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A simple solution to those annoying water restrictions

By Andrew Leigh - posted Tuesday, 29 March 2005

As the demands on our water supply have steadily increased, Australian governments have imposed ever more stringent rules on water usage.

Recently, the Victorian Government announced that Melbourne will follow Adelaide and Geelong in making its water restrictions permanent. It seems only a matter of time before Perth and Sydney follow suit. Yet if we are to make the best use of our water resources, we could do no better than to abandon arcane restrictions across all Australian cities - and raise the price of water.

Under the water restrictions prevailing in most Australian cities, gardeners are banned from using sprinklers, and may water with hand-held hoses only between certain hours on certain days. Car owners may not use hoses to wash their vehicles.


And if you spot your neighbours doing the wrong thing, the water authorities invite you to call a "dob in a gardener" hotline, so they can impose a substantial fine.

Water restrictions impose a social cost - chiefly on ardent gardeners and car enthusiasts, but also on the rest of us. Juggling our chores to water the garden on the right day can be a hassle. Being forced to water by hand rather than using a sprinkler system uses time that could be spent with family or friends.

Individually, these costs are small - but collectively and over time, they add up.

There is only one reason for such restrictions: the price of water is too low. Plenty of other goods in society are both important and scarce.

Almost every household consumes bread, milk and electricity daily, but without government restrictions on when and how they can be used. The trick with bread, milk and electricity is that the people who supply them charge a price that reflects the cost of production.

Presumably because it fears political backlash, governments prefer to set a price for water that is too low, and then employ a plethora of regulations to keep consumption down.


A better approach would be to raise the price of water, and let individuals choose precisely how they want to save on consumption.

Some might choose to put a brick in the toilet cistern, while hosing the car down once a fortnight. Others might be happy to pay a higher price for water so that they might have the freedom to hose the occasional dog dropping off the driveway.

In international terms, Australian water prices are relatively low. A UNESCO report in 2003 found that water was cheaper in Australia than in the US or anywhere in Europe. The British and French pay more than twice as much for water as we do, the Germans more than triple.

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This is an edited version of an article first published in the Sydney Morning Herald March 23, 2005.

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About the Author

Andrew Leigh is the member for Fraser (ACT). Prior to his election in 2010, he was a professor in the Research School of Economics at the Australian National University, and has previously worked as associate to Justice Michael Kirby of the High Court of Australia, a lawyer for Clifford Chance (London), and a researcher for the Progressive Policy Institute (Washington DC). He holds a PhD from Harvard University and has published three books and over 50 journal articles. His books include Disconnected (2010), Battlers and Billionaires (2013) and The Economics of Just About Everything (2014).

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