Melbourne’s desal plant pumps abundant stupidity

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ScreenHunter_1831 Mar. 27 13.49

By Leith van Onselen

The Age has reported today how Victorians will be required to pay $613 million this year for Melbourne’s desalination plant, despite not a single drop of water being ordered from the plant:

The multi-billion dollar desalination plant was commissioned by the Labor government in 2007 and has been criticised for being too expensive.

…for the third consecutive year [Victoria] would not order any water from the Wonthaggi plant…

In 2013-14 the plant cost taxpayers about $632 million

The Victorian desalination plant, built to guarantee the state’s water supplies amid the population ponzi, is some of the worst public policy making that I have seen. Instead of pursuing cheaper options, such as recycling waste water or damning the Mitchell River (which floods every few years), the former Bracks/Brumby Government built the biggest reverse osmosis plant in the world, which is well in excess of Melbourne’s future needs.

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With an annual capacity of 150 gigalitres (150 billion litres of water), the Victorian desal plant is more than three times larger than the Gold Coast’s (45GL) and 65% bigger than Sydney’s (91GL).

And due to the exorbitant price tag attached to the project – $6 billion – Victoria is now committed to paying a holding charge of $1.8 million a day for the next 27 years, totaling around $18 billion. Accordingly, household water bills have increased by between $167 to $222, with two-thirds of that price rise related to the desalination plant.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.