Australian governments, as well as economists, see market trading of secure,transparent and enforceable water rights as a key mechanism for improvingthe allocation of scarce water between different households, industrial ?rms,and irrigators (Council of Australian Governments 1994, 2003; VictorianGovernment 2003, 2004). Already much progress has been made in developingmarkets to reallocate water between different irrigation uses, particularly fortemporary trades within a region (Crase et al . 2000; Victorian Government2004). Water and land rights have been (mostly) unbundled. Water leases havebeen converted into tradeable rights, and these rights are more precisely andexplicitly speci?ed than in the past. Charges for water delivery are based on costs.