In This Article Expand or collapse the "in this article" section Murray-Darling Basin Plan: Case Study in Market-Based Approach to Water Sharing in Australia

  • Introduction
  • The Murray-Darling Basin

Environmental Science Murray-Darling Basin Plan: Case Study in Market-Based Approach to Water Sharing in Australia
Sarah Ann Wheeler
  • LAST REVIEWED: 12 January 2022
  • LAST MODIFIED: 12 January 2022
  • DOI: 10.1093/obo/9780199363445-0136


The Murray-Darling Basin (MDB) is an area in southeastern Australia that has the largest and most regulated river system in the country. Historically, it has been an area of conflict over water resources, with efforts to bring the different states together to negotiate water sharing since the early 1900s. In the 20th century, the focus of water policy was predominantly on water supply infrastructure: building large-scale dam storages, weirs, and other irrigation region infrastructure. However, increasing problems with both water quality and quantity from the 1970s onwards—such as acid sulphate soils, salinity, declines in vegetation health, and species loss—meant that more attention was turned to water demand management options. These included establishing formal water markets, trade liberalization, and water extraction caps. The National Water Initiative (2004) and the Water Act (2007) laid the groundwork in unbundling water and land ownership and created the Murray-Darling Basin Authority (MDBA). The MDBA was tasked with developing the MDB Plan (Basin Plan 2012) to readjust the balance between consumptive water use and the environment. The Basin Plan when implemented in 2012 aimed to return up to one third of consumptive water extraction to environmental use, making it one of the biggest reallocations of water to the environment in the world. It has predominantly used market-based approaches to do so. However, conflict over water sharing has remained a dominant feature of MDB water reform. Self-interest among states and irrigation interests have impacted environmental water recovery methods, resource expenditure, and allocation—subsequently weakening both the Basin Plan and water policy in general. Given current policy developments, there is real danger of targets not being met, and environmental sustainability being continually compromised. The ongoing issues of drought, climate change, and readdressing First Nations access to—and ownership of—water have emphasized distributional issues in water sharing. It is clear also that the Basin Plan has been wrongly blamed and misattributed for ongoing rural community declines, with current amendments and reductions in water reallocation targets a result of this. What is clear is that the Basin Plan is currently not the fully sustainable solution for water sharing that it set out to be. It will need to continually evolve, along with various institutions to support water governance and rural community economic development in general, to address existing overallocation and future climate challenges. The challenges of equity, rural community development, and distributional fairness lie firmly in the sphere of strong governance, high-quality data, and first-best economic and scientific policies.

The Murray-Darling Basin

MDBA 2014 describes the MDB as Australia’s largest agricultural region—an area of major economic, environmental, cultural, social, and tourism significance. Rutherford 2020 provides a broader bibliography of the MDB and Australia’s environment and its management. The MDB spans more than one million square kilometers, covers parts of four states and one territory, and is located in the southeast of Australia. As outlined in CSIRO 2008, the MDB contains Australia’s three largest river systems: the Darling (2,740km including tributaries); the Murray (2,530km) and the Murrumbidgee (1,690km). Wheeler, et al. 2014 provides an overview of the history of water markets within the MDB and reports that rainfall is generally low, but highly variable. Surface and groundwater resources are used for irrigation, urban, recreation, tourism, cultural, and environmental purposes. Irrigated agriculture has, typically, accounted for around 70 percent of water diversions and about 90 percent of the water consumed in the MDB. The Australian Bureau of Statistics (ABS 2019a and ABS 2019b) provides a series of MDB agricultural production estimates across areas and time. In 2017–2018, the MDB generated 40 percent of Australia’s gross value agricultural production, encompassed 64 percent of Australia’s irrigated area, and was home to about around 42 percent of all irrigating businesses. Quiggin, et al. 2010 highlights that climate change will have a serious impact on irrigated agriculture in the MDB. Wheeler and Garrick 2020 details how the southern part of the Basin contains the majority of irrigated farms within the MDB, is highly regulated, has many nationally and internationally significant environmental assets (including the internationally important Ramsar-listed Coorong and Lower Lakes at the Murray’s mouth), and is hydrologically connected—allowing water trade to occur between South Australia (SA), Victoria, and New South Wales (NSW). In contrast, the northern part of the Basin is far less regulated, has less diversity of agricultural production, less irrigators, larger farm sizes, and far less public dam storage. The Darling River in the Northern Basin flows (when connected) into the River Murray, and at the mouth of the River Murray in SA is the Lower Lakes and Coorong (an important Ramsar-listed wetland). Barrages were built in 1940 to prevent seawater intrusion into the lakes. Chiew, et al. 2020 reviews the scientific literature and supports the current view that the Lower Lakes were predominately freshwater prior to European settlement, and that increased water extraction upstream led to increased seawater intrusion and the need for barrages to remain. MDBA 2021a reports annual area-wide water diversions data in the MDB from 1994–1995 onwards; and MDBA 2021b reports transitional water take reports from 2012–2013 onwards.

  • ABS. 2019a. Gross Value of Irrigated Agricultural Production, 2017–18. Canberra, Australia. Australian Bureau of Statistics.

    This publication (especially pp. 1–10) contains final Gross Value of Irrigated Agricultural Production (GVIAP) estimates for Australia, incorporating the MDB.

  • ABS. 2019b. Water use on Australian farms, 2017–18. Canberra, Australia. Australian Bureau of Statistics.

    This publication (see pp. 1–8) provides information on the physical and monetary supply and use of water in the Australian economy for 2017–2018.

  • Chiew F., J. Hale, K. Joehnk, M. Reid, and I. Webster. 2020. Independent review of Lower Lakes science informing water management: Report for the Murray-Darling Basin Authority. Canberra, Australia.

    Report reviewing the studies on the science of the Lower Lakes, Coorong, and Murray Mouth. Concludes that the main evidence was that the Lower Lakes were freshwater prior to European settlement, and that increased water take upstream increased the incursion of seawater into the Lower Lakes, and hence supported the continued need for barrages and increased environmental flows for the area.

  • CSIRO. 2008. Water availability in the Murray-Darling Basin: Summary of a report from CSIRO to the Australian government. Canberra, Australia.

    Report on sustainable yields of surface and groundwater systems within the MDB, commissioned by the Prime Minister and State Premiers. Summarizes assessments for eighteen regions that comprise the Basin and is described as a world-first detailed basin-scale assessment of the anticipated impacts of climate change, catchment development, and increasing groundwater extraction on the availability and use of water resources.

  • MDBA. 2014. Landscapes of the Murray-Darling Basin. Canberra, Australia: Murray-Darling Basin Authority.

    An overview of the Murray-Darling Basin provided by the Australian government. Includes information concerning the geography, climate, bush landscapes, river system, resources, Basin animals and habitat, and people of the Murray-Darling Basin.

  • MDBA. 2021a. Cap compliance reports. Canberra, Australia: Murray-Darling Basin Authority.

    Reports consumption take of water from areas in the MDB under both water audit monitoring reports from 1994–1995 to 2011–2012 cap compliance reports.

  • MDBA. 2021b. Transitional SDL water take reports. Canberra, Australia: Murray-Darling Basin Authority.

    Reports consumption take of water from areas in the MDB under both Cap compliance reporting and the trial SDL accounts, from 2012–2013 to 2018–2019.

  • Quiggin, J., D. Adamson, S. Chambers, and P. Schrobback. 2010. Climate change, uncertainty, and adaptation: The case of irrigated agriculture in the Murray–Darling Basin in Australia. Canadian Journal of Agricultural Economics 58:531–554.

    DOI: 10.1111/j.1744-7976.2010.01200.x

    Assesses the impact that predicted climate change will have on irrigation in the Basin, using a state-contingent model. Without mitigation or adaptation, impact is predicted to be severe.

  • Rutherford, I. D. 2020 Australia’s Environment and Its Management. In Oxford Bibliographies in Environmental Science. Oxford Bibliographies Online.

    Provides a bibliography of works dealing with Australia’s environmental landscape and various approaches to managing the environment over time. Included is a brief overview of water reform policy in the MDB, as a result of overallocation of water, environmental crises, and the Millennium Drought.

  • Wheeler, S. A., and D. Garrick. 2020. A tale of two water markets in Australia: Lessons for understanding participation in formal water markets. Oxford Review of Economic Policy 36.1: 132–153.

    DOI: 10.1093/oxrep/grz032

    Provides a profile of Australia’s water markets in the Southern and Northern Basins of the MDB—identifying a notable example of a “tale of two water markets.” The paper also offers insights about the economic policy levers that can drive participation across different hydrological, irrigation, and socioeconomic contexts, along with some key lessons.

  • Wheeler S. A., A. Loch, A. Zuo, and H. Bjornlund. 2014. Reviewing the adoption and impact of water markets in the Murray-Darling Basin, Australia. Journal of Hydrology 518, part A:28–41.

    DOI: 10.1016/j.jhydrol.2013.09.019

    Paper provides an overview of water policy in Australia since the 1900s and examines the adoption of water trading in the southern MDB of Australia.

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