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Abstract
The Australian National Water Initiative (NWI) builds on the foundations of earlier water
reforms, attempts to correct earlier errors in both policy and its implementation, and
seeks to better define some of the policy aims with the benefit of hindsight. However,
despite the deliberate effort to improve on earlier reforms, the NWI still embodies
a significant economic paradox. Although policymakers have shown their faith in
the market insofar as allocating water between competing agricultural interests is
concerned, they have not shown the same degree of faith in the ability of urban users to
respond to price signals. This paper attempts to shed at least some light on this question
by examining the responses of a number of State governments across Australia to
the NWI. The paper specifically explores the rationale for non-price regulation in the
urban context but challenges the long-term viability of this approach.