Water brokers have cautioned against drawing negative conclusions from the high level of $0 trades, after the Murray-Darling Basin Authority found they accounted for more than a third of all transactions.
An MDBA audit found much more needed to be done to ensure robust administration supported the market for water, traded in the Murray-Darling Basin.
MDBA compliance executive director Brent Williams said several straightforward steps were required by governments, to improve the quality of price data and increase market transparency and confidence.
"The central finding was that no Basin government has robust arrangements in place to gather comprehensive price information," Mr Williams said.
"As a consequence, some of the data reported by the states and published in consolidated form by the Bureau of Meteorology (BoM) is incomplete and inaccurate."
Mr Williams said the MDBP clearly required sellers to tell the relevant state agency the price of their trades and, for their part, state agencies were obliged to provide this information to the BoM.
"Our audit found that water trade data is dispersed across a great many approval authorities that use a multiplicity of processes, built around the needs of water managers rather than the needs of the market," he said.
Mandatory price reporting was introduced in 2014, and the audit found that compliance and enforcement practices remained sporadic.
"Of all trades reported in the Basin in 2017-18, for example, 44 per cent were submitted with a $0 price," he said.
The audit provides detailed recommendations, including that a compulsory trade price field be included on all trade application forms by December 31, 2019, and a trade price validation process be in place by Basin states by June 30, 2020.
But while brokers said they were fully supportive of greater market fairness and transparency, there had been an unfortunate overemphasis on $0 trades.
H2OX chief executive Lex Batters, Bendigo, said his company had long advocated for mandatory price reporting of all trades at a register level.
"While the focus was on $0 trades because they are easy to 'see', it raises questions about the accuracy of price reporting, in general," Mr Batters said.
"Price and liquidity discovery are the two biggest issues in the water market."
He said that was an issue for the market and brokers to resolve.
The audit highlighted market participants' ability to determine the current price of water was made more difficult by inaccurate or non-reporting of price information.
He called on the Basin states to ensure all trade prices were reported accurately and to impose penalties for those water market intermediaries who failed to do so.
"H2OX have long called for, and fully support, regulation of water market intermediaries and the water market to ensure a fair playing field for all participants," he said.
"The water market is fractured into many small pools of liquidity, only a few of which are transparent.
"This makes it extremely difficult for market participants to determine the volume of water for sale at any one time.
"This can lead to perceived shortages of water, forcing buyers into the market and driving prices higher."
Mr Batters said H2OX believed that a central exchange and clearing house, in addition to tighter regulation, would resolve many of the issues in the water market.
But Anthony McCloskey, Key Water, Griffith, NSW, said focussing on $0 trades as an example of water market problems didn't give the whole picture.
"A $0 trade is perfectly reasonable," Mr McCloskey said.
"They can be a legitimate indication of the trade itself; it can be an entitlement trade, where someone has bought a licence and transfers the allocation that goes with it."
But he said improvements could still be made.
"The market should be fair and transparent, I've always said this," he said.
He said while the transfer process was very good in Victoria, it needed to be improved in NSW and South Australia.
He questioned the call for an overarching register, covering all Basin states.
"I think it would create another level of bureaucracy and I can't see the state's given up their authority, either," he said.
Water Minister Lisa Neville has flagged significant changes to the way water is managed in northern Victoria.
She said she had asked her department to look at the options and benefits of a completely transparent water trading system.
Ms Neville agreed $0 trades were not the big issue, as they usually involved the transfer of water to other family members, or other accounts owned by the allocation holder.
"Speculators make up only seven per cent of the market," Ms Neville said.
'What does that mean, do we have large investment companies coming in, and buying our water?" Ms Neville said.
She said if the only way people could get full confidence in the market was if there was 100 per cent transparency on trades, that's what should happen.
"But that will potentially mean their neighbours can see what they are doing, and they can see what their neighbours are doing."
Ms Neville promised a full consultation to ensure such disclosure did not cause friction, in small communities.
"I don't want to cause community disputes," she said.
The government had also asked for inter-valley trade rules to be reviewed, following environmental damage to the Goulburn River.
It had also been working on how to manage increasing demand from the Lower Murray region, potentially curbing new extraction from the river.
Tom Wilks, Wilks Water, Wagga Wagga, NSW, agreed the focus on $0 trades was unfortunate.
"I think there is a lack of understanding of $0 trades between related parties, or water transfers, parking or carryover," Mr Wilks said.
He said a $0 trade could also involve someone moving water from one state to another.
"There are many, many people who own water rights, across jurisdictions, and a lot of people spread their risk, by owning water in different places," he said.
It appeared there had been a lack of consultation, with brokers, before the report was written.
"If you are not involved in it, it's a foreign language," he said.
"It's a big 'kick the cat'.
"It just gets passed down the line, but they need to be seen to be doing something."
He said none of the states wanted to use another jurisdiction's register.
"South Australia is building a new one, in consultation with brokers," he said.
"That's great, but we are always reinventing the wheel."