National water broker Waterfind has released analysis showing it could take decades for the Federal Government to buy back its target of 1500 gigalitres worth of water licences from irrigators and a bigger budget will be required.

With the Federal Government actively purchasing water in the market place, Waterfind chief executive Tom Rooney says the Commonwealth needs to set a clear regulatory and licencing framework to make sure that water regulators, market operators and market intermediaries act in the best interest of irrigators.

"It is important that Governments indicate the maximum level of the entitlement water market that they will acquire in any one year," Mr Rooney said.

"Using the last five years as a forecasting tool, the Government would need to acquire 100pc of the Murray connected entitlement market for 14 years to achieve a 1.5 million megalitre (1500 GL) water return target through market based mechanisms."

But such a move would significantly distort and limit the effectiveness of the burgeoning water market, the report states.

"Unless the market can be deepened by several orders of magnitude it will be impossible for many entitlement holders to operate in the market," it says.

"To this extent it is critical that major barriers to trade be removed to increase the entitlement market size."

The report suggests a 30pc annual entitlement activation limit be considered the maximum market activation allowed if the Government is to support the viability of the water market and minimise disruptions.

But such a move would mean it would take 47 years for the Labor Government to achieve its goal of purchasing 1500GL worth of licences from irrigators.

The report also raises serious questions about the level of funding set aside by the Federal Government to purchase water licences.

"Assuming that the value of water entitlements continue to grow at 15pc per annum, as they have been doing over the last decade, the current budget is sufficient to only secure around 540GL of water entitlements," the report says.

* To view Waterfind's full report and analysis of the Federal Government buy back of water, visit www.waterfind.com.au/docs/WaterfindBuyBackAnalysis.pdf.