The Fiscal, Economic, and Public Health Dangers of Water Privatisation

by Jim Stanford

Safe drinking water and sewage services are one of the most essential elements of public infrastructure in our society. Communities cannot survive and thrive without reliable water services. Providing those services is core business for any municipal or regional government.

But beyond the obvious importance of good water systems to life, health, and well-being, the water system also constitutes a valuable economic asset in the overall portfolio of public enterprise (see box). Investments in high-quality water and sewage systems represent enormous sums of fixed capital. The financial and operational dimensions of water systems are significant to the fiscal and macroeconomic functioning of the whole state economy.

In this context, suggestions that the Sydney Water system might be sold to private investors raise a wide range of significant concerns: regarding the efficiency and safety of their continued operation, access to healthy and affordable water services for state residents, and the economic implications for customers, workers, and state government itself. A new research report from the Centre for Future Work reviews some of those concerns, and considers the likely consequences of Sydney Water’s potential privatisation.

Main findings of the report include:

  • Sydney Water represents an essential public asset, important for both economic as well as public health reasons
  • Sydney Water boasts total assets of almost $24 billion, public equity of $8 billion, annual revenues of $2.8 billion, and dividend and tax payments to the people of NSW that averaged $870 million per year since 2018
  • The state earns far more from dividend payments arising from its equity in Sydney Water, than it would pay in interest on an equivalent amount of public debt
  • Selling the utility would impose a significant fiscal cost on the state through lost dividend and tax revenues
  • Experience with privately-owned water systems in other countries suggests water charges would rise significantly under private ownership, largely because of higher interest costs, higher debt, and higher dividend payouts
  • Based on UK and US studies, Sydney Water customers could see their annual water bills grow under private ownership by 39% to 59% (or by an average of between $174 and $264 per customer per year).

The report was commissioned by the NSW & ACT Branch of the Australian Services Union.

Full report