It’s no secret that Australian businesses and individuals consume vast quantities of water. The protracted drought means prices of the valuable commodity are set to increase, but by how much? A new report suggests it should double in cost.
Water price rises have been on the agenda for some time, and a new report from the Water Services Association of Australia (WSAA) has suggested it should double.
Costs at the moment vary between 90 cents and $1.50 for every kilolitre of water used, and the costs of improved infrastructure and processes like desalination are putting pressure on these prices.
The authors of a recent WSAA report predict that they could double. That may sound alarming, but many water experts say consumers actually pay too little and some suggest the price should almost triple.
In a country as hot and dry as Australia, water is a scarce commodity, so many water supply experts say the price we pay for it is too cheap.
Professor Stuart White, director of the Institute for Sustainable Futures at the University of Technology, Sydney, agrees. “It’s true we historically and currently pay too little for water,” he said.
“We don’t pay varying amounts when it’s scarce [we] use restrictions, but we could pay more during drought periods.”
He says the price should be up to three times higher and the figure is not just based on pure economics. “If we take into account the massive spending spree on infrastructure [water] should be higher. Some of the proposals are well over $2,” he said.
“More importantly we are not including the impact on the environment so there’s a whole range of externalities [that could] drive it up potentially to over $3 per kilolitre or cubic metre. “
The WSAA report says many states will be forced to build new dams and desalination plants because recycling and conservation projects will not save enough water.
University of New South Wales water treatment expert Greg Leslie knows the cost of the pipes, treatment plants and other infrastructure needed to supply water to customers.
It amazes Professor Leslie how cheap water remains despite these costs. “The effort to supply safe drinking water, it is amazing it is sold for the price it is. It is certainly worth a lot more than what we pay for our water bill,” he said.
Dr John Marsden, a water economist who advises both the federal and state governments, says cost rises are inevitable. “It is going to vary by city. One needs to be careful about generalising. [We could see it rise to] $1.20 to $1.80, or see it rise to $2.20,” he said. “We are not going to see it at $5.”
But Dr Marsden says consumers must keep any price increases in perspective. “Up until recently we were only paying a third of our household energy budget. It’s not that this is going to become unaffordable, [like] a price hike and sticker shock,” he said.
“Prices [may go] up by 20-50 cents but that is small compared to energy budgets and gambling. Its not unaffordable but we will be paying more.”
Today, the Victorian Government announced it wants a blanket 15 per cent price rise next year to help pay for a $5 billion plan to secure Melbourne’s water supply.
But when it comes to price hikes as a method of encouraging greater water efficiency, water experts such as Dr Marsden are sceptical.
“The available information we have is that people are not responsive to price,” he said.
“If we want to deal with demand we need a combination of responsible measures that are water efficient. Price is a useful tool but not the only one.”