This report examines the potential for reforming the water industry. It focuses on mechanisms for allocating water between different uses as well as the institutional arrangements governing businesses that supply water and wastewater services. It discusses possible problems with the status quo and examines options for reform.

The review is motivated by the importance of water as a resource and the sizeable public investment in water and wastewater infrastructure in New Zealand. The value of natural water for waste disposal, water supply, recreation and commercial fisheries (and excluding ecological and cultural values) has been estimated at around $1.5 billion per annum. The accumulated investment by local government in water supply and wastewater assets is of the order of $6 billion. This is larger than the investment in Telecom Corporation of New Zealand's network and roughly comparable to the national investment in the electricity transmission and distribution system.