National Water Initiative – The Economics of Water Management in Australia
Malcolm Thompson, General Manager, Water Reform Group, National Water Commission,
The major economic issues facing agriculture and water in Australia involve the continued transition to
using and managing water under the influence of more mature market conditions.
This includes clearer
specification of water property rights, assigning risk of changes in water allocation to improve investment
certainty, proper accounting for water, extending the scope for efficient water markets, and pricing which
seeks to better reflect the true economic cost of the resource.
Each of these elements is pursued by
Australia’s blueprint for water reform, the National Water Initiative.
Amongst other things, the transition
will involve making careful judgements in order to optimise the mix of markets, planning and regulation
for water management in Australia.
In this area, economic insights about incentive structures will be
useful to shape the mix and institutional settings for managing water on the ground.
water, Australia, markets, planning, regulation
There are a number of ways of describing water management in Australia, for example historically,
legislatively, institutionally, or in hydrological or ecological terms.
By way of background, this paper
begins by illustrating some of the challenges for water management in Australia through some prominent
tensions which currently characterise water use and management in this country.
The notion of ‘tensions’
is not used here as a negative term – it simply reflects the competing interests, incentives, methods and
understandings which lie at the heart of managing a natural resource such as water.
Some of the more notable tensions for water in Australia include the following:
Water is vested in the state and territory governments, but there are national imperatives for water
management – including the sharing of physical water resources between states, nationally
significant environmental assets, the emergence of interstate water markets, the cross-border flow
of capital to water-based investments.
All this is complicated by different legislative and
administrative arrangements between states, and by the different character of hydrological systems