Pipeline could end up down the gurgler
Whether West Australian Opposition Leader Colin Barnett knew that he had chosen the 100th anniversary of Ayn Rand's birth to announce a vision that he says will drought-proof his state - and which he hopes will win him the coming election - is doubtful. Rand might have approved of his audacity, if nothing else, but audacity in public office too often results in purchasing white elephants with taxpayers' money.
It is no doubt technically feasible to transfer water 3700km from the Fitzroy River to the southwest corner of Western Australia. As far back as 1776, Adam Smith observed: "By means of glasses, hotbeds and hot walls, very good grapes can be grown in Scotland and very good wine made of them." The claret would, however, have been expensive.
Metropolitan West Australians pay 62c per kilolitre for their water. While the calculation is messy, this is about what it costs - 0.5kW of energy is required to deliver each kilolitre. The Water Corporation estimates that an $11 billion pipe from the Kimberley could deliver water to the metropolitan area for $6.10/kL, using 14kW/kL of energy to get it there. It also estimates that desalinating seawater could deliver potable water costing $1.11/kL, using 4.5kW of energy per kilolitre. If these figures are correct, even in the unlikely event that price has no effect on the consumption of water, there is an ample potential supply of $1.11 water twixt Perth and Africa. No one seems to want to say so, but if water were sold at a price nearer to its higher marginal rather than its average cost, there would be no water crisis. The Water Corporation's figures are no doubt a little rubbery, but they were around before water became a hot political issue. It is true that we cannot compare apples with apples: a pipeline costing $11 billion is not a canal that, we are told, in the face of much scepticism, will cost only a little more than $2 billion. It is not at all clear (to me anyway) who is to find what proportions of the $2 billion, but the question is relatively unimportant. The accuracy of the capital cost is, however, critical. No matter who must find it, it is the sum that water sales, after paying running costs, must ultimately service.
The Opposition Leader says he intends to pursue a "vision". However, he also describes his vision as "nation building - and here precedent should warn us to keep an open mind.
When in 1967 the commonwealth voted $30 million for construction of the Ord River main dam, that too was hailed as nation building. At some point during the 1980s, the 1967 outlay began to earn something - but by then, at a real annual rate of return of only 3 per cent, the $30 million 1967 investment would have become $63 million in 1967 dollars. (Of course it would be many more devalued '80s dollars, but that figure would not be a fair comparison.)
Since the $30million worth of 1967 effort and machinery could have been put to uses yielding 25 years of net rewards rather than net costs, the use of taxing power to favour an exceptionally bad investment actually reduced the nation we thought we were building. Nevertheless, the Centre for Independent Studies, in a nice little 1982 publication, noted one benefit: the outlay more or less established the price of a Senate seat - and it is, after all, important that pork-barrelling politicians should not, through ignorance, pay more of our money. Even the dogs are now barking that Barnett should never have committed to such an expense without a proper evaluation. Perhaps so, but remember that no notice was ultimately taken of proper evaluations of the Ord River Scheme. Today many more people understand that it is the promises that politicians keep that weaken their nations. Should future evaluation damn the canal, I am quite hopeful that it will prove not to have been a core promise.
Long ago when I was a politician, there was a saying around the corridors to the effect that no politician is truly dangerous until he believes his own speeches, and I doubt that Barnett has yet reached that state of grace.