Australia has a long-term water problem that can only be resolved by charging more for water and allowing irrigators to sell water to city users, says a new report.
The report, by leading Australian economist Professor John Quiggin, is published by CEDA as part of the CEDA/Fujitsu 2007 Economic and Political Overview.
The report says Australia's current water policies involve creating a market for irrigation water but using water restrictions to control water in cities. This approach is "inconsistent and ultimately unsustainable", it says (see page 46 of the Overview).
The report argues that water restrictions such as those now in place in Australia's major cities work well in the short term, but will not fix long-term water problems. Over time people start to ignore restrictions, and to find ways to meet the letter of the restrictions while ignoring their spirit.
Replacing city water restrictions with higher prices in the long term will encourage people to invest in water-saving technologies, find other ways to use less water, and encourage the development of new supply options such as recycling.
The report also argues Australia needs to free up the controls that now stop irrigators from selling more water to city users. Selling cities an extra six per cent of the water now used for irrigation could add 20 per cent to city water supplies and "make a significant difference to the availability of urban water", it says (see page 46 of the Overview).
Irrigation uses approximately 70 per cent of Australia's water supply and is priced at around 10 cents for every 1000 litres. Urban households and business account for about 25 per cent of total water use, but pay around $1 per 1000 litres. Even allowing for the costs of treatment and distribution, this is a large gap. In the absence of controls, city water firms would find irrigation water an attractive supply source - and some irrigators would make more money selling water to the city than using the water on their crops.
This latest CEDA report extends the conclusions of CEDA's landmark 2004 report Water and the Australian Economy, which warned that Australia was entering a period of water scarcity that would demand more market-based approaches.
The 2007 Economic and Political Overview reports will be formally launched on Monday morning at the opening CEDA/Fujitsu Economic and Political Overview conference in Perth. This is the first of six conferences taking place over the next month in each of Australia's state capitals, to be attended by more than 1200 people from business, government, universities and other organisations. The reports and conference series are sponsored by business solutions group Fujitsu Australia and New Zealand.
Professor Quiggin's report and the other Economic and Political Overview reports are included in the February edition of CEDA's Australian Chief Executive magazine.
For further information please contact:
John Harris
Corporate Relations Director
Phone 03 9652 8415
Email info@ceda.com.au
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