The importance of water security to the development of northern Australia is well recognised. The recent completion of Rookwood weir in the Fitzroy River, Central Queensland, provides an example of the successful development of new water supply infrastructure in northern Australia. While water supply infrastructure plays a significant role in achieving water security, this needs to be completed by well-functioning water markets to ensure that water allocations can transfer to higher value users and provide adjustment mechanisms in times of low water availability.
There are existing market mechanisms for water in northern Australia, consistent with the national framework for water reform. However there are some complexities in northern Australia that may limit the efficiencies of those market mechanisms. In the first part of this analysis, activity in existing water markets in Queensland, Northern Territory and Western Australia is reviewed to identify patterns of use and prices. In the second part of the analysis, some particular issues that might limit the scope of water markets in northern Australia are evaluated. These include issues of thin markets, patterns of concentrated water holdings, potential restrictions from detailed environmental conditions, and water security issues.