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PRIVATISATION OF WATER
A briefing note for campaigners

Background

Water actually belongs to the State, so the privatisation of water actually means that the treatment, sanitation and distribution processes are outsourced by the Government to a private sector corporation. A related issue is that of water trading, which refers to buying and selling water licences or entitlements. Both issues are covered in this note.

Values

This campaign focus is based on values of concern for our neighbour, especially those who are poor, and also on the value of preserving the integrity of creation – a value threatened by the profligate overuse of cheap water.

1. Privatisation of water services is part of a trend. Australian Governments began to sell off public trading enterprises (PTE) to the private sector, starting with the sale of the Commonwealth Bank, in 1991. Financial services, transport, communications and utilities such as gas, water and electricity, are the mostly widely privatised sectors. Governments have raised huge sums as a result, most of which has been used to retire government debt.

Privatisation of essential services can create problems. Government providing these services, have no responsibility other than to meet the needs of its citizens. Private corporations however, need to return a profit for their shareholders. In order to do this, they will often seek to reduce costs or to charge more for the service provided.

There is growing evidence that this practice has some negative effects, especially on low-income consumers. Studies in areas where water distribution has already been privatised, both in Australia and the UK, have found that low-income consumers often take drastic measures to minimise costs and ensure they can pay the bill. These measures include reducing usage of water – for example by not showering every day, going without food, or missing out on children’s clothing or shoes.

2. Water markets: The creation of water markets and the buying and selling of water rights and licences is a feature of the rural water scene. Water rights have actually been traded in Australia for more than 20 years. Now, however, the trend has gained pace. Water entitlements can be traded in a manner similar to real estate. In 1994 The Council of Australian Governments (CoAG) initiated wide-ranging reforms in the water industry. In addition, the National Competition Council has pushed for an expansion of water markets. Now, States can receive substantial payments from the Commonwealth for developing water markets in accordance with National Competition Policy.

Advantages of water markets: Water markets tend push up the price of water entitlements, and this in turn can result in licence-holders using water more efficiently and reducing waste. Reduced water use means a reduction in the water that returns to rivers and aquifers after irrigation, which is often polluted with pesticides and fertilisers. It also means increased river flows. In addition, governments or other bodies can purchase water entitlements from existing holders and return this water to the rivers. Water markets also tend to encourage farmers to extract the highest value from water, for example by changing to a higher value crop.

Disadvantages of water markets: The reason put forward for the development of water markets is that the value of water will find expression in the price paid for it. But this is still not happening. Water can be priced below its real value – for example, Cubby station in Dirrambandi in Southern Queensland, the largest cotton farm in the southern hemisphere, pays only $3,700 to extract enough water to fill Sydney Harbour.

Another disadvantage is the awakening of “sleeper” entitlements. With the establishment of water markets, many farmers found they have entitlements which they do not need. Previously, the water covered by these entitlements simply flowed down the river. Now the temptation is there for the farmer to sell these unused entitlements to others who will extract this water from the river.

Campaign Focus

SAO is asking all candidates in the forthcoming election to support legislation to ensure that people on low incomes will not be deprived of affordable access to clean water supplies as a result of the privatisation of water services. SAO is further asking candidates to ensure that water market prices reflect the real value of water as a scarce resource.

 

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