Speculators not the problem in MDB water markets

Speculators not the problem in MDB water markets

Water
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While water speculators and brokers have come under fire, the ACCC says they are not to blame for issues in MDB water trading

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MORE INFO NEEDED: Mick Keogh, ACCC deputy chairman, says better market information is the key to a more functional Murray Darling Basin water trading system.

MORE INFO NEEDED: Mick Keogh, ACCC deputy chairman, says better market information is the key to a more functional Murray Darling Basin water trading system.

BETTER information, rather than more regulation is critical to a more effective water trading system according to the Australian Competition and Consumer Commission's deputy chairman.

Mick Keogh, whose organisation has just handed down its yet to be publicly released final report into Murray Darling Basin water market to the Federal Government, said when handled correctly water speculators could help create the correct value for water assets.

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Rather than implementing regulatory change that would tie water ownership with physical use of the water, as has been suggested in some quarters, he said the best way forward was a more transparent information system.

"You might see why people are calling for an end to speculation in the water market, but we've extracted data from sources in the water market and what we've found is that if you're an irrigator with extra water taking away options for marketing can decrease the value of your asset," Mr Keogh said.

"If the information system was to become more robust and people better understood the mechanisms surrounding the sale of water then I think a lot of these concerns would disappear."

"The market information that is available at present is less than ideal, as we outlined in the initial report."

Mr Keogh said the complex water trading system, with its intricacies and variability in terms of concepts like inter-valley transfers (IVTs) was difficult to understand and said it was critical those involved in water trading fully understood the regulations.

"Regarding delivery and carry-over and constraints, one of the thing people need to think about is the way the decisions are made," he said.

"Not only are the mechanisms an issue in accessing IVTs, it is understanding how things work."

"It's knowing how decisions are made, where they're made and when they are made," he said.

"You put it in terms of any other market and you would say it needs to be better understood and communicated to the market."

"That is an interesting challenge given the diversity of the decision makers involved in some of those decisions."

He said the water market needed to be broken up into separate concepts to understand it better.

"Particularly in the southern basin we need to think of it as having two elements involved.

"One is the water management function, and that is a very complex system of itself with the storages, the need to deliver down channels, down rivers.

"On top of that, we've imposed a market with another set of rules and constraints associated with it.

"You have to make sure the rules of the market reflect the realities of the management system."

"Secondly you have to ensure those participating have what you would anticipate would be provided in a market such as the ASX.

"That would mean concepts like transparent and readily available market information and consistency of rule-making."

He said the behaviour of participants also needed to be put under the microscope.

"You can go to a livestock agent and be comfortable knowing they have a fiduciary responsibility to act in your best interest.

"In the water market you could use an agent but they have no such responsibility and you wonder how many people understand this fundamental difference between a stock and station agent and a water broker.

"These are the sorts of things that need to be addressed to restore confidence."

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