With energy constantly in the news and roads and transport dominating the infrastructure discussion, urban water struggles to get the attention it needs as an over $15 billion industry. But does it matter?

I argue it does and we don’t want urban water to become the energy crisis of tomorrow. The origins of bad policy in urban water are different from the origins of bad policy in energy. However, the impacts on customers will be the same.

This week the Productivity Commission (PC) released a bold report to kick-start Australia’s productivity (Shifting the Dial Productivity Review). In part it’s a shocking read, with statistics like 4.9 million Australians are obese and over 11 million do little or no exercise. But the recommendations by the PC are courageous and clearly make the case that “mediocrity beckons if we let it”. 

I was hoping for a similarly bold Draft Report from the Productivity Commission on National Water Reform. I was hopeful we would see a platform for reform, a fresh look at issues like competition, economic and environmental regulation and more certainty around urban water having a greater role in urban land use planning.  Yes, these issues are mentioned, but bizarrely it feels like the industry is proposing a more ambitious reform package than the PC, the lead national reform organisation.

After all, water utilities are transforming their businesses to place their customers at the centre of all their activities. This means reducing costs, deeply engaging with customers and delivering services they value and most importantly, can afford.

However, much of what utilities do is governed by the planning, policy and regulatory environment in which they operate. Unfortunately this environment has not evolved to meet current challenges. It is undoubtedly weaker than it was 15 years ago and the Productivity Commission’s last Inquiry into Australia’s Urban Water Sector in 2011, nor the far-reaching recommendations of the National Water Commission (before it was ‘decommissioned’) have been able to arrest the slide.

In particular, we are seeing the retreat of economic regulation and the effective de-corporatisation of water businesses in some states including Tasmania. This returns us to the era before the productivity-boosting reforms undertaken by the Commonwealth and the states during the 1990s. We don’t want to return to the days of keeping prices down in political cycles only to create price spikes down the track.

Unless we embrace reform, the costs of meeting the challenges of urban growth, asset renewal and climate change will be much higher than necessary. For example, Western Sydney will need to accommodate a city the size of Adelaide in the next ten years. This type of growth is the key issue for infrastructure – our cities and communities will be critical to the productivity of our nation and health of its residents (playing a role in curbing the obesity and exercise numbers I mentioned above).

Customers should not face price spikes because planning, environmental, economic, and health regulation individually do not meet best practise, or because they exist in separate silos without proper integration. The liveability of our cities should not be compromised because urban water is not given a seat at the planning table. While it was pleasing to see the Greater Sydney Commission recently lay out bold plans for a blue-green grid for Sydney, actually delivering that vision will need organisations to collaborate in ways we have not seen before. 

Getting the policy setting right isn’t just about delivering the services of today it’s also essential to meet future aspirations. As Christopher Gasson, CEO of the respected UK based Global Water Intelligence recently commented:

"If there is one thing that they (UN) could advocate which would make a real difference to the achievability of the Sustainable Development Goals for water, it is economic regulation.  Without it, we will all end up paying a very high price for our cheap water."

It’s time to grab the bull by the horns on urban water reform. It will not be easy for the Commonwealth and States to craft a new agreement. However, we are not the only ones calling for action, the PC’s Shifting the Dial Review has Commonwealth and State Governments at the centre. As Professor Ian Harper, Chair of the Competition Review says in today’s Fin Review its time to

“get serious about institutional reform to promote greater trust in government decision-making so that rational, productivity-enhancing reforms can see the light of day… Productivity growth is a national priority but the policy changes required involve all three levels of government.”  

However, as with the reforms of the 90s, there needs to be rewards and sanctions compliance, overseen by an independent national water reform body. The payoff from bold action now will be repaid many times over in affordable water services that create new cities which are not just dwellings but places to live and thrive. 

25 Oct 2017

Adam Lovell

Adam Lovell

Executive Director