Abstract
The aim of this article is to provide derived estimates of the price elasticity of demand for water for residential urban consumers in Australia over the years 2005/06 to 2016/17. The results of the study indicate that higher water and sewerage prices, bundled together, are associated with lower demand for water. The relationship, therefore, between the prices of water and sewerage and demand for water is a negative one.  This relationship, however, is a relatively inelastic one, that is a large change in price is required before there is much of a change in demand for water.  With the supply of water in most Australian urban centers are controlled by monopoly suppliers this means that there is some scope for water restrictions to negate this market power.
Highlights
Water is a vital element of life and plays an essential role in economic development
Water is a scarce resource and it is essential that water prices are a reflection of the cost of extracting and delivering it to consumers, in order that water supply and sewerage disposal infrastructure assets are used efficiently, and so that funds can be raised to finance improvements and extensions to the infrastructure
The results of the study indicate that higher water prices are associated with lower demand for water
Summary
Water is a vital element of life and plays an essential role in economic development. In recent years the difficulties with ensuring a sustainable supply of water for Australian urban centers has been an important issue of economic and political concern In response to this concern a range of measures have been undertaken by governments at the national, state and territory levels, designed to cope with these problems. This has taken place for a range of reasons, including the increased desire on the part of governments to extract greater returns from water industry assets, as well as the need to pay for substantial investments on non-traditional water sources. It is expected that projected population growth, rising real incomes and a reluctance to build surface water reserves will put further pressure on supplies of water and lead to prices of water remaining high (Freebairn, 2008)
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