Productivity Commission reports on water buybacks

The Productivity Commission has raised concerns about aspects of the design and sequencing of the Australian Government’s Murray-Darling Basin plan, noting problems in the commencement of buybacks before ratification of the plan.

The Commission found that acquiring entitlements directly in active markets is likely to be more efficient that the current tender approach.

Commissioner Neil Byron said the Australian Government’s $3.1 billion buyback of water entitlements in the Murray-Darling Basin could be improved.

“There is still much that can be done to improve the recovery and management of water for the environment in the Basin,” he said.

In its report, the Commission recommended that the Murray-Darling Basin Authority (MDBA) set ‘sustainable diversion limits’ under the plan, balancing environmental, social and economic tradeoffs.

It also recommended rigorous approval processes be applied to irrigation infrastructure projects to prevent inefficient or inequitable investment; and environmental watering be addressed through purchasing a portfolio of water products.

It advised jurisdictions to clarify how the risks of reductions in water availability are shared between irrigators and governments and recommended the removal of water trading imposed by state governments.

Read the full report: Market Mechanisms for Recovering Water in the Murray-Darling Basin [PDF]

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