Review underway of ACCC Water Markets Inquiry interim report

Review underway of ACCC Water Markets Inquiry interim report   

1 September 2020

Citrus Australia’s review of the interim report into water markets in the Murray-Darling Basin by Inspector General Mick Keelty can be summed up in a simple phrase – nothing changes if nothing changes.

Policy and Membership Officer Kerry Thompson expressed frustration that much of the report reflected on policy and reviews from previous years all calling out the same issues.

“It is no secret that the Murray Darling Basin is complex due to the levels of government involved, the report goes in to great depth to explain this, but these issues are not unfamiliar to growers or to past inquiries,” she said.

The ACCC found that water users do not trust the water market and believes that increased regulation and compliance is required to build back that trust.

The report states that many of the Basin’s issues are grounded in failure of governance, and the market has outgrown its original design.

“Because of the substantial differences in Basin States’ entitlement frameworks and trade processes, trade is cumbersome for individual traders,” Kerry said.

“These differences result in more than 150 classes of water in the Basin making trade incredibly complex.”

The report identifies two broad grouping of issues with brokers, client facing (i.e. not disclosing to the buyer how much the water is being sold for), and market facing (i.e. registering $0 trades to manipulate the market).

Citing an audit conducted by the MDBA which found gaps in state process which allowed $0 trades to be recorded and that over 50% of trades sampled were not compliant.

Sixty-six per cent of the volume of approved water allocation trades in the Southern Connected Basin in 2018-2019 had a reported price of $0.

Entering $0 trades is an easy way to manipulate the true value of the market, by only reporting high priced trades to bump it up.

Brokers do not have to provide a reason for this because the current regulations and processes do not require it.

“The ACCC found that the inconsistencies in the trade processes between states meant that the ‘new products’ beyond entitlement and allocation transfers such as options, forwards, contractual leases have increased financial risk to water users due the lack of transparency, reporting and infrastructure.”

The ACCC has so far acknowledged the issues Citrus Australia has highlighted on behalf of industry. However, the ACCC need more clarity and detail on certain matters so please respond to our survey which is coming out soon

We look forward to the Inspector General’s final report but more importantly the change that’s got to come.

Please contact Kerry Thompson by email at Kerry.Thompson@citrusaustralia.com.au