Australia’s water industry is vital to national prosperity, providing water and sewerage systems to millions of households and businesses across the nation.

Updated: February 2018

“Australia is facing unprecedented challenges when it comes to how we plan and manage our water resources. The nation’s future prosperity is inextricably linked to how well our water resources will meet the needs of a growing population, diversified industries, and protection of the environment. Climate change and rainfall variability are placing increasing pressures on every aspect of the water industry as it grapples with aging infrastructure and increasing urbanisation.”

– AWA and Arup, Australian Water Outlook 2016

Essentially a natural monopoly, the water industry is dominated by a small number of State Government corporations. Fixed infrastructure and regulation in water supply restricts the number of suppliers in the industry. Governments regulate prices to benefit consumers and the industry alike, with recent water price rises being implemented to cover the cost of additional infrastructure investment. Traditionally run by Local Government, authorities have been amalgamated and centralised into larger State Government corporations. The arguments for centralisation are primarily based on greater economies of scale, efficiency gains and building a solid skills base.

Australia’s water industry is vital to national prosperity, providing water and sewerage systems to millions of households and businesses across the nation. However, the volume of water consumed across the nation is expected to skyrocket over the coming years, placing greater pressure on the industry to meet national demand. The industry and the wider community have raised concerns around the lack of water security, with additional investment and improved efficiency needed in order to protect supply.

The size and scale of most water infrastructure, and the social responsibility that comes with operating and maintaining it, makes the water sector a challenging prospect. Balancing water security against cost has also posed a challenge. Privatisation has proven problematic, while many water authorities chased short-term cost savings while risking longer-term supply.

While dramatic demand growth will pose challenges for existing infrastructure, it will also provide great opportunities for industry improvement and workforce expansion, and will encourage greater investment in networks over the coming years.

The water industry comprises all water capture, storage, treatment, and supply, including the systems that supply water for irrigation. The water sector expected to generate $24.2 billion worth of revenue in 2017-18, with the large majority of this revenue coming from households.  The industry is also a major employment provider, with 28,700 employees and wages of $3.4 billion according to IBISWorld[1].

[1] IBISWorld Industry Report D2811 Water Supply in Australia – January 2018

The water industry faced mixed fortunes over the past five years, with investment fluctuating and water security fears continuing in some parts of the industry. While the nature of the sector ensures it remains profitable, weakening investment and higher usage pose future threats, restraining growth across the sector.

Value of engineering work in Australia – water sector


Source: ABS Catalogue 8762.0

Rising consumption of water is expected to provide additional opportunities for industry participants over the coming years, as authorities invest further in water infrastructure. According to the Infrastructure Australia, water usage is expected to double over the coming years, rising from 7,641 gl in 2011, to a forecast 15,285 gl in 2031 . The rapid growth in demand for water will place great pressure on the industry, as water authorities seek to meet rising consumption levels. The significant weather variation that Australia is prone to, will likely increase the threat to water security. While Australia’s water supply is able to keep up with demand during periods of normal weather, during droughts, the water supply is much less robust.

At present, most states have invested in some form of desalination operations, with many plants not currently at full use. However, even when fully operational, the capacity of these plants will not be adequate to cater for the full level of consumption, although they do provide a much needed safeguard. Desalination currently provides over half of Perth’s water supply in Western Australia, demonstrating the important role that this infrastructure plays in ensuring access to potable water.

While water security remains the highest priority for both the sector and most Australians, water prices have received significant media attention more recently. Investment in security often requires that costs are passed on to users, and rising living costs have placed the spotlight on prices. Consumers have responded to some degree, with higher prices pushing average household consumption down to a degree as consumers have learned to use water more wisely.

The ability of households to decrease consumption further is declining, and future price management will rely heavily on effective management from governments, regulators, and water authorities. Targeted investment, managed by skilled staff will be vital in this process, with greater efficiency required in the procurement process. An emphasis on maintenance will also minimise replacement costs where possible. Authorities will need to be careful. However, water authorities will need to avoid knee-jerk cost cutting, as a loss of skilled staff, an overreliance on outsourcing, and a lack of investment will likely have a negative effect on both efficiency and cost management, and lead to higher water prices in the future.

Variable weather conditions have been identified by Infrastructure Australia as one of the greatest challenges for the water industry. The importance of a stable water supply to households and businesses across Australia means that the industry must be well-prepared to manage supply issues when hit by drought or natural disasters. Australia recently suffered one of the worst droughts in history, and parts of the nation remain under threat. This prompted changes in the way we use water and the way Governments and water authorities manage and invest in water supply.

Value of engineering work in Australia – water sector

Source: ABS Catalogue 8762.0

Investment in additional supply and lower household demand have eased the threat – at least for the time being – of water shortages in major capitals. As a result, several major infrastructure projects have been completed and are being paid for by consumers but have yet to be used. However, the variability of rainfall patterns across Australia — from severe drought in 2009 to major floods in 2011 — means that additional safeguards are integral to the security of Australian water supply, effectively drought-proofing major cities. The importance of investment in supply has been highlighted by Western Australia, where more than half of Perth’s water supply is provided through desalination.

Desalination plants across Australia have come under criticism as most are currently not in use or are running at minimum levels. Governments have responded by highlighting the importance or pre-emptive solutions to drought conditions, with desalination likely to be very important if drought strikes a major city. The cost of projects has also been a major point of contention, with the major cost blowout at Victoria’s Wonthaggi plant highlighted as an example. The final project cost came in at double the budgeted $3 billion , indicating that greater attention should be placed on ensuring a qualified and skilled workforce in the water sector to manage project delivery.

Despite recent investment, there are questions over whether the level of water infrastructure will be able to meet demand when consumption doubles as forecast, particularly if major drought were to strike again. The level of new water infrastructure investment has declined markedly since 2010-11, placing ongoing security at risk. In order to manage this risk, Governments will need to ensure that infrastructure investment remains strong and that skill levels in water authorities remain high. Drought-proofing Australia’s water supply will remain a major challenge for water authorities over the coming years, and efficient, innovative solutions will need to be found to ensure that Australian businesses and households are not left high and dry. Skilled engineering staff will be especially important in this process, as water authorities seek to manage their investment efficiently, ensuring that best-value outcomes are achieved.

Modest employment growth is forecast in the water industry over the coming years. This growth follows similar increases over the past five years. As a result, there will be some additional opportunities available for skilled technical professionals, as water authorities look for innovative ways to deliver a better, more-efficient water supply. While overall employment growth is expected, outsourcing will pose an ongoing challenge to greater industry employment, as some authorities focus heavily on price and cost minimisation.

Many water authorities have reduced their in-house capacity in recent years, preferring to rely on external consultants during periods of increased need, packaging wages into project costs. While this makes some sense where work levels fluctuate significantly, many industry professionals are reporting consistently high levels of consultants, often employed at higher costs and with less industry-specific experience.

Historically weak investment in water infrastructure will also restrain employment growth in the sector to a degree, with investment declining significantly since 2010. The expansion of water networks to provide potable water to some previously uncovered regional areas may support employment, as authorities seek to keep up with a growing water network. An increased emphasis on maintenance will also ensure ongoing employment growth, as proper maintenance of water infrastructure is typically more cost effective that running assets to failure. As networks grow and as assets age, maintenance will increasingly become a topic of conversation for the industry.

Water sector employment in Australia


Source: IBISWorld industry reports D2811, D2812

Career prospects for engineers are intrinsically linked to the performance and size of major engineering industries. Industries undergoing growth tend to invest to expand their operations, while major areas of employment such as water supply and treatment tend to maintain a large stock of engineers. Job vacancy statistics can provide key insights into the performance of the different engineering disciplines, and whether employers expect demand to expand over the short to medium term.

Engineering job vacancies by discipline and state


Source: Department of Employment – Internet Vacancies Index

According to data from the Department of Employment, the number of advertised engineering roles across Australia is continuing to rise, with relatively steady growth seeing the number of ads rise almost 80% over the past two years. Civil engineering roles accounted for the majority of engineering positions, with civil engineering skills having the broadest range of applications. While the level of work done in the water sector has declined in recent years, the overall volume necessitates a large number of engineers. Over growth in job advertisements indicates that employment prospects for engineers are improving, and qualified candidates are likely to find suitable employment upon entering the market.

Engineering vacancies map by discipline


Source: Department of Employment – Internet Vacancies Index

Professionals Australia’s annual Professional Engineers Employment and Remuneration Report for 2017 highlighted the level of remuneration for engineers across different industries. Overall, remuneration for engineers employed in the water sector fell closely in line with engineers across the wider job market.

Engineers in the water sector reported a median total package of $124,795. By comparison, the median total package across all industries was $125,925, which quite comparable to engineers in the water sector.

However, respondents from the water industry reported significantly lower wages than their counterparts in the electricity and gas industries. This trend poses the threat that professionals in the water industry may seek to leave the industry to find higher wages. The challenge for industry operators will be to improve the competitiveness of industry wages, as high skill levels and an adequate technical workforce will become increasingly important over the coming years as water authorities respond to challenges around water security and demand.

Engineer remuneration and wage growth in the water sector – by responsibility level


Source: Professionals Australia, Professional Engineer Employment and Remuneration Report: 2017

From a growth perspective, engineers in the water sector again reported similar results to the wider engineering cohort. Overall, engineers in the water sector reported average wage growth of 2.5% year on year. This growth represents an outperformance of the Wage Price Index (WPI), which rose at 1.9%. Overall, this growth is a good sign for the engineers in the sector, as it points to rising demand for engineering skill and recognition of the importance of technical expertise. Salaries also outperformed the consumer price index (CPI) over the past year, which increased by a modest 2.1%. While the past year has been marked by weaker wage growth across many professions, this outperformance points to growth in real wages across the water sector.

Wage growth was highest at the level 1, as engineers rapidly grew in capability and skill. Engineers at lower levels also tend to earn lower wages overall, meaning that higher percentage rises are required in order to deliver meaningful wage growth. However, it is important to note that even engineers at the highest responsibility levels outperformed wage growth across the wider economy.

Asset management

Asset management will pose a major challenge for the water sector over the coming years. Australia’s size and climate conditions make asset management within the water sector particularly difficult, particularly when considering cost.

While most Australians agree on the need for water security and a reliable supply, cost pressures have placed downward pressure on investment in recent years, as ultimately these costs must eventually be passed on to consumers.

With the need to deliver balanced asset management in mind, water authorities will need thorough asset management plans to sustainably deliver the necessary investment. Engineers will play a key role in this process, as a high level of technical skill will be needed to meet desired service levels within a given cost framework.

Water markets

Many of industries across Australia are heavily dependent on a reliable water supply. Water is used across agricultural industries and heavy industries in cooling equipment. The agricultural sector is the largest user of water in Australia, accounting for 57.0% of total volumes[4]. However, agricultural users contribute only 7.9% to total expenditure on water. This disparity reflects the additional subsidies provided to the agricultural sector, and the relatively cheaper infrastructure used to transport water for agricultural and industry use, compared with the infrastructure required for potable water.

Households use just 13.8% of water by volume, with this figure falling over the past decade due to a greater focus on water efficiency. However, households contribute 62.7% of total revenue. Households are a much easier source of revenue for water authorities, despite their relatively low level of water usage.

While the topic of high water prices has received significant media attention over recent years, the ability to divide costs over each household is still vastly more acceptable than placing additional cost burdens of industry users. However, water authorities will need to explore innovative ways to strengthen the nations water supply, without driving further increases in consumer prices.

 

[4] ABS Catalogue 4610.0 – Water Account