Publication Details

This paper was originally published as Hoffmann, M, Worthington, AC and Higgs, H, Modelling residential water demand with fixed volumetric charging in a large urban municipality: The case of Brisbane, Australia. Discussion Papers in Economics, Finance and International Competitiveness, School of Economics and Finance, Queensland University of Technology, 196, June 2005.


This paper uses household level data to model residential water demand in Brisbane, Australia from 1998 to 2004. In this system, residential consumption is charged using a fixed annual service fee with no free entitlement and a fixed volumetric charge per kilolitre. Water demand is specified as quarterly household water consumption and demand characteristics include the contemporaneous and lagged marginal price of water, household income and size, and the number of rainy (with at least some precipitation) and warm (greater than 19.5°C) 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 renter households. However, the results also show that weather, especially the number of warm days, is likely to exert a much greater influence on residential water consumption than any factors subject to the usual demand management strategies.