Productivity Benchmarking the Australian Water Utilities

Abstract

This article presents a productivity benchmarking study of Australian water utilities using stochastic frontier analysis of the input distance function. It identifies total factor productivity (TFP) trends and comparative levels and, through decomposition, explores some of the reasons for productivity change. Productivity is found to have declined between 2006 and 2010 over all regions, with the smallest declines in the four major urban Victorian utilities and the largest declines among the regional Victorian urban water utilities and the major utilities in other states. Comparative technical efficiency analysis finds the major urban Victorian utilities were more efficient than the average water utility, while the regional Victorian urban water utilities and the major utilities in other states were of below-average technical efficiency. The benchmarking method employed in the study may be relevant to economic regulation.