Purpose - Within the new public management (NPM) context, this paper aims to examine the inclusion of equity issues in pricing policy development and implementation in the water industry in Australia.
Design/methodology/approach - A review of literature relevant to the pricing of water shows equity issues have four dimensions which tend to be, at best, only implicitly considered. An empirical illustration employing a transaction cost framework is provided of a case in which change in pricing mechanisms was strongly suggested.
Findings - An equity paradox emerges as an explanation of why 63.7 per cent of Queensland urban water entities chose not to adopt the user-pays pricing mechanism for water. This suggests that the balance between "equity" and "efficiency" continues to be required in policy development for water pricing. Equity of access and that of distribution continue to be significant factors. As well, equity of interest and of return must be considered, especially under a user-pays pricing mechanism.
Practical implications - In respect of NPM considerations, it is argued that consideration of the four dimensions of equity in the implementation of a water pricing policy will resolve contradictions with, and paradoxes met in dealing with efficiency.
Originality/value - The argument used in the paper is interdisciplinary. References and terms used include those which are social, economic, and environmental from an accounting and management perspective.