Sydney needs to understand that demand curves for water slope downwards

One of the most robust findings in economics is that demand curves slope downwards. If something becomes more expensive, on average people will buy less of it (quantity demanded decreases when price increases). If something becomes less expensive, people will buy more of it (quantity demanded increases when price decreases). So, this article from The Conversation earlier in the week should come as no surprise:

Melbourne’s average residential water consumption is 161 litres per person per day. In Sydney, for 2018, it was 210 litres per person. That is nearly 50 litres more per person – a difference of about 30%!

So why do Sydney residents use so much more water than people in Melbourne?...

The lower water use per resident of Melbourne is a major element in the city’s lower water thirst. If you live in Sydney and use the average amount of water a day (210 litres per person per day) that will cost you just 48 cents per day. The price is A$2.28 per thousand litres.

Water is far more expensive in Melbourne, which has variable pricing for residential water. The more water you use, the higher the progressive cost per litre.

Each of Melbourne’s three water retailers charge more money for low and high water usage. For example, Yarra Valley Water charges A$2.64 (per 1,000 litres) for water use less than 440 litres a day. For more than 881 litres a day it charges A$4.62, which is 75% higher than the lowest water use charge. For intermediate amounts the charge is A$3.11. This sends an important price signal to residents – it pays to conserve water. In comparison, Sydney charges a flat rate for each litre of water, with no penalty for higher water users.

If you want people to do less of something, including consuming less water, one robust way to ensure that outcome is to make it more expensive. People will demand less water, if water costs them more. Both Sydney and Melbourne are worried about running out of water (and for good reason: they don't want to go through what Cape Town did in 2017-18). Increasing the price of water seems like such a simple solution. Maybe it's too simple? After all, according to the article, Sydney decreased the price of water in 2016. It's no wonder they are staring at a future water crisis.