Southern Murray–Darling Basin Water Market Update

Todays allocation announcements have increased positivity to the 2026–27 water year, with improvements across both Victorian and New South Wales systems. While the additional allocations provide greater confidence for irrigators entering the season, the broader resource outlook remains heavily dependent on winter and spring inflows, with climate indicators continuing to favour a drier pattern across much of southern Australia.

In Victoria, the Murray High Reliability allocation increased by 7% to 36%, while the Goulburn High Reliability allocation rose by 15% to 30%. The increases reflect improved resource availability following recent inflows and provide a stronger opening position than many entitlement holders were facing only a few weeks ago.

The Northern Victorian Resource Manager also released updated seasonal outlooks, with modelling showing improvements across various inflow scenarios. Under average inflow conditions, both the Victorian Murray and Goulburn systems are expected to reach 100% allocation by December 2026, highlighting the benefit that even a relatively average winter and spring could deliver.

However, the outlook remains considerably more constrained should dry conditions persist. Under an inflow sequence similar to the 2025–26 water year, the Victorian Murray is currently forecast to reach only 64% allocation by December, while the Goulburn system is projected to reach around 51%. Under extreme dry conditions, allocation growth would remain significantly restricted throughout the season.

New South Wales also announced encouraging improvements to General Security allocations. The NSW Murray increased by 5%, while the Murrumbidgee General Security allocation increased by 16%, providing welcome relief for entitlement holders after opening the season at zero.

Despite these increases, forward allocation outlooks remain relatively conservative. In the NSW Murray, current modelling indicates General Security allocations could reach approximately 30% by November under median inflow conditions, falling to around 20% if dry conditions prevail. The Murrumbidgee outlook is slightly more optimistic, projecting 40% under median inflows and approximately 26% under dry conditions by November.

These outlooks continue to reinforce the same message that has featured throughout recent market updates – while recent inflows have improved the immediate resource position, further increases to allocation through the remainder of the season remains highly dependent on continued rainfall and runoff.

From a climate perspective, that remains the largest uncertainty facing the market.

The Bureau of Meteorology continues to favour below-average rainfall across much of the Southern Murray-Darling Basin through the critical winter and early spring period. Climate models also continue to indicate an increasing strength of the current El Niño in the Pacific and a positive Indian Ocean Dipole, a combination that has historically been associated with reduced rainfall and below-average inflows across south-eastern Australia.

While climate drivers do not determine seasonal outcomes on their own, they continue to point toward a higher-than-normal probability of a drier finish to the year.

The temporary water market has responded by remaining relatively quiet. Lower Murray allocation prices have eased from around $430/ML during the opening week of the water year to approximately $400/ML, reflecting improved allocation confidence, willingness from some entitlement holders to release water to the market and negligible urgency among buyers.

Whether this easing continues is likely to depend on rainfall over the next six to eight weeks. Additional inflows would further improve confidence and place downward pressure on prices. Conversely, if winter rainfall underperforms and climate forecasts continue to trend dry, market sentiment could shift quickly as buyers begin securing water ahead of spring demand.

Although recent allocation announcements have undoubtedly improved the short-term outlook, the longer-term fundamentals remain largely unchanged. Storage recovery across several systems is still incomplete, forward allocation outlooks remain constrained under drier inflow scenarios, and seasonal climate guidance continues to favour below-average rainfall.

For water users with significant irrigation demand, the current market presents an important strategic decision. While prices have eased in the first few days, they remain well below the levels experienced during previous dry sequences. Buyers should consider whether current values represent an opportunity to hedge a portion of future water requirements, particularly if the prevailing climate signals begin to translate into below-average winter and spring inflows.

As always, the coming weeks will be critical. Winter rainfall, catchment response and updated seasonal outlooks will continue to shape both allocation determinations and market direction as the 2026-27 water year unfolds.