Australia's water catchment areas sustain life on this continent. They provide food and water for our communities, contribute substantially to our economy and provide the foundation for our rich and diverse natural environment. .
The proffered economic articles suggest a fundamental over-usage of water in Australia. They attribute such a phenomenon to "Australian governments massively underpricing water", Australia's vacillate weather conditions, low public awareness, lack of incentives for rural and city users to curb their water usage, and consistently high demand.
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Australia is a dry island continent typified by droughts, but also floods. Rainfall and consequently river flow and groundwater recharge is extremely variable. Thus, while demand continues to grow dramatically, it is placing consistent and increasing pressure on water resources. Across Australia, average water use has increased by 65% since the early 1980s. This over-usage and inflated demand has merely been exacerbated by such weather conditions, such as the current drought. Access to an adequate supply of good quality water is essential to the economic and social well being of all Australians. .
(1) The government's underpricing of water due to the subsidy wedge was designed to make water accessible to a greater proportion of society due to equity considerations. However, by subsidising water the government have essentially depressed the price of water and given society the false perception of an abundant resource, consumers to waste it. It is a given that water is subsidised by the government, however the majority of the costs associated with the environmental externality are not internalised. In the past and to a lesser extent today, the social costs associated with treating environmental externalities have not been borne by the users of subsidised water. Thus the irrigator's, and urban users have benefited from both a direct subsidy via the price of water and indirect subsidy related to the mitigation of externalities by the taxpayer.