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Abstract
State and Federal governments are increasingly reliant on the re-purchase of
water access rights as a vehicle for bringing ‘over-allocation’ in the Murray-
Darling Basin into check. Not surprisingly, this has attracted criticism from
several quarters, usually on the basis that such mechanisms produce
unnecessary hardship for rural communities. Set against this are the views of
many economists who have bemoaned the modest endeavours of
governments to actively use water markets and the ongoing proclivity of
agencies to instead embark on public projects under the guise of water use
efficiency (see, for example Watson 2008).
This paper focuses specifically on water buyback and traces recent policy
episodes in this context. The paper also offers details of alternative market
instruments which have the potential to improve on the current, relatively
fragmented arrangements. We use contemporary examples to test the
efficacy of alternative buyback instruments in the hope of informing policy
formulation.