National Water Reform 2026

National Water Inquiry

I, the Hon Jim Chalmers MP, Treasurer, pursuant to Parts 2 and 3 of the Productivity Commission Act 1998 and Section 88 of the Water Act 2007 (the Water Act), request that the Productivity Commission (the Commission) undertake a National Water Inquiry.

In addition to the requirements of Section 88, the Inquiry should also advise on approaches for a more sustainable water service industry, as set out below, to inform further work by all jurisdictions to refresh Australia’s water policy.

Background

Water underpins Australia’s social and cultural wellbeing, supports the resilience of communities and industries, and sustains the ecosystems and environmental values that make Australia unique. As climate change places increasing pressure on this finite and highly variable resource, we must continue to ensure that water is managed carefully to meet the needs of people, economies and the environment.

The water sector plays a critical role in delivering the services that underpin economic activity in urban and regional communities. Ongoing reform and adaptation of the sector is essential to ensure its continued effectiveness in responding to contemporary challenges, such as climate change, population growth, and competition for water resources from new and expanding industries. The Inquiry provides the opportunity to examine approaches needed to manage and support a sustainable and resilient water services industry.

Since the last Inquiry, the Australian Government worked in partnership with all jurisdictions to renew the national approach to water reform established under the 2004 National Water Initiative (NWI). This was done through the development of a new intergovernmental agreement – the National Water Agreement (NWA). The Committee on Aboriginal and Torres Strait Islander Water Interests provided guidance on developing the NWA to the National Water Committee and the Water Ministerial Council to elevate Aboriginal and Torres Strait Islander water interests and values. 

The NWA retains the strong foundations of the NWI, while introducing new priorities, objectives and outcomes. Jurisdictions are commencing work to refresh Australia’s water policy. This will include updating water pricing principles and reviewing independent economic regulation. 

Scope of the inquiry

The Commission should apply the requirements of Section 88 of the Water Act noting that:

• The NWI that set shared goals and national priorities for water management – is more than 20 years old
• The Commonwealth, together with the States and Territories, has developed a new NWA which builds on the strengths of the NWI to address current and future water challenges
• The Australian Government has signed the NWA, and it is now with each state and territory government to consider signing
• Jurisdictions who are party to the NWA by 28 May 2026, will have entered into the successor framework to the NWI with updated objectives.

The Commission should also examine all jurisdictions’ water policy and regulatory settings required to support the long-term sustainability of Australia’s water services industry, having regard to water affordability, productivity and other key priorities (housing supply, net zero transition, National Closing the Gap targets and the sustainable development of new industries, including data centres).

The Commission should provide recommendations on approaches that Australian governments and the water services industry can take to improve the security, resilience and sustainability of water services, and support productivity and affordability, through consideration of:  

• pricing:
  • ensuring efficient resource allocation and the long-term financial sustainability of the water services industry
  • approaches to the challenge of balancing affordability with long-term service resilience.
• economic oversight and regulatory design that:
  • balances national consistency with jurisdictional diversity
  • achieves efficient cost recovery while meeting distributional and social policy objectives
  • promotes proactive and sustainable asset management
  • is responsive to emerging challenges such as environmental contaminants
  • supports utilities’ long-term planning, including investment in circularity and moving operations towards net zero.
• governance options to improve the overall sustainability of the industry
•  regional and equity considerations, including structural challenges faced by regional and remote utilities. 

In conducting the Inquiry, the Commission should consider:

• where relevant, the NWI and in particular the objectives listed in clause 23
• where relevant, the NWI schedules and associated principles, guidelines and modules and further policy work underway by jurisdictions to refresh Australia’s water policy
• any Commonwealth, state or territory reform initiatives relevant to the Inquiry scope including the NWA
• the scope of other relevant reviews (such as the reviews of the Water Act or Basin Plan 2012) with a view to avoiding re-examination of matters already under consideration
• the perspectives and socio-cultural rights of Aboriginal and Torres Strait Islander peoples
• the government response to the recommendations of the independent review of the National Agreement on Closing the Gap.

Process

The Commission is to update its findings from the National Water Reform 2024 Inquiry Report, in line with the requirements of the Water Act. 

The Commission is to undertake public consultation including, inviting public submissions where appropriate.

The Commission should establish a stakeholder working group in accordance with Section 89 of the Water Act.

The Commission should consult nationally, including with Commonwealth, state and territory governments, relevant sectors and stakeholders and Aboriginal and Torres Strait Islander peoples.

The final report should be provided no later than 4 September 2026.

The Hon Jim Chalmers MP
Treasurer

[Received 27 March 2026]