Since the early 1990s sectors of Australian industry, such as gas, electricity, transport and telecommunications have been opened to private sector investment under National Competition Policy (NCP). Water has more common characteristics with some of these sectors than others. For example, water is seen as an essential commodity in a similar way as gas or electricity but dissimilar to other essential services like healthcare and education. Similarly, members of the public do not necessarily expect the supply of water, gas or electricity to be subsidised and, by and large, communities are more than capable of paying a price for these services which reflect the cost of delivery and ensures a fair return to the public or private utility that provides the service.
A review of competition policy by the Productivity Commission in 2005 concluded that NCP has delivered net substantial benefits to these industries, the Australian economy and community. The Organisation for Economic Co-operation and Development (OECD) and the International Monetary Fund (IMF) also affirmed that wide ranging structural reforms and sound macroeconomic policies were the main reasons Australia's economic performance has strengthened significantly in recent decades (COAG National Policy Review, February 2006).
• Following the introduction of competition, electricity bills fell by about 23 to 30 per cent on average for New South Wales and Victorian businesses covered by the national competitive market; while wholesale prices in Queensland fell by around 23 per cent after its internal competitive electricity market commenced.
• Gas prices for major industrial users fell 50 per cent after deregulation of the Pilbara market in 1995, while gas distribution tariffs are set to fall 60 per cent by the year 2000 in New South Wales.
• Rail freight rates in Western Australia fell by 42 per cent in real terms from 1991-92, while rail freight rates for the Perth-Melbourne route fell 40 per cent and service quality and transit times improved, following the introduction of competition in 1995.
• Conveyancing fees in New South Wales fell 17 per cent between 1994 and 1996, after the abolition of the legal profession's monopoly and the removal of price scheduling and advertising restrictions, leading to an annual saving to consumers of at least $86 million.
• Prices for government trading enterprises fell substantially between 1991-92 and 1995-96 and payments to governments doubled, due partly to competition reforms. Evidence shows that these trends are continuing. In the five years to 1996-97, the sharpest price reductions occurred in electricity (24 per cent), port services (23 per cent), telecommunications (23 per cent and air traffic services 40 per cent) (NCC, 1997-98).
A recent decision by the Australian Competition Tribunal on 21 December 2005, to declare that elements of Sydney's sewerage system should be open to third party access suggests that from a legal perspective, opportunities already exist for the greater involvement of the private sector in the provision of water and wastewater services. There are other factors that favour greater private sector involvement: the success of other sectors who have gone down this path (there are 60 gas and electricity third party access arrangements registered at present); movement towards cost-reflective pricing for water; improved and cost-effective technologies for treating and recycling water; and changing public attitudes to private sector involvement.