Two Victorian price reviews now before the Essential Services Commission offer a window into a much larger transition underway across Australia’s water sector.
Submissions by the Water Services Association of Australia to the Melbourne Water and North East Water reviews frame the proposals not as outliers, but as part of a national transition marked by rapidly rising capital investment, ageing infrastructure and intensifying climate risk.
WSAA argues the industry has entered a step change rather than a temporary investment peak. Capital expenditure across water and wastewater services reached $11.2 billion in 2024–25, almost double the level of just three years earlier, and is projected to rise further over the coming decade. This trajectory, the association says, reflects unavoidable structural pressures rather than discretionary spending.
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Melbourne Water and North East Water in context
Melbourne Water is proposing to increase capital investment by 62 per cent over its next regulatory period, reaching $7.9 billion across water, wastewater and drainage services. Despite the scale of that program, proposed prices are flat in real terms in 2026–27, followed by modest increases of 1.5 per cent per year before inflation.
North East Water, by contrast, is proposing $279.7 million in capital expenditure over the 2026–31 period, with further investment flagged beyond 2031. To fund that program, it has proposed real price increases of 5.25 per cent per year, consistent with trends seen in other jurisdictions and supported by its deliberative forum.
WSAA’s submissions emphasise that both proposals align with national patterns. Recent determinations for Sydney Water and Hunter Water, as well as proposals from Central Coast Water and TasWater, point to a sector-wide recalibration of prices to reflect higher investment needs.
Why investment can no longer be deferred
For more than a decade, water customers have been largely shielded from price rises. National data shows typical water and wastewater bills have remained broadly flat in real terms for 11 years, supported by efficiency gains, low interest rates and increased borrowing rather than revenue growth.
WSAA warns this approach has reached its limits. Many core assets are now approaching the end of their useful life, while population growth and stricter health, environmental and cybersecurity standards are pushing costs higher. Climate change is adding further pressure, driving the need for rainfall-independent supply, flood mitigation and more resilient networks.
The submissions argue that deferring investment to manage short-term cost-of-living pressures risks creating much larger problems later. International experience, including in the United Kingdom and New Zealand, shows that underinvestment can lead to declining service standards and sharper price shocks when failures can no longer be avoided.
Regional and metropolitan differences, shared challenges
While metropolitan and regional utilities face different operating conditions, WSAA notes their underlying challenges are increasingly similar. North East Water, for example, is planning to support capacity for around 9,000 new homes while managing uncertainty around growth, climate impacts and regional economic conditions.
Regional utilities also play a direct role in local economies through capital works and employment. In North East Water’s case, the proposed investment program is framed as essential not only for service reliability but for broader regional resilience.
Both Melbourne Water and North East Water have also strengthened hardship and customer support measures. Melbourne Water has introduced its first dedicated hardship package, while North East Water is proposing to double its Customer Support Fund to $400,000 per year, acknowledging the pressure price rises place on vulnerable customers.
The role of economic regulation
A central theme across both submissions is the importance of independent, transparent economic regulation during periods of transition. WSAA argues regulators have a critical role in assuring customers that investment programs are prudent and necessary, while resisting pressure to suppress prices at the expense of long-term outcomes.
The submissions point to recent NSW determinations as evidence that rigorous regulation can support large capital programs while maintaining public confidence. Conversely, they warn that opaque or inconsistent regulatory processes risk undermining trust at precisely the moment the sector needs social licence to invest at scale.
Paying today to avoid tomorrow’s crisis
WSAA’s message to regulators is clear. Australia’s water sector is no longer able to rely on legacy assets built by previous generations. The current generation must now fund renewal, expansion and resilience to ensure water services remain safe, reliable and fit for purpose.
While higher prices are politically and socially difficult, the submissions argue they are preferable to the alternative. Sustained investment, backed by strong regulation and targeted customer support, is positioned as the least-cost pathway through a period of profound transition for the water industry.