Southern Murray–Darling Basin Water Market Update

Allocation announcements released yesterday confirmed a largely steady resource position across the Basin. In northern Victoria, allocations in the Goulburn River system increased marginally by 1%, marking the final allocation determination for the 2025-26 season. Updated outlooks for 2026-27 show a slight improvement for the Victorian Murray system, while the outlook for Goulburn has eased slightly compared to prior guidance.

Across New South Wales, there were no further increases to announced allocations, with the Murray River system remaining at 20% and the Murrumbidgee River at 32%.

Forward resource positions in New South Wales have, however, become clearer. In the NSW Murray, the required reserve for the 2026-27 water year – approximately 236 GL – has now been fully secured, providing greater certainty around high-security supply but reinforcing the constrained outlook for general security users. In the Murrumbidgee, the required reserve is currently estimated at 191 GL, with around 166 GL secured, and authorities continuing to prioritise reserve accumulation through the remainder of the season.

Despite these relatively tight settings, dam levels have stabilised through March, with storage volumes broadly similar at the beginning and end of the month. This reflects a combination of factors: above-average rainfall during March, improved soil moisture profiles, reduced irrigation demand, and lower evaporation rates as temperatures ease. Increased on-farm rainfall has reduced the need for water releases from storages, allowing systems to hold position despite limited inflow generation.

Catchment conditions have improved noticeably. Root zone soil moisture across much of the southern Basin is now average to above average, increasing the likelihood that follow-up rainfall events could convert more efficiently into runoff. Rainfall deciles for March further reinforce this, with large parts of the Basin recording above-average rainfall for the month.

However, the forward outlook remains less supportive. Seasonal guidance continues to indicate a low probability of exceeding median rainfall through April to July, aligning with earlier expectations of a drier autumn-early winter period and transition toward El Niño conditions later in the year. This remains a critical window for inflow generation, and without sustained rainfall during this period, storage recovery may remain limited.

Market pricing has responded to the short-term improvement in conditions. Allocation prices have eased in recent weeks, reflecting reduced immediate demand, improved on-farm water availability, and a degree of uncertainty influencing irrigator decision-making. Broader factors – including the ongoing fuel supply issues in Australia and constrained access to fertiliser – are also beginning to influence planting decisions for annual crops, further dampening short-term water demand.

At the same time, some market participants appear focused on balance sheet considerations as the season draws to a close, contributing to softer pricing dynamics in the near term.

Despite this, longer-term fundamentals remain largely unchanged. Storage levels across key systems are still relatively low, forward allocation outlooks remain constrained – particularly for general security users – and climatic signals continue to favour a drier bias through the critical inflow period.

As a result, while the market has softened in the short term, the broader outlook continues to point toward tightening supply conditions and potential upward pressure on prices into the 2026-27 water year, particularly in the absence of sustained rainfall across key catchments.