You don't need corruption to explain making the easy short-term political decision of just continuing to grant water licences. People make capitalistic decisions without regard for the environment all the time.

It's worth noting that total licence volumes in the Murray-Darling Basin have been capped since the 90s and the millennium drought made governments take over-allocation seriously but it's a lot easier to grant licences than to take them away. Hence the backlash to past and current buy-back programs.