In many areas of Australia, demand for groundwater now exceeds sustainable supply rates. Groundwater trading aims to encourage the efficient allocation of scarce water access between competing users. 

This report sets out a management framework for groundwater trading that provides a structure to establish or develop groundwater markets in a range of situations. It builds on economic theory, existing groundwater management arrangements, the National Water Initiative (NWI) agreement and related developments in national water management.

In developing the framework, the first step was to investigate and describe the current groundwater trading situation in Australia.

The report found that the trade in groundwater entitlement represents about five per cent of all water entitlement traded in Australia, and groundwater allocation trades account for approximately 10 per cent of all allocation traded.

There is a high degree of variation in both groundwater trading activity and approaches to groundwater trading management - with variation occurring both within and between jurisdictions.
Encouragingly, where significant trading activity is occurring jurisdictions are generally applying strategic approaches to developing and implementing trading rules and assessing and mitigating the potential impacts of changing groundwater extraction locations.

In developing the framework a set of 15 principles have been developed to maximise the net gains of groundwater trading and have been grouped into three areas:

• specifying market boundaries
• assessing potential market activity
• establishing appropriate management regimes.

The principles provide a sound basis to ensure groundwater trading delivers benefits to water users and the possible risks are properly managed.

The framework will provide guidance to all states and territories of Australia and is relevant to all groundwater systems where trading is taking place or will take place sometime in the future.

Expected outcomes include more thorough groundwater planning processes, efficient distribution of groundwater access, effective management of third-party impacts of groundwater extraction, and improved productivity of water-dependent industries.