The following OECD assessment and recommendations summarise chapter 5 of the Economic survey of Australia 2008 published on 10 October 2008.
Water management reform has to be pursued
Better water management is essential to halt the over-exploitation of water resources, particularly in rural areas, and improve supply in large urban areas which are facing persistent quantitative restrictions. Although exacerbated currently by an exceptionally long period of drought, pressures are likely to increase with the growth of demand and the negative effect of climate change on water resources. To better identify and overcome over-exploitation, which primarily affects the country’s main water catchment area (the Murray Darling Basin) which is shared between five states, the Federal Government has implemented the Water Act 2007 and introduced the AUD 12.9 billion Water for the Future plan to improve the management of the basin by giving an increased role to the federal authorities. The plan aims in particular to modernise irrigation infrastructure and buy back water entitlements. It represents a big step forward. Its full implementation, which will stretch until 2019, should be accelerated. Market mechanisms and water entitlement trading also need to be strengthened. Efforts to clarify and harmonise water entitlements between states must be pursued. The numerous impediments to trading permanent water allocation entitlements have to be dismantled. These include restrictions on access to markets for certain users, barriers to trade between rural and urban areas and the exit fees restricting transactions between irrigation districts. Reforming urban water management by government owned monopolies should be explored, while public subsidies for funding water infrastructure projects should be avoided. Lastly, the reform of water charging needs to continue, especially in agriculture, so as to ensure recovery of full supply cost and some environmental and economic externality costs, while water prices in urban areas should reflect demand pressures.
Water usage per capita is high due to strong agricultural use1
1. Data shown for Belgium include Luxembourg. The OECD aggregate excludes the Slovak Republic.
Source: Food and Agriculture Organization of the United Nations, Aquastat Database, accessed September 2008 and OECD (2008), OECD Economic Outlook: Statistics and Projections – online database, No. 83, OECD Publishing.
Cost of water for urban consumers is relatively low
US dollars per cubic metre, June 2007 1
1. User cost (based on 2007 purchasing power parities) assuming consumption of 15 cubic metres per month per user; including value added tax but excluding wastewater treatment. Unweighted average of the city data available for each country. The OECD aggregate is an unweighted average excluding Ireland.
Source: Preliminary estimates from Global Water Intelligence.
The Policy Brief (pdf format) can be downloaded in English. It contains the OECD assessment and recommendations.The complete edition of the Economic survey of Australia 2008 is available from:
For further information please contact the Australia Desk at the OECD Economics Department at email@example.com. The OECD Secretariat's report was prepared by Claude Giorno and Vassiliki Koutsogeorgopoulou under the supervision of Peter Hoeller. Research assistance was provided by Desne Erb.