Water, electricity prices too high - and too many Ministers

Wednesday, 9 March 2016

South Australia should slash government red tape on water and electricity prices to help ease the pressure on consumers and make business more competitive, and the State could get by with fewer government Ministers, according to a new report from the University of Adelaide’s South Australian Centre for Economic Studies (SACES).

In the centre’s latest Economic Issues paper, economists say SA has an important decision to make: to continue down the path of being a highly regulated and taxed State, or to follow the path chosen at a Federal level back in the 1980s, and aim to be lightly regulated for the ultimate benefit of business, customers and the economy.

"The State Government does have stated objectives of reducing and having more efficient regulation, but our paper highlights a range of over-regulated areas that require urgent attention," says the University’s Associate Professor Michael O’Neil, Executive Director of SACES and co-author of the latest Economic Issues paper.

Among the key examples of over-regulation in South Australia are high water and electricity prices.

"Our report shows the overall cost to South Australian households of water per kilolitre has been consistently higher than the other mainland States and growing generally faster than interstate," Associate Professor O'Neil says.

"The Essential Services Commission of SA (ESCOSA) is required to use values determined by the South Australian Treasurer when setting water prices. The price per kilolitre is often higher than it should be in order to provide SA Water with an agreed rate of return.

"As a result, South Australia has the nation's highest metropolitan water usage prices ($3.63 per kilolitre) and highest water supply charges ($71.60 per quarter). Compare that with Western Australia ($2.86 per kl), and even with Los Angeles, California (between $2.52 to $3.14 per kl), which has been drought affected for several years."

Associate Professor O'Neil says two former Water Commissioners and a former CEO of ESCOSA (now a Professor at the University of Adelaide) have all highlighted the potential impacts of this over-regulation: "High water prices are a cost to consumers, they make South Australian industry less economically competitive, and they likely impact on location and investment decisions by enterprises and agricultural producers," he says.

"Many of our principal export industries – agriculture and horticulture production, wine and food processors – face high input costs, which are a clear drag on their international competitiveness."

Associate Professor O'Neil says these comments also apply to the higher cost of electricity for South Australian consumers and business, as a result of the State Government’s approach to the regulation of renewable energy.

"The higher cost of water and electricity to industry, and the high costs of sewerage and waste disposal, all affect industry profitability and employment, and may act as a brake on new businesses and product and service innovation. Because of this, South Australia could be missing important opportunities for growth," he says.

The paper also says South Australia could operate with just nine government Ministers instead of the current 14. "While our State already has the second lowest number of government Ministers in Australia, 14 Ministers is still relatively high when you consider the size of the population being governed," Associate Professor O'Neil says. "Reducing the number of Ministers would likely provide savings in Ministerial expenses and coordination costs, creating efficiencies."

The latest Economic Issues paper has been announced ahead of tomorrow's SACES business luncheon in Adelaide (Thursday 10 March), featuring guest speaker Professor Ross Garnaut AO.


Contact Details

Associate Professor Michael O'Neil
Email: michael.oneil@adelaide.edu.au
Executive Director, SA Centre for Economic Studies
The University of Adelaide
Business: +61 8 8313 4545
Mobile: +61 (0)408 812 032

Mr David Ellis
Email: david.ellis@adelaide.edu.au
Website: https://www.adelaide.edu.au/newsroom/
Deputy Director, Media and Corporate Relations
External Relations
The University of Adelaide
Business: +61 8 8313 5414
Mobile: +61 (0)421 612 762