*3.1. Murray–Darling Basin, Australia*

The Murray–Darling Basin (MDB) is located in Southeast Australia and covers an area of over one million km2. The MDB suffers from highly variable rainfall and, sometimes, severe droughts. While there have been various supply-based strategies to respond to the risks of droughts, such as

the construction of large up-stream water storages, there has also been a well-recognized need to undertake water reform in terms of how water is used within the basin [36].

The most recent water reform in the MDB began with the National Water Initiative (NWI), agreed to by Basin states and the Australian governmen<sup>t</sup> in 2004 [37]. Article 5 of the NWI highlighted the need to " ... ensure the health of river and groundwater systems by establishing clear pathways to return all systems to environmentally sustainable levels of extraction." In addition, the NWI prioritized the establishment of consistent rules in relation to water rights and the need for comprehensive water accounting.

A lack of progress in the implementation of the NWI led to the *Water Act 2007* that reassigned the jurisdictional powers for governance of water in the MDB from the Basin states (Australian Capital Territory, New South Wales, Queensland, South Australia and Victoria) to the federal government. This act is being implemented through a ten-year Basin Plan that passed the Federal Parliament in November 2012 [38]. The 2012 Basin Plan specifies catchment and basin-level sustainable diversion limits (SDLs).

To encourage states to agree to the change water governance powers, initially opposed by the state of Victoria, and to give effect to key objects of the *Water Act 2007*, the federal governmen<sup>t</sup> allocated A\$10 billion (subsequently increased to A\$13 billion in 2008) over ten years to compensate irrigators and ensure the success of water reform [39]. This financial reform package [36] included some A\$8.9 billion to respond to over-allocation of water by buying back water entitlements from willing irrigators (A\$3.1 billion) and also by modernizing irrigation infrastructure (A\$5.9 billion) to increase the irrigation efficiency.
