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Water poverty - a crisis in the making?

Ed Wilcox, Paul Harris — June 2011

Emerging Issue: In their 2011 report into Australia’s Urban Water Sector, the Productivity Commission suggests that the affordability of water depends on the:

  • Cost of purchasing access to and use of water services
  • Cost of other essential goods and services
  • Level of household income, and
  • Ability to budget for water service bills and pay them when they are due.

Utility prices are increasing all over Australia. Figure 1 shows that over the last 12 years, the rate of increase in the price of water (including wastewater) has outstripped all other utilities. Furthermore, Figure 2 shows that in recent years, the rate of increase in all utilities – especially water – is far greater than the rate of increase in average income.

Figure 1: Rate of increase of utility pricing 1998 – 2010 (source: ABS)

Figure 2: Rate of increase of water and electricity versus average income 1998 – 2010 (source: ABS)

Despite water prices increasing at a faster rate than other essential services, the proportion of water expenditure of total household expenditure is still less than electricity or housing costs, such as mortgage or rent. Figure 3 shows that water constitutes 2 per cent of total household expenditure, with electricity and housing costs constituting 3 per cent and 16 per cent respectively. In dollar terms, this translates to average expenses of $1,500 per annum for electricity compared to $1,000 per annum for water and wastewater.

Figure 3: Cost of water versus selected household costs (source: Productivity Commission Urban Water Report)

An examination of customers with troubles paying their water bills shows an increasing number requesting bill extensions or payment plans. One water retailer has experienced approximately a 25 per cent increase in the number of customers in bill distress in recent years, totalling about 40,000 customers. The co-located energy retailer has close to 80,000 customers in a comparable bill distress position.

For another water retailer, the figure for ‘total debt aged greater than 60 days’ has increased by 20 per cent in the last year. For this water retailer, this has translated to current debt levels being reported as 15 per cent higher than at a similar time last year.

Aligning these facts with the Productivity Commission’s criteria for determining the affordability of water, we observe that the:

  • Cost of water is increasing
  • Cost of other essential goods and services is increasing
  • Rate of increase of water is outstripping household income, and
  • Customers under bill stress increases.

‘Water Poverty’ is a new term to the Australian community. ‘Energy Poverty’ is increasingly a concern for government and industry – surely water is not far from this? Is ‘water poverty’ a crisis in the making? Are there segments of our society already experiencing water poverty? What will water retailers need to do to manage this emerging issue?  What are the appropriate policy responses of governments, and how should these be best linked to initiatives taken by the water retailers?  Will such considerations be linked to the similarly emerging ‘energy poverty’ concerns across the country?  Should the water and energy industries take a coordinated stance, and proactively seek to influence government responses?

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