Lessons from urban water reforms, the Australian story

Lessons from urban water reforms, the Australian story

Capacity Development and Training Manager Declan Hearne reflects on the Australian water reform story and why considering the lessons from others can assist drive water reform to support the sustained delivery of water services for all.

Lessons from urban water reforms, the Australian story

Outhouses in Brisbane 1960’s – The water and sanitation service standards currently enjoy in Australia have come a long way in the last few decades. Source: QUU

Governance reform is a catch phrase that is often used by water leaders as a panacea to fix the many ills of a water sector, but from a management perspective reforms can be difficult to pin down and even more difficult to know where to start. In some ways, there is no one right starting point. For example the OCED principles for good water governance provides sound guidance on what you need for reform but doesn’t necessarily give direction on how to get there. A good starting place is often to look at what someone else has done and learn from their experience.

Urban water supply utilities in Australia are recognised as global leaders in delivering efficiency, productivity and security of supply as well as upholding robust environmental standards. This view is backed by a recent report from the Asian Water Development Outlook by the Asian Development Bank, which tracks five key dimensions of water security, and identifies Australia as delivering effective urban water services. This level of service, however, has not always been the standard, and the history and process of reforms has not previously been comprehensively documented.

The International WaterCentre and the University of Queensland partnered with the World Bank to document lessons from the Australian urban water reform processes with a view that the story could provide useful lessons for other countries that may be embracing different stages of an urban water reform process.

Bottom up, top down

Our report tells the story of urban water reforms in Australia tracing back from the late 1970s and documenting change across three waves of reform – highlighting the drivers of each stage and the processes and major outcomes from each phase.

The first wave emerged from the bottom up, where a number of utilities responded to local challenges associated with water scarcity and financial pressures often linked with inefficient property value-based charging. In Western Australia in the late 1970s, declining inflows in the city of Perth led to a two-tiered pricing system for urban water consumption. On the Eastern seaboard, Hunter District Water Board, facing similar water shortages and financial pressures, introduced user-pays pricing but took it a step further by reducing water allocations.

Another milestone in this first phase took place in the state of Victoria, where a Public Bodies Review Committee (1983) led a wide-ranging and bi-partisan parliamentary review of water management across the state. This lead to aggregation of some two hundred small water authorities to less than twenty. This process presented to other states and the national government what could be achieved in bipartisan agenda setting.

Recognising what could be achieved through bipartisan agenda setting gave confidence to the national government to step in and lead the second wave of reforms which focused on consolidating earlier lessons and bringing those lessons to scale. Key drivers for this stage of reforms included economic downturn and an unproductive and costly water sector. The national-led reforms included whole of government coordination led by the Council of Australian Governments (COAG), the adoption of a National Competition Policy, coupled with a range of initiatives for mainstreaming reforms. These initiatives included: a reforms framework, federal incentives, benchmarking, and investment in water knowledge and expertise.

The reforms were adopted by states in different ways but collectively led to a three-staged approach to restructure utilities and agencies: 1) aggregation (or disaggregation in some cases); 2) separation of responsibilities including clarification of service delivery roles often through corporatisation; and 3) establishment of professional regulators which provide a platform for commercialisation.

A third phase of reforms was driven by the Australian millennium drought where water scarcity reached crisis point across the nation. In response, the National Water Initiative was established and while largely focused on the need to deal with over-allocated or stressed water systems, this phase also brought reform in the urban context on pricing for water storage and delivery, and increased focus on demand management.

Leadership for reforms

While some regard economic regulation as the most powerful intervention from all the reforms to have been implemented over the last three decades, it is also clear that reform is not just about structures, and that the processes and people involved were key for enabling change.

Building support for national led reforms involved a wide range of champions such as Sir Fred Hilmer who in the earlier 1990s led the process of ‘cherry-picking’ the best and most relevant of reforms from different parts of the country and merged them into a coherent national-level reform strategy, the Water Reform Framework.  Importantly he had the resources and support to explore and develop on individual lessons by gaining a ‘bird’s-eye’ view of any observed barriers to reform.

At the institutional level the importance of having key individuals who possess “an understanding of how to interact with the political and the public, as well as the paying customers, and know how to treat them as stakeholders was critical.” Local leadership was also critical to lead the evolution of organisational culture and ensure the right diversity of skillsets to address the range of challenges and opportunities presented by the urban water reforms.

Importantly, there was also political leadership. Reforms could only be achieved through negotiated outcomes with stakeholders and communities that were politically feasible at the time. This had implications for how reforms progressed and the pace of reform over time, emphasising that water reform is an iterative process where some states could move faster, depending on the readiness of stakeholders. This recognition of the need for different paces of reform and acknowledgement that there is no one size fits all are important lessons from the Australian experience. The Australian reform story highlights how a set of principles were used to engage states and territories around a shared focus, while allowing for different approaches and structures to emerge in different jurisdictions.  Despite differing approaches all, or nearly all, delivered on the targeted outcomes of achieving more efficiency, productivity and security of supply while upholding robust environmental standards.

WRG_fig 2

Map of urban water utilities in 2016. Source: BOM

Why is it important to share these lessons now?

The current level and forms of urban water service delivery in Australia, while varied and not all perfect from provider-to-provider, may be the envy of many water practitioners elsewhere in the world who struggle with inefficiencies, lack of clarity around roles, unclear pricing structures and conflictive policy directions. With a global focus on universal access as aspired for under Sustainable Development Goal (SDG) 6 and SDG 17, recognising the need for global partnerships to enhance policy and institutional coherence for sustainable development offers both an opportunity and imperative for Australia to explore ways and means to share these lessons.

The World Bank did not engage in this project to document this story for Australia’s sake, but rather to inform possible lessons for countries that may have similar legal frameworks and are attempting similar transitions. Take the case of India as an example. India and Australia are both federations. In India, as with Australia, responsibility for water supply is devolved to the states, with local authorities mandated to provide effective water and sanitation services while the national government assumes responsibility for enablement, funding and oversight, and seeks to chart directions for the national interest.

While the coordination of water reforms in Australia has involved six states and two territories, India has 29 states and seven unions, and a population of approximately 1.3 billion, some 55 times that of Australia. It is clear that the scale of the challenge now facing the Indian urban water sector vastly exceeds the challenges that faced Australia at any stage of its water reform history. It is also clear that any lessons from Australia can only contribute to part of the future Indian reform story. This does not diminish the value of considering which structural, institutional, organisational and individual factors in Australia were seen to influence change, or the sequencing of change and how changes were applied at different levels and across different states.

The next steps for us include partnering with in-country stakeholders to both understand the demand for reform and to explore how any individual or collective bundle of lessons can be translated to inform opportunities. The hope is through these actions we can drive reform to enable enhance policy and institutional coherence, that will be critical for supporting the sustained delivery of water services for all.

The Australian Urban Water Reform Story: with Detailed Case Study on New South Wales is published by World Bank and can be downloaded here: https://openknowledge.worldbank.org/handle/10986/27532

Water Reform and Governance Online Training

The International WaterCentre’s Water Reform and Governance is a six-week online training course designed to engage water practitioners across sectors to explore how policy reform and water governance can improve water management systems. Taking lessons from Australia and the world, this course is for those wanting to understand and influence water reform and governance models through collaborative understanding and information sharing.

Enrolments are now open for the next delivery of the course, commencing 23 August 2017.

Learn more & enrol here.

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