Water Business


As soon as the March 2007 State election was in the bag, NSW Premier Morris Iemma broke his pre-election promise not to increase State charges and set in motion the bureaucratic machinery to achieve a dramatic hike in water prices. (While the public’s attention was diverted by the headline-grabbing APEC summit he also let slip that the Government was seeking big increases in bus and ferry fares another breach of specific election promises).

On 13 June, Iemma wrote to the so-called Independent Pricing and Regulatory Authority (IPART) asking for a new set of prices covering Sydney Water’s water, sewerage, stormwater and recycled water services. Sydney Water is Australia’s largest publicly-owned statutory water corporation.

The IPART review, Iemma said, should consider ‘all aspects of Sydney Water’s revenue and expenditure’ to include issues such as changed climatic conditions and the construction of the controversial desalination plant under at Kurnell on the northern tip of Sydney’s Sutherland Shire. He admitted that the last review, undertaken in 2005, had set water charges from October 1, 2005, until June 30, 2009, but circumstances now demanded further increases. If you strip away the political gobbledygook, he was saying that after 12 years in power in NSW the Labor Government, having been cornered, was being forced to raise revenue, principally from domestic users, to play catch-up in securing the water supply for Australia’s largest metropolis.

Thanks to Fiona Katauskas

For the record, IPART’s name is something of a misnomer. It is a publicly-funded instrument whose membership is handpicked by the Government. Only in the Wonderland of Party politics could such an organisation be described as genuinely ‘independent.’ Perhaps a more accurate title would be the ‘State Price Fixing Office’ but that wouldn’t have passed the sanitisation test set by the ALP’s principal PR advisers, Hawker Britton.

IPART was the brainchild of former Premier Bob Carr who wanted to take his Government out of the firing line of scorching headlines every time gas, electricity and water charges and fares went up. With his penchant for double-speak, Carr boasted that he wanted an ‘independent arbiter’ to fix the prices charged by public utilities.

On June 1, less than two weeks before Iemma wrote to IPART asking for water price hikes, Sydney Water announced a new chairman Dr Tom Parry. By a happy set of circumstances, Parry is the former Chairman of IPART; indeed, he was the organisation’s founding Chair, handpicked by Carr himself.

Parry left IPART in 2004 to join Macquarie Bank as a senior adviser. One year later, in mid-2005, Carr quit the premiership and he, too, went off to join Macquarie Bank on a highly lucrative contract (with expenses).

So the situation is as follows: Iemma writes to IPART, formerly chaired by Tom Parry, urging extra water charges be granted to Sydney Water which is chaired by Tom Parry of Macquarie Bank. (This is the same bank where the boss, Allan Moss, collects an obscene salary of $33 million a year. Incidentally, his wife is Irene Moss, the former ICAC commissioner and NSW Ombudsman during the record 10-year term of the Carr Government.)

Another Sydney Water director is John Brown, a former KPMG partner who headed the firm’s busy NSW Government Practice during Labor’s long rule; while the token trade unionist upholding the interests of working men and women is Alison Peters, who holds the almost embarrassing title of Deputy Assistant Secretary of Unions NSW.

One of the longest serving Board members is John Priest, former Chief Financial Officer and Director of Corporate Development for Coca Cola Amatil Ltd. The giant beverage group is one of the State’s biggest private water purchasers with literally dozens of contracts to purchase spring water for its three major bottled water brands: Mount Franklin, Pump and Neverfail.

Last Sunday,17 September , Iemma called a press conference to announce that tough water restrictions in the Sydney basin would remain permanent irrespective of the water levels at the city’s main supply, the Warragamba Dam. His stern message was that even if dam capacity rose to 99 percent, householders will continue to face restrictions on using hoses in their backyards and driveways. This forms part of a carefully designed program: first turn water into a socially precious commodity and then give it a matching market price.

At the heart of this strategy is the Government’s determination to bury the old-fashioned notion that water is a basic service provided by government to all citizens at a negligible charge.

What’s the point of changing the public perception of water?

Iemma would argue that by placing a proper market price on water and continuing to enforce tough regulations over its domestic use, the Government is making the citizenry water-conscious and that this is a socially responsible policy to save water. Then again, it is regarded by many in Government as a prelude to the privatisation of Sydney Water.

With a work force of more than 3000 and assets worth some $20 billion, Sydney Water provides drinking water, recycled water, wastewater services and some stormwater services to more than four million people in Sydney, Illawarra and the Blue Mountains. With its large property assets across greater Sydney, it is a cash box that is ripe for asset-stripping and profit-making.

According to Sydney Water’s mission statement, its three objectives are to protect public health, protect the environment and be a successful business. The last of these tasks is in the hands of Managing Director Dr Kerry Schott who previously served NSW Labor as Deputy Secretary at the Treasury. She was recruited to the Treasury from the private sector where, as a merchant banker, she held top-shelf jobs as Managing Director of Deutsche Bank and Executive Vice President at Bankers Trust Australia.

This is an executive for whom the aims of government and business are a seamless area of mutual benefit with rewards for both sides. According to well-placed Sydney Water sources, the former merchant banker is Treasury’s representative on the Board of the statutory State-owned corporation, and this feeds their concerns about the organisation’s future as a public asset.

The climate for privatisation is being set by Iemma himself. In the six months since the election, he has already marked electricity distribution and Sydney Harbour ferries for potential sell-off. (The union leaders who tipped millions of dollars into his election campaign should surely be held to account for their blind stupidity!)

One of those circling Labor’s water strategy is Macquarie Bank, Australia’s biggest investor in infrastructure. In October last year, the so-called millionaires’ factory acquired Thames Water for $20 billion and immediately became one of the world’s pre-eminent players in the increasingly profitable water industry. After managing the vast Thames Water operation, which supplies water to eight million people in the Greater London area and runs sewerage services to 13 million customers, Macquarie will be in the box seat to snap up Sydney’s State-owned water corporation and start making handsome profits for its shareholders that is, investors who can buy shares for up to $80 each.

Or perhaps you believe that Dr Parry, Dr Schott, John Priest, John Brown, Alison Peters and the other Sydney Water Directors will stage an heroic battle and save the city’s water supply from falling into the hands of the private profiteers?

Or even that the Labor Cabinet and backbenchers will rise up to stop the march to privatisation by the State Government’s ruling duo Iemma and Treasurer Michael Cost

At the very least, Labor is shamefully establishing all the micro-economic settings for an incoming Coalition Government in March 2011 to press the button for full-scale privatisation.
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Launched in 2004, New Matilda is one of Australia's oldest online independent publications. It's focus is on investigative journalism and analysis, with occasional smart arsery thrown in for reasons of sanity. New Matilda is owned and edited by Walkley Award and Human Rights Award winning journalist Chris Graham.