Monday, October 23, 2006

Water Trading for Non-users

The Federal Government's "National Water Initiative" has recommended that the water trading market be opened to include "non-users". That is, people who do not need the water from farm production can buy & sell the rights.

It says that having more people buy & sell the rights to use water would make the market "more efficient". It does not say how.

I believe that that the non-users would be market speculators, and include thaose who would want to control the market. The effects of introducing non-(production) users into the market will be:
  • greater demand for water rights, due to more players in the market
  • the amount of water is largely fixed, depending on seasonal variations
  • increased prices for water rights, as new, cashed-up, marketers buy, and then re-sell the same water rights.

Increased prices for water are the last thing Australia's farmers need.

We can only hope that the Federal Government is not so stupid as to increase the costs borne by our farmers.

The Analyst