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House of Assembly - Fifty-First Parliament, Third Session (51-3)
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WATERWORKS (RATES) AMENDMENT BILL

Second Reading

Adjourned debate on second reading.

(Continued from 29 April 2009. Page 2463.)

Mr WILLIAMS (MacKillop) (12:06): I indicate to the house that I am the lead speaker on behalf of the opposition. The bill before us is, in itself, quite small. It runs to only a few pages and does not have many clauses; however, it is most significant in terms of where we in South Australia find ourselves at the moment. Indeed, I will put the case, on behalf of the opposition, that it goes to the very heart of the significant problems that South Australians have been suffering recently in regard to the availability of water. Before I address the history of the bill, I would like to say that it has been in the government's mind for almost 12 months; it had to happen, and the government has known about it for a very long time. It is a very important piece of legislation.

I had a very brief and casual conversation with an employee of SA Water late last year as we were leaving a function—it was well before Christmas, probably sometime in November. I made a casual observation about the legislative changes needed to go to quarterly billing. The person said casually to me that it was in hand and that they were working on some changes to the legislation. I observed then that I was aware that the new price had to be gazetted by 7 December and that that time was fast approaching, and I suggested to this person that it would be ideal if the legislation were introduced before then.

I must say that the employee of SA Water did not reveal any internal secrets and was quite circumspect in the way he responded to my comments, but at the same time we did have a reasonable conversation. The employee said, 'No, no; we've been using some regulations. There are some things we can get around. It's a bit clumsy, it's not ideal, but we are working on the legislation. It probably won't be available until sometime in the new year.' I expressed my surprise and disappointment at that, given the amount of time that the government had already had, and I think I suggested that the government would, in any case, be anxious to get the legislation through the parliament before the end of the current financial year. I believe that was probably acknowledged in the conversation.

I make these comments because this bill was introduced in the last sitting week, less than a fortnight ago. As I said in my opening remarks, it is a very important bill, and I intend to speak extensively about its background and about the implications of water pricing in South Australia to illustrate the importance of how we go about the process of pricing water in this state. There has been considerable failure in at least the last seven years.

I want to point out that I think it is poor governance when we have a bill of such importance dropped on the parliament and the government wants to progress it at the very next opportunity, just a week later. I think it is more important than that. The government has possibly argued that it has been out consulting and it is possibly even arguing that all of the stakeholders have been involved. I believe that it leads to poor legislation and poor consideration of legislation when the government spends six, eight or almost 12 months considering its legislative response to a problem that it has and gives the opposition less than a fortnight to consider the government's response. I think that leads to poor legislation.

That is one of the reasons the opposition vehemently opposes the Premier's idea that we should get rid of the other place. Without the other place, this would be a regular occurrence with all sorts of legislation, and there would be very little opportunity for the opposition and minor parties to have time to scrutinise legislation, and history has shown that under those circumstances we are all the losers. I think that is quite clear.

Having said that, I will talk a little about where this came from. As I mentioned a moment ago, section 68, I think it is, of the Waterworks Act stipulates that the minister needs to gazette the price for the ensuing water year (post 1 July) before 7 December in the preceding year.

The government fell into a trap last year. I accept that the current minister was probably genuinely unaware that people receiving their bills immediately after 1 July in the next water year were being billed at that new price, notwithstanding that the consumption of the water that was being billed at that price may have occurred way back in January. I accept that the current minister was probably genuinely unaware of that, and I know the government was severely embarrassed when what was happening came to light. The embarrassment was created because the government was increasing the price of water so substantially that it became a sensitive issue.

When the government announced the price increase, it was at pains to say that this would not occur until 1 July of the following water year—and I think it was probably 5 or 6 December of the previous year (2007) when the government announced the price increase. When it was exposed that they were charging that price from January, it created severe embarrassment to the government.

I think it was very obvious that the previous minister responsible for SA Water (I think he is now the Minister for Police and Minister for Recreation, Sport and Racing and other things) was aware. He might have overlooked the matter at the time it went through cabinet, and I suspect that is what happened, but it was pretty obvious from his body language that he was aware that that was the way in which the system worked. I cannot comment on whether other members of the government were aware—some of them are very good actors—but they certainly feigned that they were unaware, and I guess we have to take that at face value.

Notwithstanding that, what we found was that the government was severely embarrassed, because it had set a substantial increase in the price of water, and it affected consumers within weeks of the announcement rather than six months later.

The government's reaction to that was quite amusing at the time, but I commend the government for then announcing that it would immediately go to quarterly billing. The government was going to change the billing system substantially, and that announcement in itself I suspect was part of the salvage operation of the government to take the heat off its significant bungle. I think the Treasurer had announced previously that the government was considering quarterly billing; then suddenly we had a rash of announcements bringing this on with urgency.

The opposition supports in every way the move to quarterly billing. In fact, the opposition has been calling for a system for a significant time now where consumers have a better understanding of the impact of their water use on their water bills. We have significant restrictions in place, and the opposition has also argued that the restrictions that we have are a bit of a nonsense in that there is a restriction on the water that you use outside the house but no restriction on the water you use inside the house. Therein lies a problem because, in round terms, about half the water consumed in metropolitan Adelaide, at least, is consumed inside the house and the other half outside the house. It is of that order.

We have this very strange restriction regime where some householders can use substantial amounts of water because there is no impetus for them to reduce the amount of water they are using inside the house, and that all comes back to the way that we price water and the pricing signals that are sent. That is one of the reasons why the opposition supports the move to quarterly billing, so that we can more readily make the connection between water use and the amount of money that the consumer is paying for that water.

More importantly, it highlights that fact to the consumer four times a year rather than only twice a year as to that connection between their water use and what they are paying. The old axiom 'out of sight, out of mind' I am sure comes into play when teenage children are in the shower. I am told that teenage daughters, in particular, think nothing of spending 20 minutes in the shower.

The Hon. R.B. Such: It's more like 40.

Mr WILLIAMS: The member for Fisher suggests that I am being very generous to them and it could be double that. Having been raised on a farm (and I currently live on a farm) where the household water is supplied from rainwater tanks, spending 20 minutes in the shower is quite foreign to me. There was a very strict regime in my mother's house when I was a little boy.

The Hon. R.B. Such: That was a long time ago.

Mr WILLIAMS: It was a fair while ago, Bob, but I have not forgotten it. In the home my wife and I raised four children in, we have a 5,000 gallon tank (I think that is a bit over 20,000 litres) connected to our roof and that provides all the water for household use apart from the toilet flushing, and we have never looked like running out of water. In fact, if the tank gets towards half empty—and I do look at it occasionally during the summer—I start to look at the skies wondering when the next rain might come. However, I comfort myself in the knowledge that there is probably another six to eight weeks of water still available. I admit that where I live in the Lower South-East it rains a little more regularly than in most of South Australia.

The Hon. K.A. Maywald interjecting:

Mr WILLIAMS: Considerably. Notwithstanding that, this is why we have this piece of legislation in front of us today. As I said, the opposition supports the thrust of quarterly billing. We object to one thing in the legislation, and I will come right out with that now: we do not see the necessity for the change of the date to gazette the water price. Historically, the date has been 7 December. I think that clause 10 seeks to repeal section 68. I am not too sure how long that has been the date by which the water price needs to be set, but the opposition sees no necessity to change that date. In particular, being in opposition we are always suspicious. I know that members of the government were very suspicious when they sat on this side of the house.

Mr Pengilly: They are still suspicious over there.

Mr WILLIAMS: Those up the back are; they are very suspicious. How coincidental it would be to repeal section 68 and then have a new provision that the new water price did not have to be nominated by the government until 1 June in the next year, which happens to be an election year. How convenient would it be for the government, which has already flagged that it will raise water prices substantially as we go forward. How convenient would it be for that government to avoid having to announce those significant water increases right at the beginning of the election campaign, at the beginning of December, and put it off until 1 June.

The opposition can see no reason why that date should be changed. In fact, the process—and I will talk about the process of setting water prices at length in a moment—of setting water prices in South Australia is an established process which happens year in, year out. It just rolls along. It rolls along so that the cabinet makes a decision, probably in the last week or two of November, to hit that date in the first week of December. The process is there, and I am sure that it has been rolling along this year, since the last announcement, and I am sure that there will be no difficulty in meeting that date next year.

The only difficulty in meeting that date is that, as I said, the water consumers/taxpayers/voters of South Australia will be flagged of what substantial increase in water rates they will be paying right at the beginning of an election campaign. The opposition will be opposing that measure to change the date, and I will be interested to hear the government's defence of that position.

I suspect that the government will suggest that, by having that date closer to the water consumption period, it more adequately aligns consumption decisions because people are aware of the price. Well, we have already addressed that by going to quarterly. We will have already addressed that by moving to quarterly billing where people will be reminded on a quarterly basis exactly the price they are paying for water consumed.

I am sure that the announcement will be made as quietly as possible, probably in the shadows of some significant event to make sure that the majority of people do not even hear it. The first time they will have any understanding of the new water price will be when they get their first quarterly bill after 1 July. I do not think it is possible for the government to make a compelling argument that it is absolutely necessary to change that date.

I talked about the importance of this legislation because of the impact it will have in South Australia. One of the failures that we have witnessed in South Australia in the last seven years concerns the drought. I will be kinder to the government, I will restrict it to the last five or six years, but we have certainly known that we have been in drought since 2002. The impact in South Australia probably was not quite as severe in the first couple of years because there was still water in storage in the Dartmouth and Hume, and water was still coming down the river; we still had that back-up.

However, we have known and the government has known that we have been in drought and that the nation has been in drought since 2002. The Premier came back from Canberra in November 2006 from a meeting with the then prime minister and other premiers and announced, 'We were told that this is a one-in-1,000 year drought.' They were the words of the Premier. At least since November 2006 the Premier has stated (presumably he told the rest of his cabinet, as certainly the opposition heard his words) that we were in the most significant drought this country could expect to experience in 1,000 years.

Personally I do not accept that diagnosis. We have had significant droughts not dissimilar to this one since white settlement of this nation, but this is a very severe drought—let us not walk away from that—and the government has known about it. If it did not know about it before November 2006, it cannot argue that it was still unaware of it at that point, as the Premier is on the record making that statement.

Why has there not been a response? Part of the reason there has not been a response (I will go on much longer than I intend if I go fully into this) is that the state, in spite of statements from the Treasurer, has had no money. In those good times the current government has squandered the rivers of gold; the billions of dollars of cash that have flowed into the Treasury coffers have been squandered.

Mr Pengilly interjecting:

Mr WILLIAMS: What we have seen in South Australia will be done to the nation many times over, that is for sure. In reality the government was loath to take a decision as it knew it would cost a lot of money, because it had squandered the rivers of gold, and it is all about having capital. Every time the opposition suggests that something should be done in South Australia the immediate response from the Treasurer is, 'How are we going to pay for it?' That gives us an insight into the Treasurer's mind. He has been asking himself that question for a long time now. I am sure that various ministers take very good ideas to him. I am sure that various water ministers have taken very good ideas to him over the years, and his response has always been, 'How are you going to pay for it?' The decision has been put off continually.

The government talks about the Water Proofing Adelaide strategy, and that goes back to 2004. If members read that strategy—and there are a couple of graphs on pages 14 and 15, from memory—we see the supply and demand curves for metropolitan Adelaide, and they show that by 2005-06 (it is hard to extrapolate as it is a fairly general graph—around that time), under drought conditions, in South Australia the supply and demand curves would meet. As we go forward from that point they would pass each other, that is, the supply would fall short of the demand.

That is not new, but herein lies the problem: the price set for water in South Australia, the mechanism for setting water prices, does not send the proper signals to either side of the market. The demand side has been going on merrily, with people turning on the tap and paying a relatively low price for water, and the supply side has been locked into having to, first, sell water at a relatively low price and, secondly, give 95 per cent of any money it made back to Treasury. So, neither side of the market has received adequate price signals to make them change their behaviour, and therein lies the problem.

We have a number of principles that have been established over many years, and we go right back to the 1994 COAG agreement where principles of setting water prices were established. The principles basically stated that we should be charging what it costs to source the water and deliver it to households. There are a number of other principles in it, but that is the basic one: we should be charging what it costs.

The 2004 National Water Initiative expanded on that, refined how we went about it and stated that not only should we charge what it costs but we have to be careful we do not charge too much. So, we have an independent process to set the price, like an independent regulator (the Essential Services Commissioner would be a good person to do this work). We would have an independent process to set water prices so that the right market signals are displayed to both sides of the market and we do not institutionalise monopoly rents. That is the terminology they use.

Another issue is that these principles suggest that a government-owned water corporation or water business, such as the one in South Australia and in most states, should be run like a private business. However, the reason we have these independent price-setting mechanisms is that a private business is subject to the market. In water, obviously, because it is a monopoly, the monopoly is incapable of determining the correct price via normal market mechanisms. They are the fundamental principles behind the regime that has been adopted through both the COAG agreement of 1994 and the more recent National Water Initiative.

The process should, indeed, have a fully independent body, person or authority to set the water price, taking into account all the factors; however, in South Australia, we do not use that system. We use a system whereby the Treasurer sets the water price, and the Treasurer sets the water price possibly for the wrong reason—because he is the beneficiary of any profit from SA Water, and therein lies one of the problems in South Australia. That is why I think it is fair to argue that the correct price signals certainly have not been sent to the supply side of the market, and that is why SA Water has not been in a position to increase the supply.

That is why SA Water has not been able to go to government much earlier and say, 'We need to build a desalination plant in South Australia.' That is why SA Water has not been able to convince government that we need to establish a comprehensive and integrated stormwater harvesting system across metropolitan Adelaide—a stormwater harvesting act for storage and recovery. That is why the government keeps pushing that off to the local government sector and does not want to be involved—because Treasury is setting the price for the wrong reasons. It is not setting the price to ensure that SA Water is a business that reacts to the realities of water supply and demand in South Australia. It operates a business such that SA Water can supply cash to the government. In his 2008 report, the Auditor-General put it this way:

Effectively, the government fulfils a number of key roles in relation to the corporation including: price setter; taxer; banker; shareholder and owner; and regulator. In each of these roles it can influence the financial performance of the corporation which impacts on the amount of funding it provides to, or receives from, the corporation.

Those words, or something close to them, have appeared constantly in the Auditor-General's Report for a number of years. It is obvious what the Auditor-General is trying to say to us. The Auditor-General is reporting to the parliament that the government is using SA Water as a milch cow. The Auditor-General's latest report (Volume 4, page 1214) has a graph which shows that in the last five years, from 2004 to 2008, substantial amounts of cash have flowed from SA Water to Treasury.

For the record, in 2004 there was $236 million by way of income tax payments and dividends. That figure grew to $248 million in the following year. In the next year it also included $74 million, under the heading 'Repayment of capital', but the total payment to Treasury was $386 million. Something like a quarter of everyone's water bill goes directly to Treasury. In 2007 it was some $320 million and in 2008 it dropped back to $274 million. By then the drought was biting and the sale of bulk water was substantially impacted upon by the drought, so it was $274 million. We know that since then the price set by the government for SA Water to charge customers has increased substantially.

The process that the government uses, notwithstanding COAG agreements and the national water initiative principles, is that the government develops what it calls a transparency statement. Part A sets out its argument as to what the water price should be, and that is what sets the price. To try to look as if the government is complying with the principles of COAG and the national water initiative, it sends part A of the transparency statement to the Essential Services Commission (ESCOSA), which has a brief to look at it. ESCOSA's most recent final report into the water pricing process in 2008 at page 10 states:

The commission observes that its task, as set out in the terms of reference, is to review price-setting processes only.

The Treasurer would have us believe that the Essential Services Commission has a major role in the setting of water prices in South Australia. Let us not be fooled by that. The reality is that the Treasurer develops a document that says, 'This is what we want to charge,' sends it to ESCOSA and says, 'Look at it and make some comments about the process.' ESCOSA does that as well as it can, given the terms of reference, and hands down its final report. Notwithstanding its final report—as I will demonstrate in a few minutes—the government takes no notice of it and does what it wants to do anyhow.

The National Water Commission in a recent report also comments on the process. It was a more generic comment, particularly with regard to South Australia. Page 10 of ESCOSA's final report states:

The [National Water] Commission observed that 'the current form of inquiry, being a retrospective inquiry into the processes for establishing prices, is not conducive to meaningful public consultation'.

Let us not accept that the government is taking either ESCOSA or the public into its confidence as it is moving forward in setting water prices in South Australia.

The National Water Commission goes on to say that the 2007 biennial assessment of progress in implementation of the national water initiative noted that some of the major prerequisites for achieving improved water charging outcomes derive from reforms outside of the national water initiative. One such reform area specifically identified by the National Water Commission was for stronger independent charging oversight in some states. I will guarantee that, when that sentence was written, South Australia was at the forefront in that phrase 'some states'.

That just highlights some of the problems we have. I repeat: the reason I am going through this is that I want the house to understand that the reasons why we find ourselves with inadequate water supply in South Australia and an inadequate response to the drought lies in the way that water pricing strategies have been developed in South Australia. It is integral to the failure of this government to make adequate provision for water supply in South Australia.

I want to refer reasonably extensively to ESCOSA's final report because I think it is quite revealing on this matter. At page 31 it talks about major capital expenditures and the impact that they have on water prices in South Australia. It is noted:

…it appears that the two major water security projects that have been taken into account in the 2008-09 water pricing decision are the desalination plant and at least part of the costs of the north-south interconnector. However, Transparency Statement—Part A—

that is the bit that is constructed by the Treasurer and sent off to ESCOSA to review—

does not make this explicit.

Here is ESCOSA trying to comment on the process of establishing water prices in South Australia and it has to assume that the water prices which are going to be used as of 1 July in South Australia are designed to bring in funds for those two projects, but it is not explicit.

Might I say that is one of the reasons why the opposition has called for the government to set up a hypothecated fund. When the government makes the argument that it has to increase the price of water substantially because of the major capital works that are in front of us, why is the government too frightened to put those extra revenues into a hypothecated fund? The answer is pretty obvious to the rhetorical question. It is a nonsense. It is Treasury that is reliant on that cash flow. The ESCOSA report goes on to say:

while Transparency Statement—Part A provides information on SA Water's capital program, little or no information is provided to demonstrate that forecast capital costs are efficient.

It goes on to make some further comments. It is trying to get its head around whether the pricing, which is based on the capital needs of SA Water—that is what is driving these pricing increases—are efficient and are the policies (which are supposed to come out of these pricing signals) the right policies? ESCOSA, I think, is arguing that it is not being given enough information. It stated:

Furthermore, in relation to externality benefits that were suggested for certain Water Proofing Adelaide projects, the Commission [the National Water Commission] noted that:

no information is provided on the nature or approximate value of these benefits. It is therefore not possible, on the information presented, to assess whether or not the projects are efficient.

I think that is a pretty scathing criticism. We are having a public debate in South Australia (and it will crank up as of this day) about whether, once we build a 50 gigalitre desalination plant in Adelaide, we then double the size or whether we put the next bucket of money into developing a stormwater harvesting aquifer storage and recovery system across metropolitan Adelaide. The opposition has been making the case for the latter for at least 12 months. The government has been resisting it. However, it seems that the government has been going to Canberra and saying to the federal government, 'We want to double the size of the desalination plant.'

We know from ESCOSA's final report, just on the 50 gigalitre desalination plant and the north-south pipeline, that ESCOSA cannot determine, because the information has not been provided, whether that is the best way to go forward. How on earth can ESCOSA and the community get their mind around whether we are best to build a second stage of the desalination plant to take it to 100 gigalitres or whether we should put that additional money into a stormwater harvesting aquifer storage and recovery project? The government is not doing the homework on the externalities.

The reality is that, even if we do not harvest stormwater in Adelaide (and I know this minister is not responsible for the environment), somewhere government has to address the degradation to our coastal waters. The coastal waters study has identified that one of the major contributors to the degradation of our coastal waters is stormwater runoff. Something like 170 gigalitres a year of stormwater runs off metropolitan Adelaide in an average year. Prior to European settlement of the Adelaide Plains that figure was about 20 gigalitres. So, an additional 150 gigalitres of runoff is being created that is running through our creeks and streams into the sea and impacting on our coastal waters. I think the cost of that is one of the externalities that was being talked about by the Essential Services Commission when it said:

No information is provided on the nature or approximate value of these benefits. It is therefore not possible, on the information presented, to assess whether or not the projects are efficient.

I think the Essential Services Commission is saying that there is no cost benefit analysis of various projects, yet the price of water being charged in Adelaide (in South Australia in general) is being driven by these projects. But there is no cost benefit analysis. The report quotes the Transparency Statement—Part A, which states:

For the proposed Adelaide desalination plant, firmer estimates of future operating and capital expenditures will become available upon completion of all environmental and engineering studies and pilot plant testing. As firmer estimates become available, revisions will be made to the regulatory model and will be considered in subsequent annual price setting processes, as appropriate.

If we remember that that was probably written in the middle of last year, I suppose that is a reasonable thing to say, on behalf of the government (this is the government's part A). The commission's response to that was as follows:

The Commission acknowledges that estimates of major capital projects are still at a preliminary stage. In particular, it understands that a due diligence program will be undertaken that will result in firmer estimates of future costs. However, the expenditure forecasts represent a significant increase compared to historic levels and have a large influence on price outcomes.

Again, the commissioner quotes from Transparency Statement—Part A:

These major infrastructure investments eventually need to be funded through increased water charges and, hence, were a major influence on the government's 2008-09 water pricing decision.

So, here is the government saying that a major influence on its water pricing decision was the decision to build a desalination plant, but it says, 'Hey, we don't know what it's going to cost. Hey, we don't know very much about it but, notwithstanding that, we're going to charge this anyhow.' The commissioner continues in response to that latter quote, and says, among other things:

The commission observes that there is still significant uncertainty over the level of cost and hence the level of prices that will eventuate in future years as a result of the projects—

that is the desal plant and the north-south connector—

and that the proposed pricing approach allocates the full risk of such uncertainty to water customers. That is, the current process does not provide incentive to minimise and actively manage cost variations because any increase in forecast cost is likely to be passed through to consumers who are least able to manage this risk.

I was talking earlier about SA Water and its monopoly standards. Here, the commissioner is saying, 'Hey, because you are so airy-fairy in your Part A, because you're saying, "We can't give you this information because we don't have it yet," you are transferring all the risk, because you have a monopoly, to water consumers.'

What the commissioner is saying is that the government has taken a decision to build a desalination plant, and I will reconfirm the opposition's position on that: the only thing that the government has done wrong about building a desalination plant from the opposition's perspective is that it has not done it earlier. It should be up and operating.

However, having taken the decision to build it, I think the Essential Services Commissioner is saying, 'You are being dammed sloppy. You haven't done the business case. You haven't done the cost benefit analysis. All you've done is said, "Yes, we're going to build it and to hell with what happens to the costs in the meantime because we can pass those costs straight on to the consumer".' The commissioner continues:

Based on its assessment of the material provided to cabinet—

this is the commission's assessment of the material provided to cabinet—

in support of the 2008-09 water decision, the commission does not consider that the level of information provided to cabinet in relation to these expenditure forecasts would enable determination of whether or not the expenditure is efficient.

The commissioner is saying that the cabinet took a decision based on very scant information. Cabinet, basically, signed off on the price on the basis of very scant information. I think we should all be somewhat concerned about that.

It has been my desire to leave the house in no doubt that there is no connection between the price that has been charged to water consumers in South Australia and what it costs to efficiently and effectively deliver that water, because other factors have intervened, principally, that the Treasurer is hungry for that cash.

The outcome of that is twofold. Neither the supply side nor the demand side understands where it is going. Consequently, neither the supply side nor the demand side has adapted as it should have to the current drought. The demand side has not received an increase in price signal to say, 'Whoa! You've got to cut back on your water use.' What the demand side has received in lieu of that is a very draconian set of restrictions which, as I said earlier, apply outside the house not inside the house. That only confuses people a lot more, and I think anybody who suggests that there are not a lot of people out there who are flouting those restrictions is not living in the real world. That is one of the problems.

Another problem is that the industry, SA Water itself, has not received the correct price signals to say, 'Hey, isn't it about time you did something about increasing the supply?' It has been waiting and waiting and waiting for a political decision. The Treasurer wants the cash, and the political question is: does the Treasurer keep taking the cash or do we actually do something about water supply? To date, the decision has been that the Treasurer wins and takes the cash.

I happen to know that for a number of years the Premier kept debating, in his own mind at least, 'How foolish will I look if I go out and spend $1 billion-odd building a desal plant and it rains?' I happen also to know that the Premier has had the mental anguish of coping with that particular question.

Mr Goldsworthy: He has lots of mental anguish.

Mr WILLIAMS: He has lots of mental anguish, and that is one. That, in itself, has probably cost the supply side here in Adelaide at least 12 months, if not two years. That is why the opposition is quite confident in saying that, had we been in government, we would be drinking and washing in desalinated water as I speak. That is a reality.

In recent years, a plethora of papers, generally emanating from academia, have been written on this very question, that is, on the relationship between supply, demand and price. By and large, they all say one thing: because we intrinsically have these monopoly organisations in various jurisdictions, we must have an independent price-setting mechanism that operates under a strict set of guidelines. The guidelines have been established for years. COAG and the National Water Initiative have put down the guidelines, and they have been established for years—but we have failed to use them, and that is the problem.

I will not go on and on and quote from them; however, I can say that the Allen Consulting Group quoted a study done by the Centre for National Economics 2005, entitled 'Economic benefit cost analysis of new water supply options for the ACT'. In a report, entitled 'Goodbye to water restrictions', the Allen Consulting Group suggests that householders in Adelaide would be willing to pay between $77 million and $300 million a year (these figures are a couple of years old) to get rid of water restrictions. The government has failed to recognise that water restrictions are costly. They cost society, and they cost the community. I cannot emphasise that point enough.

When you break down the elements the government has put together to make up the water price, there is a whole range: the cost of operating the business; the cost of sourcing the water; the cost of delivering the water; and the cost of maintaining the system. I have probably not included all the elements in that short list, but one is the cost of the asset. I seek leave to continue my remarks later.

Leave granted; debate adjourned.


[Sitting suspended from 13:00 to 14:00]


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