As an economist in the water industry, I am starting to get asked ‘Why is my water bill going up so much’? There is a long economics answer to that (ask me, please), but there is a much shorter answer. It starts with a different question – Why is water so cheap?
Australian utilities invest in advanced water and wastewater infrastructure. But with very long-lived assets it is also true that we have a massive legacy to the past. Water is cheap in Australia because our previous generations built many the assets we use today. They built them and they paid for them, and they passed them onto us, virtually debt free and in great working order. We are like teenagers who have been given a car by their parents and only pay for the scheduled servicing.
Think Warragamba Dam in Sydney near where I live. Completed in 1960 and still supplying water to most people in Sydney today. We pay little for the cost of the dam. We also pay little for the vast hidden network of pipes and tunnels under our cities. Thousands of kilometers of pipes under every city which we rarely think about, built and paid for by the last generation.
But you can see where this is going. Water will always be excellent value, but it can’t be cheap forever.
All around Australia we have used up the capacity in those systems which were built up to 70 years ago. They are starting to need more maintenance and replacement to last for the next 100 years. Australia has a rapidly growing population and every one of the Government’s targeted 1.2 million new homes will need a water and wastewater connection. Servicing growth costs more when you are getting the existing services at a low price. Oh, and there is that thingy climate change to prepare for, which involves more recycling and desalination as well as preparing for extreme events.
So, the short answer to why bills will go up is that this generation needs to pay its fair share and even start considering what it might leave to its children and grandchildren. Blunt, I know, but there you have it.
Water is a basic human right, and the water industry will always look after those that can’t afford to pay, particularly during the cost of living crisis. But for the rest of us who can pay, we really can’t complain about paying a bit more.
1 Oct 2024
