Crossroads For The Future Water Summit 99Enterprise and Commerce
Water and wastewater services are one of those basic, yet essential services that we rely on for the normal day-to-day activities of life.
These services aren't particularly glamorous - and they are often taken for granted.
But the delivery of these services to New Zealand households and businesses costs hundreds of millions of dollars every year, and the investment in infrastructure assets is considerable.
When last estimated six years ago New Zealand's local authority owned water and wastewater infrastructure was valued at around $6 billion dollars.
The annual operating cost to local authorities of providing water and wastewater services is approximately $600 million dollars.
Some councils estimate they will spend tens of millions of dollars over the next few years on deferred maintenance.
For example, Metrowater in Auckland City estimates it will have to spend $220 million.
This is a lot of money.
But, when you consider the extent to which these services are used by New Zealanders, you see the important role they have in maintaining and sustaining the Kiwi way of life.
New Zealanders use about two thousand million cubic metres of water each year (not including hydro electricity generation).
Of this, two thousand million cubic meters, or about 11%, is used by people in their homes; 57% is used for irrigation; 18% for livestock and 14% by industry.
Water, wastewater and stormwater services are critical for most, if not all businesses, industries, learning institutions and households.
These play a big role in the functioning of our economy.
They are a key input to the production of nearly all goods and services.
They are also crucial in maintaining a healthy and productive workforce.
Perhaps most importantly, we all rely on access to safe drinking water to survive.
Service failure or the delivery of poor quality services can result in high costs to the health and wellbeing of our communities.
Over the past decade National-led governments have been committed to promoting economic growth, social prosperity and security, and environmental sustainability for all New Zealanders.
Our broad economic framework has allowed innovation and enterprise to flourish, based on five fundamental principles:
An open, internationally competitive economy;
Low inflation and interest rates;
Low tax rates and fiscal prudence;
An open, transparent and predictable legal and business system; and
Flexible labour markets which enable business to adjust to changing markets at home and aboard.
To bring the benefits of these policies to fruition, New Zealanders and New Zealand business must have access to an efficient, effective, high quality water and wastewater infrastructure.
The key to this is ensuring there is an appropriate framework in place for management and maintenance.
This is why the Government has initiated a comprehensive and coordinated review of the delivery of water and wastewater services.
The review was initiated because of the growing concern by a number of stakeholders about the regulatory framework for water and wastewater a was affecting the quality of service for families and businesses.
These concerns included:
The fragmented nature of the regulatory framework for water and wastewater. (There are at least five main pieces of legislation relating to the sector, and more than 30 pieces in total).
The poor state of the infrastructure in some areas and the need to address issues of maintenance and replacement.
(For example, local authorities in Dunedin, Auckland and Wellington have announced the need to confront deferred maintenance on their water and wastewater assets. In some cases deferral and neglect has gone on for more than a decade. Communities are now paying the price. )
The variable quality of drinking water and the potential in some areas for public health to be compromised.
At present, about 85% of New Zealanders have access to safe drinking water. This is a major improvement on the 70% in 1994 and only about 50% in 1992 - but 15% of New Zealanders still need access to safe drinking water.
We do not want to expose New Zealanders to the same sort of risks created by the problems with Sydney water supply last year.
The impact the sector can have on the environment, and on cultural values.
(Heavy rain placing pressure on the capacity of existing sewerage and stormwater infrastructure and causing an overflow of wastewater into the environment).
Work undertaken by the review team so far appears to confirm that these problems are due to the lack of a comprehensive and coherent legal and regulatory framework that creates incentives for efficient and effective management.
The need for such a framework is even more important in the face of the rapidly changing domestic and global economy.
New Zealand is an internationally competitive economy, and businesses more than ever need to focus on reducing the costs involved in doing business
Businesses are also looking for more individualised services from water and wastewater suppliers to meet their specific needs.
There is an increasing level of sophistication in the consumer market.
Consumers are demanding to know more about the costs of providing services they receive, so that they can make informed choices.
These changes are not only affecting the water and wastewater sector. They are also evident in the wider economy.
Recently I announced a five point plan to promote innovation and enterprise in meeting consumer demands.
The five points are:
Lifting New Zealanders' skills and New Zealand's intellectual knowledge base, and championing the success of winners;
Better focusing of government funding for research and development;
Improving access to risk capital (including investor investment capital).
Ensuring regulations and laws support, and not frustrate, innovations and business.
Actively promoting success and helping build a culture supportive of innovation and enterprise.
I believe that this plan complements and strongly reflects some of the key outcomes desired from the water review.
The review aims to achieve an appropriate regulatory framework for the delivery of water and wastewater services that:
Encourages innovation and service improvement;
Promotes incentives for appropriate investment in infrastructure and water quality;
Enhances the incentives for efficient production and resource allocation; and
Leads to sound operational and demand management practices.
Let me now also emphasise what the review is not about.
It is not about privatisation - despite what some political activists and conspiracy theorists may try and tell you.
The Government believes that ownership of local authority water and wastewater infrastructure is a matter for local communities to decide.
It is important to look at governance issues to see how the benefit of the right balance of public and private management can be captured.
The review is not simply a cost cutting exercise.
It is about finding the best way to manage and maintain water and wastewater to get the services we all need.
The review is not about imposing a single solution on communities that have unique characteristics and different needs.
We recognise that one size will not necessarily fit all.
Many small water schemes are run by locals to meet their particular needs.
The review team is making good progress.
The review has been embraced with enthusiasm by Local Government New Zealand.
The next opportunity for input will be a public discussion document.
This was to have been released by the end of this month, however, this timeframe has been extended to the end of May to allow for the inclusion of additional work .
Involvement by a cross section of stakeholders is crucial.
It is important that we hear first hand the issues confronting you and the approaches you are taking to ensure a useful and comprehensive outcome from the review.
If you and other affected parties have not made a submission I urge you to do so.
The world is changing and we must rise to the challenges.
The delivery of reliable, high quality water services is an essential ingredient for the growth of our economy in the new millennium.