The Australian Competition and Consumer Commission (ACCC) hosted a forum in Mildura on Monday presenting the findings and recommendations in their ‘Murray-Darling Basin Water markets inquiry’ to stakeholders and brokers from the area and surrounds.
The inquiry and sub-sequential report, which is 650 pages long, was commissioned by the Federal Government 18 months ago amidst talks that the current water market had deficiencies and did more harm than good.
The ACCC conducted various forums, including one in Mildura, on top of their own research methods to complete the inquiry.
ACCC Deputy Chair Mick Keogh presented the findings and recommendations at the Deakin Centre and was accompanied by the ACCC’s Bruce Mikkelsen and ACCC Commissioner Steven Ridgeway.
In their inquiry, the ACCC identified issues with the water market relative to governance, transparency and information, market integrity and market architecture.
“It is key to first note the importance of water as an asset to farmers in the basin, with the annual trade being around $1.8 billion worth, so it pays to be cautious when you call for markets to change the fundamental way they operate,” Deputy Chair Keogh said.
“The major issue is that the market information is extremely fragmented and there is almost no transparency. Not all transactions are reported and there is no information or report readily accessible.
“The nature of information is quite poor and that’s an issue because if you’re participating in the market and not getting good information about what’s happening, what prices are being paid, where the trades are being made, it’s going to impact your confidence and ability to partake in the market and then impact decisions you make around water-use on the farm.”
Deputy Chair Keogh also discussed concerns around the water market architecture, with it becoming apparent that the rules around trading are not in line with what trading capabilities along the river are.
“The rules which govern trade in the Southern Basin really don’t seem to have kept up with what’s changing in the markets and this leaves people confused and with a lack of confidence in the operation of the market,” he said.
“These rules do not always adequately reflect scarce storage and delivery capacity, and an exceeding of this capacity has at times led to river channel congestion and negative environmental impacts.”
The final prominent deficiency of concern identified by the ACCC, and one which was reflected by stakeholders after the presentation, was the lack of laws or regulations around manipulation of the market.
“In our inquiry we did not find any evidence of market manipulation or untoward behaviour but it has become clear that if someone is found to be manipulating the market there is nothing to say it can’t happen, which is an issue,” Deputy Chair Keogh explained.
“Brokers have asked for a mandatory code of conduct to help bring back some confidence in this side of things which is a positive.
“It is also important to realise though that if you don’t have reporting of trades occurring it is impossible to crack down on rule-breaking.”
As part of the solution to these issues, Deputy Chair Keogh put forward the ACCC’s recommendation of introducing a ‘Water Markets Agency’ to oversee trades and implement a code of conduct as well as legislation around conduct and integrity.
“The agency would do things like implement a public-facing information platform to improve transparency in the market, develop a reform roadmap for designing and operating efficient markets now and into the future, and implement better rule-making processes and Basin-wide water market conduct and integrity codes and legislation,” Deputy Chair Keogh said.
“These are recommendations to the Government though so what they do remains to be seen.”
If you would like to read the ACCC’s report and all other information surrounding their inquiry, visit accc.gov.au/focus-areas/inquiries-ongoing/murray-darling-basin-water-markets-inquiry.