Australia needs a comprehensive national water strategy and policy. We need to apply a whole-system view particularly in connected river systems and multiple sources of water including recycling, urban runoff and desalination.

At present there is no holistic planning to work towards water resources infrastructure and management which can take Australia into the next century. Conjunctive and integrated management of water sources can potentially reduce the risk of supply to various consumptive uses such as urban, agriculture, industry and the environment.

Recent modeling of the potential impacts of climate change shows a medium to long term reduction in rainfall and increase in temperature. Sustainable water supply for Melbourne implies the ability to meet water demand while minimising other environmental impacts including carbon emissions.

A comprehensive strategy that involves all potential sources of water including recycling, urban runoff and desalination, together with an appropriate pricing structure that ensures more efficient use of water must be undertaken.

Price signals need to be set at levels which provide an incentive to invest in water efficiency and reliability initiatives. Irrigated agriculture consumes 75 per cent of the water diversions in the Murray Darling Basin.

Water trading is the policy instrument that can drive water towards higher economic productivity, however, for this instrument to work, it is necessary to remove barriers to trading between water use sectors such as agriculture, urban and the environment. Only under this scenario are the real cost of water supply options revealed and can sufficient flexibility be provided to cope with increased climate variability and reduced supply. This agenda must be pursued in conjunction with strategic infrastructure investment to enable a sustainable agricultural sector.

Associate Professor Hector Malano is Head of Civil and Environmental Engineering at the University of Melbourne. His water resources research has included on-farm modelling of surface irrigation systems, modelling of irrigation distribution networks, water allocation at the catchment level and improved harmonisation of irrigation systems within catchments.