Water Trade in the Southern Murray–Darling Basin


Correspondence: Deborah Peterson, Productivity Commission, Locked Bag 2, Collins Street East, Melbourne, Vic. 8003, Australia. Email: dpeterson@pc.gov.au.


In this paper, we use TERM-Water, a bottoms-up regional computable general equilibrium model of the Australian economy, to examine the regional effects of expanding trade of irrigation water in the southern Murray–Darling basin. We find that water trading dampens the impact of water allocation cuts on gross regional product (GRP). The benefits of introducing trading within irrigation districts are greater than those of a further expansion of trade between regions. Permitting trade of seasonal allocations allows irrigators to reallocate water in reaction to climatic conditions and water availability; and it is this flexibility that enables GRP reductions to be minimised.