this week amount to over 100,000 ML, the Lower Murray Darling basin. This equates to a little less than 19% of entitlements, up from approximately 15% at the same stage in 2007/08.

Downward pressure continues on allocation prices, with reported sales now in the range of $320 - $340. Market reports indicate good underlying demand below $320. However over 900ML traded in the 3 major Watermove markets at $350 - unusual that these markets were at the same price. Often they can be well apart - all for fungible water!

Good rainfalls across the Eastern parts of the Lower Basin have maintained moderate inflows. In the North East of NSW, significant rainfalls caused some flooding, however this water is likely to dissipate across the floodplain and add little useful inflows.

LATEST ALLOCATION ANNOUNCEMENTS

Goulburn Murray Water (G-M) has announce a small increase in allocations for the Goulburn system - now 21% (up 3%), and the Murray - now 24% (up 3%). There are still no allocations for any of the other G-M Water managed systems.

According to G-M Water, there is little likelihood of any more than 30% allocation for either the Goulburn or Murray system by mid February and 0% for other systems.

In NSW, the Department of Water and Energy has announce a 10% increase in the Darling system General Allocation to 40%. In the Murrumbidgee system General Allocation has moved up by 2% to 9% with another 2% available after February 2009. However, with insufficient inflows in the Murray system, there has been no move on allocations.

SOUTH AFRICA - UNBUNDLED WATER?

AgriSA and the Department of Water Affairs and Forestry are at odds over the trading of water rights.

According to a report in Rapport, more than 100 farmers have so far been barred from selling their water rights. The department claims that Article 27 of the Water Act prohibits them from trading in water rights, as it is subject to a reform process to redress inequalities of the past. AgriSA disagrees, claiming the department's BEE policy contradicts the general BEE policy of the Department of Trade and Industry. They want farmers with a turnover of less than R5m to be exempt from the requirements.