Perhaps I wan't clear enough. The big plants in the central Queensland industrial city of Gladstone sit directly on the harbour. The bulk of the water they use is for cooling. Cheap, fresh water was always preferred as using seawater increases maintainence costs. They simply began using seawater for their processes while desalinating and recycling for the few processes they could not use it for. To produce a reliable supply of potable (drinking quality) water for a whole city would have been an enormous undertaking (and impossible inland). Furthermore, it would be volitile. Any percieved attempt to exploit the price of water leads to community outrage, as the commercialised Gladstone water board discovered. This would be a disincentive to any "water investors" looking to quickly recover some of the astronomical costs of such a venture.

Face facts Ed. At this point in time, water supply is usually going to be a non-contestable monopoly regardless of the owner. The main problem with private monopoly holders is that they are not answerable to the public and are driven by the profit motive. Thus, my preferred model is public ownership of critical services and utilities and an appropriately regulated private market in most other things. I see the role of government as serving the need of citizens and the nation rather than consumers. Do you consume hospital beds when you are sick? Do you consume the basic education that gives you the opportunity to become a productive member of society? These things must be run on a not for profit basis to ensure everyone has access - something the private sector is incapable of doing.

Total privatization of basic public services has usually been disasterous from Mexico to New Zealand to Iraq ( I doubt Iraqis will ever accept total foreign ownership of their economy, even though the U.S has re-written the country's constitution to virtually gaurantee it)

Fozz,

Thanks for the background information, no doubt there is more to this story.

"The main problem with private monopoly holders is that they are not answerable to the public and are driven by the profit motive."

I see nothing wrong with the profit motive, in fact, it is a good thing. As I keep drumming on, you need incentives to encourage investment in innovation, efficiency and productivity. These are important in keeping future costs down and maintaining a reliable and efficient water supply.

If the Govt won't allow the board to make a profit, in the long run there will be insufficient funds to invest in new equipment and technology. This will result in a deterioration in existing equipment, falling service standards, an increase in prices (and/or taxes), and water shortages (and rationing).

In a previous post you indicated this could be resolved by simply changing the Govt. Given that it won't allow the board to make a profit, how would a new Govt fix the problem?

BTW, is the water board making a profit? Even if it is profitable now, I predict that over time it will begin to accumulate losses, thanks to Govt over-regulation.

I haven't been able to find out what the current arrangement is Ed. Perhaps the government just bought it back. If so, it's clear they should never have sold our water supply off. Now that it is back to where it was, we once again have reasonably priced, reliable water. This was threatened to be taken from us under the commercialised arrangement.

Just come to terms with it Ed. There are some things only government can do or does better than anyone else. You sound just like me years ago - I was convinced that absolutely everything must be owned by the state and the evil capitalists would invariably disappear. These days, I accept their existence and that of an (appropriately regulated) market. This doesn't mean I agree with everything they do.

Why are you so insistent that government is unable to effectively invest in basic services and infrastructure? They can and do and the benefits can be profound. They increased our potential (and now, actual) water supply by increasing the resevoir size. They selected the most cost effective tender from the private sector to build it. Built by the private sector and then run on a fair price basis by elected government. Reliable, fairly-priced water much more likely to encourage business to invest in the area than the private monopoly that did little more than try to rip us off.

I would note that all the deteriorations you speak of are occurring in privatised public services. De-regulation is often responsable for more problems than over regulation. (This does not mean that regulations should not regularly come up for reveiw).

Fozz,

By pure chance, the Productivity Commission has just released a report titled "Towards Urban Water Reform: A Discussion Paper". Media release here: http://www.pc.gov.au/research/commissionresearch/urbanwaterreform/mediarelease

Take note of the following:

"Most urban households face severe restrictions on their use of water. These impose hidden costs that could amount to billions of dollars each year. Australia’s urban water shortages are only partly due to low rainfall. An important contributor has been inadequate institutional arrangements for the management of our urban water resources.

In a discussion paper released today, the Productivity Commission identifies a number of deficiencies in how urban water is currently managed, the most fundamental being the lack of any effective market.

Commission Chairman, Gary Banks said, ‘From storage and distribution through to delivery and waste water removal, urban water supply is the domain of government monopolies. Water charges cover storage and distribution costs, but ignore whether dams are overflowing or running dry. With no real urban water market, the difficulties of making efficient investment decisions are compounded.’

The paper reveals that some of the issues are complex to resolve and it does not lay out a particular blueprint for reform. Nevertheless, the Commission finds that the direction for reform seems clear. Key areas for more detailed assessment that it identifies include:

- allowing a greater role for prices to signal water scarcity and to allocate resources;
- removing artificial impediments to rural urban water trading; and
- removing barriers to competition in the supply and retailing of urban water.

The Commission argues that appropriate reforms would be best advanced through a comprehensive public review, to determine the merits of different options and build a greater understanding within the community of the costs of the status quo and the tradeoffs in pursuing change."

In essence, the Productivity Commission is saying that Australia's water shortage is mostly due to Govt mismanagement rather than low rainfall. Solving the problem requires more competition in the market and an end to price fixing. The lack of a proper market is a disincentive for investment. Which is pretty much what I have been saying.

Ed, the productivity commisission is a collection of high level bureaucrats selected by the government. The current crop were selected by the previous government so it should come as no surprise that they would advance recomendations for commercialisation because that is exactly what they were selected to do by the last neo-liberal regime. Anyone without open neo-liberal sympathies would be most unlikely to be selected.

Brisbane's combined dam capacity is currently under 40%. No amount of privatization is going to fill them. We are short of water for the combined reasons of extremely long drought and rapid population growth. We are reaching the limits of growth without access to a much expanded capacity. Commercial pricing arrangements are not going to free up more water to go around because the water is not there to be freed up.

Have you missed the fact that I have kept banging on about? - commercialising our water supply allowed the owners to act as though an abundance was a shortage and charge accordingly.

Competition is a wonderful thing.

You really get excellent service from the subservient shop assistant who knows that a third of the staff are going to be laid off and is determined to stay.
You get really vague and dozy advice from the call centre operator reading from the service script in the call centre in Mumbai.
The nurse caring for you in a private hospital was probably hired at the start of the shift and doesn't know the ward routine and is probably more worried about getting enough shifts to cover their rent and car loan payments.

Did any one else hear the analysis of Australian foreign aid spending? Australia spent about $200 million in the Solomon Islands, giving $128 million to the Packer family companies.