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National Water Reform

Draft report

This draft report was released on 11 February 2021.

This draft report assesses the progress of the Australian, State and Territory governments towards achieving the objectives and outcomes of the National Water Initiative (NWI), and provides practical advice on future directions for national water reform.

You were invited to examine the draft report and to make a written submission or brief comment by 24 March 2021.

The final report is expected to be handed to the Australian Government by the end of June 2021.

Download the draft report

  • At a glance
  • Webinar
  • Contents

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Key points

  • Water is critical to the economy, the environment and the wellbeing of Australian communities. But highly variable rainfall patterns, with frequent droughts and floods, make it a challenging resource to manage.
  • Since the mid–1990s, governments have implemented a program of national water reform, with the most recent agreement — the National Water Initiative (NWI) — signed in 2004.
  • This national water policy has served Australia well, but it is 17 years old. It has reached its use-by date and it will struggle in the face of the challenges ahead — increased population, increased community demands and the likely effects of climate change.
  • It is time for Governments to once again lead the way on developing a new national water policy and agree a pathway to meet these challenges. The NWI needs to be modernised and strengthened to create an agreement that will provide clear and sensible guidance to governments, communities, industries and environmental managers over the next 10 to 15 years.
  • This inquiry responds to the Australian Government’s request for the Commission to undertake its second assessment of jurisdictions’ progress towards achieving the objectives and outcomes of the NWI, and to provide practical advice on future national water reform directions.
  • Jurisdictions have made good progress against the reform agenda. Reforms have been widely supported by the water sector, industry and stakeholders. And they have contributed to sizeable benefits — providing the foundations for sustainable resource management and the capacity for water to move to its highest value use and facilitating a more efficient and financially sustainable sector.
  • But reform needs to be adaptive — reflecting lessons learnt from experience, evolving as the broader policy context changes and proactively dealing with anticipated challenges. Seventeen years of NWI implementation has provided a wealth of experience and knowledge including from managing through extreme and prolonged droughts.
    • There have also been shifts in community expectations since the NWI was signed, for example, about the role of water in promoting liveability and urban amenity, and about access to water for Aboriginal and Torres Strait Islander communities.
  • To ensure water security is maintained for communities and industries in the face of these challenges, governments and water utilities are gearing up to spend billions of dollars over the next decade on infrastructure. It is critical that this investment is spent wisely to maximise the benefits to water users, and avoid sharp price increases or excessive costs for taxpayers.
  • Australians will need to become even more adept at dealing with drought, and communities, industries and the environment will have to adapt to lower water availability.
    • For cities, this will mean considering all potential water sources.
    • For the environment, it will mean using available water to best effect.
    • For irrigators, markets will continue to provide a tool that supports adjustment to drier conditions.
  • The key challenges ahead provide a compelling case for continuing reform effort through a renewed NWI.

Media requests

Leonora Nicol, Media Director – 0417 665 443 / 02 6240 3239 /

Media release

Australian Governments need to modernise and strengthen the National Water Initiative

Water is critical to the economy, our environment and the wellbeing of all Australians.

Our national water policy has served us well, but it is 17 years old. According to a Productivity Commission report released today, it has reached its use-by date and it will now struggle in the face of our future challenges of increased population, increased community demands and the likely effects of climate change.

Commissioner Dr Jane Doolan said, “It is time for our Governments to once again lead the way on developing a new national water policy and agree a pathway to meet these challenges.”

“We can expect an estimated additional 11 million people living in capital cities by 2050, and climate change is likely to mean significant reductions in water availability for most of the country and an increase in the frequency and severity of droughts and floods across the nation.”

“To position governments and communities to face these challenges, the nation’s long standing water reform framework, the National Water Initiative (NWI), needs to be modernised and strengthened to create an agreement that will provide clear and sensible guidance to governments, communities and industries over the next 10 to 15 years,” Associate Commissioner Drew Collins said.

To this end, the report provides draft advice on modernising the NWI and strengthening its governance arrangements. It identifies the major water management issues to be addressed, and the potential policy directions for a renewed NWI.

“Whilst many of the fundamental policy directions in the NWI are sound and need to be maintained, there are some significant gaps. The NWI needs to be refocused to provide strong guidance on how to adapt water management to best meet our needs in a changing climate. It needs to recognise the importance of water in the lives of Aboriginal and Torres Strait Islander people and provide greater direction on water service provision in cities and towns,” Dr Doolan said.

“We have also learnt a lot over the 17 years since the NWI was signed and we need to bring that experience into a renewed NWI. For example, in water accounting and compliance — to improve community confidence in water management, and in environmental management — to ensure best use of water for the environment and the community,” she said.

Mr Collins said, “A new NWI will need to provide guidance on new water infrastructure developments. Billions of dollars will be spent over the next decade by governments and water utilities and it is critical that investment is spent wisely to maximise the benefits to water users and avoid sharp price increases or excessive costs for taxpayers.”

“Our future is more people and less water. So ensuring we have a forward-looking, modern, national water policy is both important and urgent. This is a strong message that the Commission has heard through its consultations and submissions to date,” Dr Doolan said.

The report on National Water Reform is a draft report. The Commission encourages interested parties to read the report and make submissions and / or attend upcoming public hearings, details of which can be found at

Media requests

Leonora Nicol, Media Director – 0417 665 443 / 02 6240 3239 /

Video: National Water Reform 2020 draft report

Transcript of video

Australia faces huge challenges in the future management of water. Both population growth and climate change mean it is likely there will be more demand for water but there will be less water available to meet that demand.

Neither water nor the environment recognise state or territory boundaries, and now more than ever all governments need to be effective in working together to manage our most precious resource — water.

The report says we face a drier future with more frequent and severe droughts and extreme events.

And it's not just the environment that will have to get used to less water but also towns, cities, regions, irrigators and other industries.

While Australia is now viewed as a world leader in water management, climate change will put real stress on our water systems unless we effectively plan for our drier future.

Projections suggest that really severe droughts, like the Millennium Drought, will be more frequent and longer lasting. Recovery periods will be shorter.

The Commission hopes all governments will work together to renew the National Water Initiative, maintaining its strengths and helping communities adapt to our new drier future.

Each state and territory has its own challenges when it comes to water management.

The Productivity Commission says it sees examples of best practice in each state and territory and they would like the National Water Initiative to capture this innovation and make this the minimum standard for all.

A major success for Western Australia in facing their dwindling surface water resources has been finding alternative sources of supply. The average water supply inflow to Perth dams over the past decade is 75 per cent below historic levels. Since 1995, average winter rainfall levels have been markedly lower than the historic average. To ensure sufficient security of supply for an expanding population in Perth and its surrounds, major public investment has been committed to desalination and managed aquifer recharge technology.

South Australia is tackling its drying climate in some cities and towns through integrated water management technology, so they are recycling their wastewater and stormwater. Adelaide's water supply is heavily reliant upon water pumped from the River Murray.

Significant public investment has gone into recycled water technology as both a substitute for supplying water for horticultural irrigation near Adelaide, and for watering sports fields, parks and wetlands in some Adelaide suburbs.

The Northern Territory is improving Aboriginal access to water resources. Strategic Aboriginal reserves have been set up to enable Aboriginal land owners to develop their land and create local jobs.

A strategic Aboriginal water reserve is a volume of water within a water allocation plan area set aside for exclusive use or trade by Aboriginal landowners.

Queensland faces challenges of developing water infrastructure to support regional development and agricultural productivity. Significant public investment has gone into planning and constructing additional water storage and delivery infrastructure in regional and rural Queensland.

This has helped to support economic growth through more secure water supply for agricultural production and associated secondary and tertiary industries.

Victoria has established an environmental water holder with a new Indigenous commissioner. They are investing in environmental infrastructure to deliver better environmental outcomes more efficiently.

New South Wales is focusing on improving metering, measurement and compliance. They have created a new natural resource access regulator and are working to increase the volume of metered water use across the state, and when metering is not feasible, investing in improved water flow monitoring technology.

Improving water supply quality for small towns is a focus for Tasmania. Tas Water’s 24 glasses campaign invested 60 million dollars to improve water treatment infrastructure. 13 permanent boil water notices in December 2017 had been lifted by November 2020.

The Productivity Commission considers that a renewed National Water Initiative will be a critical blueprint for Australia as it faces a drier future.

National Water Reform 2020: draft report briefing

The Productivity Commission held a webinar to discuss its draft report for the National Water Reform 2020 inquiry.

Commissioners Jane Doolan and Drew Collins discuss the Commission's advice and recommendations for reform.

  • Preliminaries: Cover, Copyright, Opportunity for further comment, Contents, and Abbreviations
  • Executive summary
  • Draft reform advice on NWI renewal
  • Chapter 1 About the inquiry
    • 1.1 Context for the inquiry
    • 1.2 The Commission’s task
    • 1.3 The Commission’s approach
    • 1.4 Conduct of the inquiry
  • Chapter 2 Progress against the NWI and the case for continuing reform
    • 2.1 Overview of the NWI reform agenda
    • 2.2 Summary of progress against the agreement
    • 2.3 Reforms have contributed to sizeable benefits
    • 2.4 But the case for further reform is compelling
    • 2.5 In summary: the case for renewed reform effort is convincing
  • Chapter 3 NWI renewal: a refreshed intent
    • 3.1 Why a national approach to water reform?
    • 3.2 A modernised goal
    • 3.3 Modernised overarching objectives
    • 3.4 Modernised detailed objectives
    • 3.5 Foundations set in overarching principles
    • 3.6 Key elements
    • 3.7 Updated acknowledgement of other initiatives
  • Chapter 4 Building in good governance for a renewed NWI
    • 4.1 The NWI’s governance architecture has been significantly eroded
    • 4.2 Characteristics of leading practice governance
    • 4.3 A modernised agreement structure
    • 4.4 Organisational ‘best-fit’ for governance functions
    • 4.5 Incentivising reform
  • Chapter 5 Water resource management — a fit-for-purpose framework
  • Chapter 6 Water entitlements and planning
    • 6.1 Room for improvement in entitlements regimes
    • 6.2 Improvement in water planning
  • Chapter 7 Water trading and markets
    • 7.1 Trading has delivered significant net benefits
    • 7.2 More detailed principles for stronger markets
    • 7.3 Creating the foundations for leading practice
  • Chapter 8 Environmental management
    • 8.1 Progress on providing water for the environment
    • 8.2 Requirements for achieving agreed outcomes in all systems
    • 8.3 Additional requirements in systems with held water
    • 8.4 Water system managers should use their best endeavours to achieve agreed outcomes
    • 8.5 Effective monitoring, evaluation and reporting
  • Chapter 9 Securing Aboriginal and Torres Strait Islander people’s interests in water
    • 9.1 Understanding of Traditional Owners’ aspirations has evolved since the NWI was drafted
    • 9.2 A new policy element developed through co-design
    • 9.3 Achieving cultural outcomes through enhancing the influence of Traditional Owners in water management
    • 9.4 Enabling access to water for economic use
  • Chapter 10 Ensuring the integrity of water resource management
    • 10.1 Confidence in water management has been tested
    • 10.2 Ensuring integrity in water use
    • 10.3 Ensuring the integrity of water system management
    • 10.4 Building understanding of the broader water context
  • Chapter 11 Urban water services
    • 11.1 Australia has seen significant urban water reform
    • 11.2 Much has been achieved but the case for further action is clear
    • 11.3 NWI renewal is an opportunity to embed the foundations of success
    • 11.4 Best-practice system planning should be a focus
    • 11.5 Pricing and service outcomes — another focus
    • 11.6 Tailored advice for regional and remote urban water services
  • Chapter 12 Water reform in rural Australia
    • 12.1 NWI-consistent reforms have delivered large benefits to rural users
    • 12.2 Reforms have also prepared water users to address future challenges
    • 12.3 A renewed NWI would lock in past benefits and enable adaptation
    • 12.4 Community adjustment to lower water availability
  • Chapter 13 Government investment in major water infrastructure
    • 13.1 The NWI targets economically viable and ecologically sustainable infrastructure
    • 13.2 Some past government commitments raise red flags
    • 13.3 NWI renewal can contribute to improved decision making
  • Chapter 14 Community engagement
    • 14.1 The NWI has facilitated engagement but an update is needed
    • 14.2 Embedding effective practice through a renewed NWI
  • Chapter 15 Knowledge, capacity and capability building
    • 15.1 Knowledge generation needs attention
    • 15.2 Use of knowledge also needs to be optimised
  • Appendix A Terms of Reference
  • Appendix B Glossary
  • Appendix C Inquiry conduct and participants
  • References

Printed copies

Printed copies of this report can be purchased from Canprint Communications.