Where’s My Water? The Price Volatility Cost of Water Commodification Under Australia’s Murray-Darling Basin Plan

Abstract

Australia's Murray-Darling Basin Plan (MDBP) is one of the world's most ambitious and controversial experiments in water commodification, having unbundled water from land across a river system that produces roughly 40 percent of the nation's agricultural output. Using a trade-level panel of 179,000 surface water allocation trades from 2009 to 2023, this paper estimates the structural determinants of water allocation price volatility under the MDBP and traces its downstream consequences for agricultural land values. Agricultural land use composition significantly predicts allocation market price volatility, with pastoral and revenue-intensive zones exhibiting lower volatility than inflexible cropping zones. Predicted volatility is positively capitalised into farm land values, with the effect concentrated in the Northern Basin. A panel analysis of entitlement ownership concentration finds a consistent null result across entitlement type, price measure and water source.