Urban water in Australia: future directions

Future directions report coverThe National Water Commission's 2007 and 2009 biennial assessments of progress in the implementation of the Intergovernmental Agreement on the raised concerns about the performance of the urban water sector and declared that the National Water Initiative did not give sufficiently clear guidance on the required direction for urban water reform.

To resolve this challenge and provide keystone input to governments' decisions on urban water policy, the Commission launched its 'Developing Future Directions for the Australian Urban Water Sector' project in mid 2010.

This final report - Urban water in Australia: future directions - considers whether the sector's underlying institutional and policy settings need reshaping to improve performance now and in the future, and sets out the Commission's findings and recommendations.

Documents for download

Download Future_directions.pdf Future Directions report (3.6MB)

This report is also available in sections:

Key findings

  • Further change is needed to institutional and policy settings in the urban water sector.
  • There are opportunities to improve service delivery and the focus on customers.
  • Current regulation of water quality, public health and environmental outcomes is not cost-effective and creates barriers to integrated water management.
  • Confusion about the role of the urban water sector in delivering liveability outcomes is stalling progress.
  • The lack of agreed objectives for the urban water sector is a fundamental barrier to change.


The National Water Commission therefore urges the Council of Australian Governments to adopt a new set of urban water objectives to guide reform.

The Commission suggests this national statement of objectives:

'The Australian urban water sector should provide secure, safe, healthy and reliable water-related services to urban communities in an economically efficient and sustainable manner.'

More specifically, the sector should:

  1. understand and meet the long-term interests of all water consumers in the price, quality, safety, reliability and security of supply of fit-for-purpose water and wastewater services through the efficient use of, and investment in, systems, assets and resources.
  2. protect public health and the environment by ensuring that the impacts of the sector's operations and investments are managed cost-effectively in accordance with society's expectations and clearly defined obligations.
  3. enhance its effective contribution to more liveable, sustainable and economically prosperous cities in circumstances where broader social, public health and environmental benefits and costs are clearly defined and assessed, or where customers or other parties are willing or explicitly obliged to pay for the outcomes.

The National Water Commission recommends that COAG should pursue priority actions for each jurisdiction that contribute materially to national urban water sector objectives and that each state and territory government also needs to act. These actions should use stronger incentives and an improved monitoring and evaluation framework to drive timely and effective implementation.

In all jurisdictions:

  • Governments should ensure that service providers, regulators and other parties have clear objectives and accountabilities. These should align with specified roles, functions, resourcing and funding.
  • Governments, regulators and service providers should ensure that the urban water sector gives a greater voice to customers. They should do this through exploring opportunities for customer choice in pricing and service delivery, improved engagement in objective setting and the determination of trade-offs, improved customer protection frameworks, and competition.
  • Governments and regulators should recommit to using pricing to promote economic efficiency. They should broaden the coverage of fully independent economic regulation across all urban water systems and ensure that economic regulation is more flexible, to encourage innovation in price and service offerings and better reflect the value of water.
  • Governments should review and amend policy settings to ensure that there is a cohesive approach that allows an efficient portfolio of supply- and demand-side measures to emerge and evolve over time, without direct and ad hoc government intervention. Responsible agencies and service providers should adopt risk-based approaches to supply-demand planning. All parties should strive for greater transparency.
  • Governments and service providers should undertake reforms in regional, rural and remote areas to ensure that there is sufficient organisational, financial, technical and managerial capacity to meet service delivery requirements and protect public health and the environment, particularly in New South Wales and Queensland.
  • Governments, regulators and service providers should work actively towards a goal of more market-determined bulk water prices and other market-oriented options to promote efficiency and innovation, including through consideration of detailed implementation and transition arrangements.
  • Governments and regulators should better embed mandatory benefit-cost analysis and community engagement in the regulation of public health and the environment (particularly for investment in wastewater systems) to ensure that obligations are cost-effective and reflect community expectations.
  • Governments and service providers should clarify the roles and responsibilities of service providers and other organisations in contributing to more liveable communities. Decisions related to liveable communities need to be supported by more appropriate funding arrangements, based on robust evaluation of the full benefits and costs.