Independent economics and policy advisory firm Aither has launched a world-first index of the value of water rights.
The official launch of the Aither Southern Murray-Darling Basin Entitlement Index coincided with water entitlement prices reaching an all-time high at the start of May 2017.
Aither Director Chris Olszak said “Like the ASX 200, the Aither Southern Murray-Darling Basin Entitlement Index provides a simple overall snapshot of how the major water entitlements in the southern-connected market are performing.
Updated monthly and freely available, irrigators, investors, banks, and other owners of large water portfolios can use the Index to benchmark the capital growth performance of their portfolios across time.”
At the start of May 2017, the nominal Index was at 137.24 points, overtaking the previous high of 136.90 in April 2016.
The historical high is particularly noteworthy given the wet conditions across much of the southern Murray-Darling Basin over the last 12 months.
In explaining the importance of the Index to the market, Aither Senior Consultant Daniel Baker said “Australian water market reporting is fragmented, and the costs to participants of collecting information can be high.
The Index provides water market information in a way that is simple and intuitive, improves market transparency and allows market participants to make more confident decisions.”
Mr Olszak said as the Index shows, the value of entitlements dropped by around 40 per cent from 2010 to 2013, partly because of a couple of very wet seasons.
”However, the Index has more than doubled in value from 2013 to 2017 in response to drier conditions and strong demand in the irrigation sector – including the rapid emergence of the high-value nut industry,”
“We’ve seen entitlements maintain and increase their value this year despite the return to wet conditions and the very low allocation or spot prices for water in the market. This shows that entitlement holders clearly have the long game in mind,” Mr Olszak said.
The Index tracks the performance (capital value) of a group of major water entitlement types across the southern Murray-Darling Basin. It includes entitlements in New South Wales, Victoria and South Australia, helping to aggregate information across the states.
An Index value higher than 100 points indicates capital value growth compared to a starting point of July 2008.
The Index is published at Aither's website and is updated at the start of every month.
The Index is also published in Aither’s independent monthly Southern MDB Water Market Updates commissioned and published by H2OX.
Aither’s index is available online at http://www.aither.com.au/water-markets/aither-southern-mdb-entitlement-index1/