In a scenario outlined in The Australian (19 May 2006 p.7) a typical dairy farm would hold water rights to more than 400 megalitres – worth about $480,000 with water priced at about $1200/ML.
Constraints on water allocation and saleability: But under market rules only 4 per cent of the total water in any irrigation district can be sold and there can be no increase in the overall amount of water allocated to irrigation, to ensure environmental flows are preserved.
Pro rata flow-through of limitations: Moreover traded water rights will only be as good as the conditions in the catchment of origin. This means, for example, that if a Victorian farmer buys a water right from a farmer alongside the Darling River and the overall Darling water allocation is halved during a drought, then so, too, is the right that the Victorian purchased.
Vic-SA trial pays dividends: A trial water-trading scheme has been operating along the Murray in northwest Victoria and South Australia and has been credited with creating the massive expansion in horticulture in the Sunraysia and Riverland regions.