The Victorian Government manages the allocation of water resources across the state in accordance with the Water Act 1989. It uses the Water Allocation Framework to strike a balance between demands for water for consumption, the environment and other non-consumptive uses.

The water allocation framework is administered at three levels:

• Tier 1 – the State Government retains overall right to the use, flow and control of all surface water and groundwater on behalf of all Victorians.
• Tier 2 – the Minister for Water is responsible for granting entitlements to water (including environmental entitlements) and setting limits and caps.
• Tier 3 – individual rights to water.

Overview of the 3 tiers of water administration (PDF~283kB)

Trading of individual rights to water enables available water resources to be put to their most efficient use. Ongoing reforms have led to the development of an active water trading market involving Victoria, South Australia and New South Wales.

Water trading has resulted in new awareness of the value of water and the way in which market factors can help manage water use, particularly in times of prolonged drought and water scarcity.