Farmer participation in markets for temporary and permanent water in southeastern Australia

This paper analyses water market activities in an irrigation community in southeastern Australia during the first 10 years of operation, in order to establish the extent to which irrigators have become familiar with the use of markets and adopted the concept, and to identify factors impeding and driving the operations of markets for permanent and temporary water. These discussions are based on analysis of water right registers, trading registers, interviews with buyers and sellers of permanent and temporary water, and workshops with key stakeholders in the irrigation industry. The analyses show increased adoption of water markets within irrigation communities and an increased understanding of their operations and advantages. It appears that irrigators are increasingly treating water as a commodity to be bought and sold on a seasonal basis depending on supply, demand and commodity prices. Markets for temporary water have achieved far wider adoption than markets for permanent water. The emergence of a water exchange within the study area has had a significant impact on this process, providing secure, reliable, fast and cheap water transfers. Differential tax treatment, significant policy uncertainty, the administrative complexity and cost associated with markets for permanent water and irrigators' perceptions of water rights as an inherent part of their property, also are significant factors driving the preference for markets in temporary water. (C) 2003 Elsevier Science B.V. All rights reserved.