Urban water demand with fixed volumetric charging in a large municipality: the case of Brisbane, Australia *

This paper uses suburb-level quarterly data to model residential water demand in Brisbane, Australia, from 1998 to 2003. In this system, residential consumption is charged using a fixed annual service fee with no water entitlement followed by a fixed volumetric charge per kilolitre. Water demand is specified as average quarterly household water consumption and the demand characteristics include the marginal price of water, household income and size, and the number of rainy and warm days. The findings not only confirm residential water as price and income inelastic, but also that the price and income elasticity of demand in owner-occupied households is higher than in rented households. The results also show that weather, particularly summer months and the number of rainy days, exerts a strong influence on residential water consumption. Copyright Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Ltd 2006.