Water minister Lisa Neville said record volumes had been flowing from the Goulburn to the Murray, in excess of 2000Ml/day up to an average of 2800Ml/day in January 2019.
Tagged water moving from the Goulburn to the Murray outside the limits of the IVT trade rules increased from less than 10Gl in 2012-13 to 120Gl in 2017-18.
She said current flows did not reflect the natural cycles of the river.
"It’s these constant high flows at the wrong time of year that’s impacting the environmental condition of the lower Goulburn River. Ongoing monitoring and advice from a scientific expert panel has confirmed that prolonged high unseasonal flows are causing damage to the river banks, loss of vegetation and a reduction in habitat for native fish," Ms Neville said.
Ms Neville agreed unseasonal flows were also causing the same damage in the Murray River, but the scientific study was specifically related to the Goulburn River.
The initial review identified current rules were not protecting the environment and did not provide a level playing field for water users to trade water.
Three key actions to reduce environmental risk and get market settings right for future trade have been announced, including:
* An interim operational regime to achieve variable summer flows in the Goulburn well below recent volumes, to be implemented before the high-risk period begins this summer.
* Ensuring from December all trades from the Goulburn system, including water use from tagged accounts, will be treated consistently with Victorian rules for IVT and in line with basin plan trading rules.
* The start of public consultation in January next year about long-term options to change current Goulburn to Murray trade rule to maximise trade opportunities within environmental thresholds.
Young Katunga dairy farmers Stephen Fisicaro and Emily Brown don't own permanent water and used the IVT trade to secure water for their dairy farm.
"We could buy water a little cheaper for most of the season last year in 1A; and at the end of the season, even though it wasn't any cheaper, it was still available to purchase where as we couldn't get any in zone 6,'' Ms Brown said.
The couple is worried the changes could mean a further increase in price and even less water available this irrigation season.
"We have no idea what is ahead, the price of water is just ridiculous and far out of our reach," Ms Brown said.
Ms Neville said the review built on outcomes Victoria secured at the Ministerial Council meeting and will be looking at deliverability and constraints, as part of implementing the Murray-Darling Basin Plan.
``Terms of reference for a Commonwealth-only review by the ACCC will be looking at the water market, including the use of carryover," Ms Neville said.
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