Unbundling water rights as a means to improve water markets in Australia’s southern connected Murray-Darling Basin

Australia has defined its water entitlement and allocation arrangements in a manner that has made it possible to establish one of the world’s most sophisticated water marketing systems. Entitlements are defined in perpetuity as an entitlement to a proportion of any allocations assigned to a water resource pool. Entitlements and allocations are tradable and in the Southern Connected River Murray system a vibrant water market has emerged. The functioning of this market is reviewed in this chapter. Overall the assessment from an individual water use perspective is that the introduction of this EPI has succeeded. From a national perspective, most experts also describe it as a success. As a Nation however, Australia would have been better off if it had solved the water accounting and over-allocation problems before it introduced water trading. An important conclusion is that unbundling has made it easier to resolve issues step by step. It also makes it much easier for individuals to adjust and innovate. New business and new technology must be expected to emerge with each reform that is made. The chapter concludes by highlighting relevant policy lessons for the practical application of water markets.