National overview

In 2015–16 rainfall, runoff and streamflow were below average in most of Australia’s key catchments (Map 1 and Map 2). While average or above average rainfall were observed in many parts of Australia, this did not translate into run-off and streamflow, which were significantly below average in parts of Victoria, south-western Western Australia and the NSW–Queensland border (Map 2). Conditions were particularly dry in the first 9 months of the year, but improved after good rainfall in May and June.

Source: Bureau of Meteorology 2017a

Note: Image created by ABARES using BOM data. Circles indicate streamflow gauge readings and background texture represents run-off over 5 km grids.
Source: Bureau of Meteorology (2017c)

Australian storage volumes declined by 9 per cent in 2015–16, ending at 50 per cent nationally (Figure 1). This continued the trend of declining storage volumes since the flood events of 2011 and 2012. Storage volumes in the sMDB reached a low of 31.3 per cent in May 2015, down from 44.6 per cent at the same time in 2014–15. Northern MDB storage volumes began and ended the year at around 27 per cent, following large declines since 2012–13.

Note: Storage volumes are reported as a percentage of operating capacity rather than total possible storage, and can therefore reach greater than 100 per cent.
Source: Bureau of Meteorology

Temperatures remained high in 2015–16, with many areas reaching the highest mean temperature deciles on record (Map 3). October 2015 had the highest recorded monthly maximum, minimum and mean temperatures. The autumn months of March, April and May were also particularly hot, with significantly above average mean temperatures in many areas. The combination of high temperatures and low rainfall was particularly severe for the southern MDB and southern and south-western Victoria.

Source: Bureau of Meteorology (2017e)

The higher temperatures were driven in part by El Niño conditions, which persisted from May 2015 through to May 2016 when the Southern Oscillation Index returned to positive values (Figure 2). According to the Bureau of Meteorology (BOM), the 2015–16 El Niño event was one of the three strongest since 1950, contributing to Australia’s third-driest spring on record, the record heatwave in October, and a lack of heavy rains in the north and west of Australia (BOM 2017b). In early June an East Coast Low led to widespread rainfall across eastern areas of Australia.

Source: Bureau of Meteorology (2017d)

Water allocation percentages in major water markets were generally lower in 2015–16 than in 2014–15. In the connected sMDB, water allocations were around 21 per cent lower than in 2014–15, and total water availability (including carryover from the previous year) was down 17 per cent (Figure 3).

Note: Water availability was estimated by matching data for allocation announcement and carryover percentages with entitlements on issue. Water systems include the Broken, Campaspe, Goulburn, Loddon, Lower Darling, Murrumbidgee, NSW Murray, Ovens, SA Murray and Victorian Murray.
Source: Hughes, Gupta & Rathakumar 2016

Reductions in water availability were also observed in the northern MDB NSW water systems (Figure 4). Water allocations in the major northern MDB systems were significantly higher than in 2013–14 and 2014–15, but carryover reserves accumulated during the flood years (2010–11 and 2011–12) were significantly lower than previous years. In 2015–16 the total water available in key northern NSW systems was 20 per cent lower than in 2014–15.

Note: Comprises general and high reliability entitlements in the Upper and Lower Namoi, Macquarie, Gwydir and Lachlan systems.
Source: NSW Department of Primary Industries–Water

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The primary water use in Australia is for agriculture, which accounts for 75 per cent of total extractive use (Figure 5). Evidence suggests that most water allocation and entitlement trade in Australia occurs between agricultural users (DELWP 2016).

Source: Bureau of Meteorology (2016)

Government environmental agencies have become increasingly significant participants in water markets since the Water Act 2007 and related Murray–Darling Basin Plan came into force. To date, this has occurred primarily through entitlement markets, with governments (particularly the Australian Government) purchasing water rights from irrigators for environmental flows. The Australian Government was heavily involved in the water entitlement market from 2007–08 to 2011–12 but has greatly reduced this activity in recent years (Figure 6). Recent Commonwealth water recovery has been largely achieved through infrastructure investment projects.

Source: Department of Agriculture and Water Resources

Between 2007–08 and 2015–16 the Australian Government acquired 1,551 GL (nominal) of entitlement through purchases and 1,055 GL through infrastructure investment. Nominal Commonwealth environmental water holdings in 2015–16 are presented in Figure 7. Nominal entitlement volumes represent the maximum possible allocation yielded by the entitlement per year. This can be significantly higher than the allocation realised during an average year, particularly for general and supplementary reliabilities. The Department of Agriculture and Water Resources commonly reports Commonwealth environmental water recovery in long-term average annual yield (LTAAY), which takes into account differences in entitlement reliabilities and can be significantly lower than nominal volumes.

Note: Represents nominal entitlement volumes, which can be significantly higher than long-term average annual yields.
Source: Department of Agriculture and Water Resources

In 2014–15 the sMDB accounted for around 48 per cent of irrigated water use nationally and the northern MDB accounted for 15 per cent (Figure 8). The sMDB accounted for 45 per cent of irrigated land use nationally and the northern MDB accounted for 16 per cent (Figure 9). Data are not yet available for 2015–16.

Map 4 shows the volume of irrigation water use in 2014–15 by natural resource management region. Outside the MDB, significant irrigation water use occurs in northern Queensland for growing sugar cane, particularly in the Burdekin region. Tasmania also has noteworthy irrigation water use, primarily for irrigated pasture.

Source: ABS 2016

Source: ABS 2016

Note: Murray consists of the NSW Murray and Victorian Murray water systems.
Source: ABS 2016

Around 58 per cent of irrigation farms in the sMDB participated in water allocation markets in 2015–16 (similar to the 66 per cent participation in 2014–15), while 6 per cent participated in entitlement trading (Figure 10). Market participation rates decreased during 2011 and 2012 because of the wet conditions and associated low demand for irrigation water, but have since increased above the levels observed in 2007–08 when conditions were very dry.

Source: ABARES survey of irrigators in the MDB

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Allocation trade in 2015–16 is summarised in Table 1 by region and resource type. When environmental water transfers are excluded, the majority of allocation trade continues to occur for regulated surface water within the southern MDB (2,513 GL or 81 per cent of all surface water allocation trade in 2015–16). When including environmental water transfers, the MDB as a whole accounted for 96 per cent of surface water allocation trade by volume nationally in 2015–16.

Since 2007–08 the volume of water allocation trade recorded in Australia has grown dramatically (Figure 11). In 2015–16 the total volume of water allocations traded nationally was 5,816 GL, 0.5 per cent higher than in 2014–15. Surface water continues to account for the vast majority (96 per cent or 5,583 GL in 2015–16) of allocation trade in Australia. The volume of groundwater allocation trade in 2015–16 was 233 GL.

Figure 11 Volume and number of water allocation trades, 2007–08 to 2015–16

The number of allocation trade transactions decreased significantly during the flood years of 2010–11 and 2011–12, before increasing to new highs in recent years. In 2015–16, 27,703 water allocation trades were recorded in Australia, a 4 per cent decrease compared with 2014–15.

Growth in allocation trade volumes has been exaggerated by the emergence of environmental allocation transfers, particularly within the sMDB. These are transfers of water within and between water systems to achieve environmental watering objectives. These transfers have no financial component but are still included in official trade records. In 2015–16 environmental transfers amounted to 2,465 GL or 44 per cent of all allocations traded in Australia by volume (Figure 12).

Figure 12 Volume of surface water allocation trade, by region, 2007–08 to 2015–16

Map 5 shows the volume of surface water allocation trade by water system. The majority of water trade volume occurs within the Murray, Murrumbidgee and Goulburn water systems of the sMDB. These regions also comprised the bulk of environmental transfers during 2015–16. Outside the sMDB, significant trade volumes were recorded in the Lachlan region of New South Wales, and the Border Rivers and Fitzroy systems of Queensland.

Map 6 shows groundwater allocation trade volumes by system in 2015–16. Most groundwater trade occurs in New South Wales, particularly in the Murrumbidgee, Murray, Lachlan and Namoi systems. Unlike regulated surface water, groundwater licences in Victoria have not been unbundled. The equivalent of a groundwater allocation trade in Victoria is a temporary volume transfer (lease) for a period of one year or less. Entitlement leases are not covered by this report but will be considered for future editions.

Note: Includes environmental trades. Grey indicates no trade.

Note: Grey indicates no trade.

The drier conditions in 2015–16 drove increased allocation prices in most regions, particularly in the southern and northern MDB. Within the MDB, water allocation prices in 2015–16 reached their highest levels since the end of the drought in 2009–10 (Figure 13), although prices were still lower than the peak prices of 2007–08. Total turnover in the sMDB surface water allocation market was more than $550 million in 2015–16 (Figure 14).

Note: Data for Northern MDB were available for the Gwydir, Lachlan, Macquarie–Castlereagh and Namoi systems. Data for the Southern MDB were available for the Campaspe, Goulburn, Murrumbidgee, NSW Murray, SA Murray and Victorian Murray systems.

Note: Based on annual trade volumes (excluding environmental transfers) and average annual prices.

Average prices for surface water allocations in 2015–16 for those water systems with available data are presented in Map 7. Major water systems with trade but no price data include the Queensland Border Rivers, Fitzroy, Burdekin, Barron and Burnett systems (in 2015–16 no price data were available for any Queensland water system). Prices were similar between regions in the connected sMDB, in the range of $200 to $230 per megalitre. However, lower prices in the Lower Darling reflected trade being disallowed with the rest of the sMDB system. Although technically part of the sMDB, the Ovens trading zones cannot trade with the rest of the system so prices were relatively low at under $50 per megalitre.

The dry conditions in the northern MDB resulted in high prices in the Macquarie, Gwydir and Namoi regions, in the range of $200 to $300 per megalitre (Map 7). Outside the MDB, prices were particularly high in the Werribee irrigation area in southern Victoria (around $360 per megalitre), although this is somewhat typical of this system. The relatively low prices observed in the Harvey system in Western Australia and the Hunter system in New South Wales in 2015–16 are also typical of those systems.

Note: Grey indicates no trade or insufficient data.

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Water entitlements on issue

Entitlement numbers presented here are in ‘nominal’ terms (representing maximum possible volumes available for use). For many entitlement types, water available for use in any given year can be considerably lower (especially for unregulated and low reliability regulated surface water). To avoid double counting, the entitlement numbers presented exclude ‘bulk entitlements’ (that is, wholesale rights to water that underlie entitlements held by end users), where possible (see Appendix A of the Australian water markets report 2014–15 for more information).

In 2015–16 more than 34,000 GL of water entitlements were on issue (Figure 15). The MDB accounts for 67 per cent of regulated surface water entitlements in Australia. In contrast, systems outside the MDB account for the majority of unregulated (55 per cent) and groundwater (72 per cent) entitlements.

Figure 15 Volume of water entitlements on issue, by region and type, 2015–16

Figure 16 shows the total volume of water entitlements on issue by type and water system. The largest entitlement volumes are still held within the sMDB, but significant entitlement volumes are held in many non-MDB systems, including the Burdekin system (mostly regulated surface water), Tasmania, the Sydney South Coast and Hunter systems (mostly unregulated surface water) (Map 8).

Figure 16 Volume of water entitlements on issue, by type and water system, 2015–16

The market value of entitlements on issue within the sMDB was at least $13 billion in 2015–16, higher than previous years because of significant entitlement price increases in 2015–16 (Figure 17).

These estimates were constructed by multiplying entitlement volumes by average annual market prices for products with available price data, and hence do not represent the full value of entitlements on issue in Australia. Market price data were only available for 75 per cent, 59 per cent and 3 per cent of the total nominal volume of entitlements on issue in the sMDB, northern MDB and other Australia, respectively.

Note: Data for entitlements on issue and entitlement trade were matched using a unique identifier based on a combination of variables, including water system, resource type, regulated status and reliability class. ABARES was able to match data for 19 unique water systems: southern MDB (Murrumbidgee, NSW Murray, SA Murray, Victorian Murray, Loddon, Campaspe, Goulburn, Broken, Ovens), northern MDB (Namoi, Gwydir, Lachlan, Macquarie–Castlereagh) and other (Barron, Qld Fitzroy, Hunter, Thomson–Macalister, Werribee, Burnett). For a complete list of entitlement types, see Appendix A of the Australian water markets report 2014–15.

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Entitlement trading activity

Entitlement trading activity in 2015–16 is summarised in Table 2 by region and resource type. The largest volumes of trade were for regulated surface water in the MDB.

Between 2007–08 and 2015–16 trade in water entitlements nationally increased significantly. In 2015–16, 9,038 entitlement trades were recorded, compared with fewer than 4,000 in 2007–08 (Figure 18). The volume of groundwater entitlements traded has also grown steadily (310 GL in 2015–16, compared with 45 GL in 2007–08).

Figure 18 Volume and number of water entitlement trades nationally by source, 2007–08 to 2015–16

The decrease in entitlement trade volume in 2014–15 and 2015–16 compared with 2013–14 largely reflects a significant drop in Commonwealth environmental water recovery in the sMDB. During 2013–14 large volumes of supplementary water entitlements in southern New South Wales were traded as part of Commonwealth infrastructure projects, leading to a spike in trade volume (Figure 19). A decrease in the volume of entitlement trade in the sMDB in 2015–16 corresponds to the highest entitlement prices observed since the 2007–08 drought. Outside the MDB, entitlement trade has increased steadily between 2007–08 and 2015–16 (Figure 19).

Figure 19 Volume of water entitlement trade, 2007–08 to 2015–16

Map 9 shows the volume of surface water entitlement trade by water system in 2015–16. Significant activity was observed within the northern MDB (Macquarie, Gwydir, NSW Border) and in the major sMDB systems. Large groundwater entitlement trade volumes were recorded in the SA South East and Murrumbidgee systems (Map 10).

Note: Includes environmental trades. Grey indicates no trade.

Note: Grey indicates no trade

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Entitlement prices

Entitlement prices depend largely on expected annual allocation volumes (for example, the ‘long-run average annual yield’) and expected allocation prices. As a result, water entitlement prices are highly specific to particular water systems, resource types and reliability classes. Detailed data on entitlement prices are provided in the region-specific pages.

Entitlement prices vary considerably across regions and classes, but they often display similar trends over time, particularly within MDB regions. Figure 20 shows volume-weighted average annual price indexes of regulated surface water entitlements for key systems in the southern and northern MDB. Trends in sMDB entitlement prices are somewhat consistent with trends in allocation prices for the period. In response to wetter conditions following the drought, sMDB entitlement prices decreased by around 35 per cent from 2009–10 to 2013–14. Prices in the sMDB increased by 14 per cent in 2014–15 and then 47 per cent in 2015–16, partly in response to significant increases in allocation prices (75 per cent in 2014–15 and 84 per cent in 2015–16) and expansion in perennial horticulture.

Northern Basin general security entitlement prices since 2007–08 follow a different pattern. Prices peaked during the 2010–11 flood year and have gradually declined in subsequent years amid periods of low inflows and allocations. There are a number of possible explanations for the differing trends between southern and northern MDB entitlement prices in recent years:

• demand for water from horticultural industries has increased in the southern MDB, while horticulture accounts for a lesser share of demand in the north

• the largest increases in entitlement prices have occurred in higher reliability products and there are fewer of these rights in the north

• the longer term trends in climate, particularly reductions in winter rainfall are much more pronounced in the southern MDB (BOM & CSIRO 2016).

Note: Southern MDB comprises high and general security entitlements in the Goulburn; Murrumbidgee; NSW, Victorian and SA Murray; Broken; Campaspe; Loddon; and Ovens systems. Northern MDB comprises general security entitlements in Gwydir, Lachlan, Namoi and Macquarie–Castlereagh. See Appendix A of the Australian water markets report 2014–15 for a full list of entitlement types.

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Major national water announcements during 2015–16 are summarised in Table 3. A detailed list of announcements for the sMDB is presented in Southern MDB.

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Table 4 and Table 5 summarise the performance of jurisdictions against service standards for processing times for entitlement trades and allocation trades. ABARES has included published figures from jurisdictions on performance against service standards, where possible. Where published figures were not available, service standards were calculated using the Water Trade Database (see Appendix C of the Australian water markets report 2014–15).

New South Wales, Victoria and South Australia all exceeded the standard for both intrastate and interstate allocation trades. Queensland and Western Australia exceeded the standards for intrastate allocation trade. In all cases, performance levels for allocation trades were comparable with those reported for 2014–15.

All jurisdictions met their standards for processing of water entitlement trades in 2015–16. In Western Australia, performance declined slightly from 30 per cent of trades being approved within 20 days in 2014–15 to 28 per cent in 2015–16.

ABS 2016, Water Use on Australian Farms, Australian Bureau of Statistics, Canberra, December.

BOM 2016, Water in Australia, Bureau of Meteorology, Canberra, accessed 10 December 2016.

BOM 2017a, Archive—Twelve-monthly rainfall deciles for Murray Darling Basin, Bureau of Meteorology, Canberra, accessed 10 April 2017.

BOM 2017b, El Niño is over, but has left its mark across the world, Bureau of Meteorology, Canberra, accessed 11 April 2017.

BOM 2017c, Regional Water Information, Bureau of Meteorology, Canberra, accessed 10 April 2017.

BOM 2017d, Southern Oscillation Index (SOI) since 1876, Bureau of Meteorology, Canberra, accessed 3 January 2017.

BOM 2017e, Twelve-monthly mean temperature decile for Australia, Bureau of Meteorology, Canberra, accessed 10 April 2017.

DELWP 2016, Water Market Trends: Trends in Northern Victorian Water Trade 2001–2015, State of Victoria Department of Environment, Land, Water and Planning, Melbourne.

Hughes, N, Gupta, M & Rathakumar, K 2016, Lessons from the water market, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra.

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