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Cost of Testing, Labelling and Advertising

The costs of the proposed scheme for companies are the costs of testing products, labelling the products and including water efficiency information in advertising. For those products that are compliant with the Australian water efficiency labelling scheme requirements, the testing costs will have been incurred already. There will be testing costs for product lines that are sold in New Zealand but not in Australia; however, the Covec CBA estimates that there are no more than 1 in 100 product lines for which this will be the case (this is largely restricted to taps and showerheads). The absolute cost of getting a product line tested will depend on the economies of scale that the manufacturers or importers can leverage. It has been estimated by a large manufacturer that the cost of testing 100 products for both markets would be in the order of $25,000. However, to test a single product line may cost up to $1,500.

Labelling costs include the costs of printing the label and the costs of putting the label on the product. The CBA estimated the cost of label production to be NZ$0.20 per item. The cost of affixing the label to the appliance varies between $0.20 to $2.00 per item depending on where the item is manufactured and the nature of packaging and display. Total costs of labelling are therefore between $0.40 and $2.20. The CBA assumed the average cost of labelling to be $0.50 per item. Advertising costs have been estimated to result in additional costs in the order of $0 - $400,000 (about $0.35 per item).

There may also be additional costs for retailers and plumbers depending on the consumer reaction to the scheme. Salespeople and plumbers may have to upskill so that they can provide accurate advice to consumers.

When all the costs are considered, the CBA predicts that water efficiency labelling will increase the cost of water-using appliances and fixtures by about $1 per product item sold.

In summary the costs and benefits expected from the introduction of water efficiency labelling, assuming a 1% shift in product purchases is (at a 5% discount rate):

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