Planned reviews of the water market have been welcomed by leading Victorian water broker H2OX chief executive Lex Batters, who says there's a need for greater transparency.
A Murray-Darling Basin Authority audit has found more needs to be done to ensure robust administration supports the water market.
There will also be an Australian Competition and Consumer Commission review into the water market, while the Victorian Government has also announced it will investigate options and benefits for greater transparency.
"We look forward to co-operating fully with these reviews and working towards an improved water market," Mr Batters said.
"Price discovery and liquidity discovery are the two biggest issues in the water market."
MDBA Compliance executive director Brent Williams said several straightforward steps were required by governments to improve the quality of price data and to increase market transparency and confidence.
"The central finding was that no basin government has robust arrangements in place to gather comprehensive price information," Mr Williams said.
"As a consequence, some of the data reported by the states and published in consolidated form by the Bureau of Meteorology is incomplete and inaccurate.
"Accurate trade price reporting is essential to confidence in the water market and compliance with the Murray-Darling Basin Plan."
Mr Williams said the plan clearly required sellers to tell the relevant state agency the price of their trades and for their part, state agencies were obliged to provide this information to the BoM.
"Our audit found that water trade data is dispersed across a great many approval authorities that use a multiplicity of processes built around the needs of water managers rather than the needs of the market," Mr Williams said.
"Mandatory price reporting is relatively new, introduced in 2014, and the audit found compliance and enforcement practices remained sporadic.
"Of all trades reported in the Basin in 2017-18, for example, 44 per cent were submitted with a $0 price."
The audit provides detailed recommendations, including that a compulsory trade-price field be included on all trade application forms by December 31 and a trade price validation process be in place by basin states by June 30, 2020.
Mr Batters, from the Bendigo-based trader, said the MDBA audit highlighted the fact a market participants ability to determine the current price of water was made more difficult by inaccurate or non-reporting of price information.
"H2OX have long advocated for mandatory price reporting of all trades at a register level, and for prices submitted on trade applications to be monitored by registers to ensure accuracy," he said.
"The current inability for basin state registers to distinguish between different market products also make it difficult to determine the current market price."
He called on the basin states to ensure all trade prices were reported accurately and to impose penalties for those water market intermediaries who failed to do so.
"H2OX have long called for, and fully support regulation of water market intermediaries and the water market to ensure a fair playing field for all participants."
Liquidity discovery was another major issue in the water markets that had contributed to high prices this season.
"The water market is fractured into many small pools of liquidity, only a few of which are transparent," Mr Batters said.
"This makes it extremely difficult for market participants to determine the volume of water for sale at any one time.
"This can lead to perceived shortages of water forcing buyers into the market and driving prices higher."
Mr Batters said H2OX believed that a central exchange and clearing house, in addition to tighter regulation, would resolve many of the issues in the water market.
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Andrew Miller
I'm a general reporter with Stock & Land, with a special interest in irrigation issues. I completed my cadetship, with the Age, in 1980. Over my career, I've worked for ABC radio news (Mt Isa, Qld) and at provincial and suburban newspapers.
I'm a general reporter with Stock & Land, with a special interest in irrigation issues. I completed my cadetship, with the Age, in 1980. Over my career, I've worked for ABC radio news (Mt Isa, Qld) and at provincial and suburban newspapers.
