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The Forum > Article Comments > Privatising Australia's water > Comments

Privatising Australia's water : Comments

By Selwyn Johnston, published 9/2/2006

The sale of water assets though privatisation is very tempting for Australian state treasurers.

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It took me some time to work out the point and logic of this article. Correct me if I am wrong, but it seems to be something along the lines of:

1. Privatisation is coming, whether we like it or not;

2. Water quality must be regulated (so that none of us need to take any responsibility for our own welfare);

3. The government must do the regulating (because we all trust the government implicitly);

4. Because the industry must be regulated, we can’t have competition;

5. That only leaves a monopolist, who must be heavily regulated to make sure they don’t gouge consumers and poison us.

Why all the focus on government control and regulation - what’s wrong with opening the market to anyone who wishes to compete, and letting competition regulate quality and prices?

Scaremongering about water quality to support an argument for one or two heavily regulated monopolist suppliers is ridiculous. People are not entirely stupid, and they don’t drop like flies in countries where there is little regulation of water quality. In an open market with many suppliers, those who start supplying poor quality products don't last very long. Word spreads very quickly among customers, who then switch to another supplier, or at least won’t be prepared to pay as much. We should remember that consumers had no such choice in Sydney a few years ago, when virtually the entire city’s water supply became contaminated.

In economic terms, water is a scarce resource. Controlling scarce resources by central planning and decree is feudal. Allocating them through a free market is not only fairer and more efficient, but also mitigates against shortages, and requires minimal regulation - essentially only rules to prevent stealing and deception. Were such a competitive water market operating in Sydney, I’m quite sure we wouldn’t now be forced to wash our cars by hand, or see our gardens die off through lack of water.
Posted by Winston Smith, Thursday, 9 February 2006 3:25:15 PM
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Now lets analyze this further. How did this all start. Using macro and micro economic dynamics.

A long time ago, we people joined together to live together in villages that eventually grew to become cities. Air, water and food was free.

Now nothing is free except for air. We pay for water to be piped to our homes, though it is obtained freely.

The free natural resources that we, as a group called 'common people of Australia' own, and we pay a body called 'government' through our taxes to run the country for us and a corporate body called 'Crown' has won the rights to do this (actually it is a monopoly) to whom we pay for its services. We vote in a parliament from among us which makes laws that instructs the Crown how we would like our property called Australia managed.

Now our parliament wants to determine that our water is capable of being 'owned', and so can be sold, and so we loose our rights to put our hands into a river of fresh water to take a mouthful, because that is now stealing.

Keep dreaming those who think this is what us Australians want.

Sam
Posted by Sam said, Thursday, 9 February 2006 4:13:32 PM
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"Privatisation of water"
Scenario 1. Man walks out of house into his garage and finds his car on fire.He grabs the nearest hose and guess what! no water.Man shouts out to his wife"Honey did you pay the water bill"wife reply's "no honey I thought you did".Man calls out"ring the fire brigade"Fire brigade officer in reply to Mrs Jones"It appears madam you havn't paid your fire brigade levee"Mrs Jones "Im sure I have"Fire brigade officer"well when you bring your reciept up to us we'll see what we can do for you"
(Man buys new car)

Scenario 2.Mrs Jones is being throttled by some terrorist(for the red necks)probably a Moslem.Mrs Jones screams out for someone to call the private police force.Man finally gets through to the police.Police officer after logging the details,"You realise sir there will be a surcharge for a call out at this time of night, and the officer concerned will no doubt want his meal break before he attends.And by the way have you got a gun we can borrow.?(Women dies)

Scenario 3. Mrs Jones goes into her local chemist for her husbands medication as he is dieing of cancer.Chemist"Im sorry madam but the supply's we had on hand have been sent to the Congo where we got a real good deal for them,however by next month if you can pay the going rate we may be able to supply you with them.Oh by the way, whilst your here can we interest you in our new line of condoms.(Man dies, not of cancer,but the thought that John Howard may be re-elected).

Some of you posters seem to forget what you have written in reply to other articles.I don't no if I should laugh,or cry.
Posted by PHILB, Friday, 10 February 2006 2:13:09 AM
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There is one vital difference between the markets for household water and electricity or gas. Every Urban household except highrise can be fully self sufficient in water by installing the proper sized water tank. In Brisbane the average (240m2) house needs a 13,500 litre tank. It would need only 56mm of rain to fill the tank from empty. Sydney, with 1200mm rainfall would need a smaller tank, circa 10,000 litres while Melbourne would need a larger one. This size tank is only marginally more costly than the 3,000l ones that most people are installing at present.

Recycling grey water to flush toilets will cut average household use by 25% from 255 kilolitres per year to 191KL. And this will still leave some left over for use on gardens etc, and lower total "first use" water to about 140Kl per year. A 13,500l tank costs about $2000 which means the annual interest at 7% is only $140/year. That puts the cost of private water at about $1.00/ KL which is the same as the public water today, without the fixed charge for the meter.

So that operates as a ceiling on the prices a privatised water company can charge. So if there are any merchant bankers out there who think they are going to flog a public water authority on the basis of a future capacity to lift prices, then they had better recheck their professional indemnity insurance, quick smart.
Posted by Perseus, Friday, 10 February 2006 10:27:58 AM
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Perseus, you have the germ of an idea there, but there are one or two gotchas that need to be addressed.

The first is whether competition will be possible. After all, the reticulation is largely in place, from reservoir to kitchen tap, and has already been paid for by the taxpayer. Will you allow multiple suppliers to access the same distribution mechanism? Hardly. Could you allow new suppliers to build a parallel system, as telcos have done for much of their networks? Unlikely.

So your "natural cap" of $1.00/KL will not apply, since the water company will retain a monopoly on supply to a finite number of clients - those who physically cannot provide their own tanks (apartment blocks) or cannot afford one.

There is also the problem of "average" rainfall, and average usage. Leaving aside grey water for the moment, 255KL/year in household consumption is 4,900 litres/week, so your proposed tank will last only a couple of weeks.

I would suggest that there would be a significant percentage of the population who wouldn't take the risk. This would - along with the flat-dwellers - be the constituency that would keep the monopolist water supplier's board and CEO on the gravy train.

Once more with feeling: a monopoly is not good for anyone except the monopolist.
Posted by Pericles, Friday, 10 February 2006 6:05:29 PM
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I agree in part, Pericles, but households who are inclined to install tanks are also inclined to recycle grey water etc, so they are likely to reduce their needs to only 2,700 litres a week. In fact, as the tank gets lower their water use will decrease further. And that means 5 to 10 weeks without a drop.

And in many communities a secondary market is likely to develop. The aged couple in the large colonial house with a full tank will have many friends as a dry spell continues. As they should.

Furthermore, any house with a large tank can then refill that tank by means of the much more efficient drip feed method rather than the existing 'on demand' method. That is, a cheap, thin polytube of only 5mm diameter can be strung along the broadband cable and refill the tank slowly over night or even a number of days. And this would eliminate most of the overhead costs in urban water supply.

And that is how urban water should operate. The public has an obligation to take all reasonable steps to help themselves before demanding a service from government. That way, the water utility becomes a supplier of last resort, not a monopoly, and certainly not a supplier of first request. Drinking water is a right, washing water is a need but garden water is merely a desire and there is no need for the public to expect the community to supply all of them.
Posted by Perseus, Friday, 10 February 2006 9:48:45 PM
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