A buck-per-tonne is too cheap for our most precious resource

If state governments were really serious about curbing urban water demand and ensuring that it’s used in the most economically efficient way possible, they would increase its price. Water users should be targeted through their hip-pocket and their willingness to pay for the stuff, not through an unsustainable and unfair system of rules and inspections.

I propose that state governments immediately reform water pricing. There’s a good case to be made for keeping low rates on a set volume of water - for example, the first 150 kilolitres per household per year - to ensure poorer households aren’t charged more for a necessary utility. This would also make changes more politically palatable.

Any water used beyond that volume should be charged at a higher rate, say, $5 per kilolitre. That’s still 200 litres of a precious, clean, drinkable resource for only a dollar. Personally, I consider that still cheap for what it is.

The flip-side of such a scheme would, of course, be much higher revenues for the state-owned water companies. Hopefully, demand will be scaled back a fair bit - and if it’s not, then prices can be adjusted to find the right rate to achieve sensible reductions. But there will still be extra revenue. This additional money could be used for such things as investing in physical water infrastructure, fixing broken pipes and leakages, promoting water efficiency, or providing rebates on household water tanks.

Indeed, this scheme could even be strengthened further by a greater push towards water efficiency measures. When households and businesses have to pay more for the water they waste, there’s a direct economic incentive for them to increase the efficiency of their fittings, to recycle waste water and to utilise rainwater.

To be fair, some state governments have done a good job at promoting efficiency measures and encouraging water users to take the initiative to reduce their water consumption: for example, the NSW Government’s Water Savings Action Plans, mandated for Sydney Water’s largest non-residential customers, which require strategies for improving water efficiency to be drafted and implemented. Also in NSW, the BASIX rating system for building new houses has made the adoption of water efficient devices more attractive.

Schemes like these should be replicated across Australia. However, the best way to encourage greater efficiency of water use - and hence a per-capital reduction in its use (or waste) - is through raising its price. Simple economics.

This would also be a welcome step towards making our cities and regions more sustainable.