Competition Policy has been a significant force in the development of the Australian Water industry throughout this present decade. The central hypothesis of the theory is that "the engine which drives efficiency is free and open competition" (Keating, 1992). However, characteristics of the Australian Water Industry may mean that such concepts of "economic efficiency" have limitations in their application.
This paper attempts to examine the economic theory which underlies Competition policy and contrast this with contemporary business strategy ideologies to identify the limitations of the policy and possible alternatives for the development of the Australian Water Industry. The experience of the UK is reviewed to illustrate the application of the competing economic and business strategies in the transfer of Infrastructure assets from public to private providers.
The report challenges the assumption of superiority of private provision of services over the existing system of public ownership and control. The research indicates that aspects of the Australian Water industry are presently operating at or close to "best practice" levels of comparative privatised firms, thus indicating that there may be limited scope for improvement through greater involvement of the private sector in the management or ownership within the Industry.
The central finding of this report is that the essential nature of the Australian Water Industry in the attainment of the broader social and environmental policy objectives may mean that measurement of cost should not be the single or even best measure of "efficiency" (EPAC). Furthermore, the evidence supports the argument that privatisation of the Infrastructure would introduce a structure inappropriate to the monopoly status of the Water industry (Lynk).