Secure, Sustainable Water for Growth

Australia’s increasing population, particularly in our capital cities, will increase overall demand for urban water. It has been estimated, based on current population projections, that there will be an extra +195 gigalitres¹¹¹ of water demanded by households across Australia by 2032, representing approximately a 10% increase on current demand.¹¹²

Table 16 provides a summary of the projected urban water supply outlook for each capital city, which has been sourced from each jurisdiction. As highlighted in the table, Darwin’s forecast water demand is expected to more than double by 2056, which is the greatest increase of all capital cities. It is anticipated that the additional supply provided by the Darwin region water supply (Adelaide River Off-Stream Water Storage) proposal will largely address this demand.¹¹³ It is expected that Adelaide will be able to meet its forecast increase in water demand through an increase in water efficiency, use of recycled stormwater and wastewater and desalination.¹¹⁴ Perth’s projected supply shortfall, the largest of all capital cities, is likely to be worsened by ongoing climate change impacts in Southwest Australia, including persistent drying and decreased rainfall availability emphasising the need for further diversification.¹¹⁵

^Figures approximated to the nearest GL
*TasWater figures for the whole state, not just Hobart
**Shortfall met by Adelaide River Off-Stream Water Storage proposal¹²⁵
Note: The highlighted cells show the greatest increase in forecast water demand, and greatest supply shortfall, across all capital cities.

Australian governments may consider investing in a diverse portfolio of water supply options, due to decreased reliability of rainfall-dependent supply such as dams and groundwater systems. Infrastructure Australia previously highlighted the need for diversification of water sources to improve water security in Australia’s towns and cities. All potential supply and demand options must be considered based on their full merits. These alternative water sources (not supplied by surface water or groundwater) are valuable sources of sustainable water and include harvested rainwater and greywater, stormwater, recycled water, captured condensate and desalinated water. Utilities and bulk water authorities across Australia are investing in alternative supply sources,¹⁰³ especially climate-independent sources such as recycled and desalinated water. Exploring new opportunities and technologies to develop and use alternative water sources to increase water security will continue to be an important area of focus in the future.

Table 17 provides a breakdown of current water sources for each major urban centre. The data highlights that most Australian capital cities are still reliant on rainfall-dependent water sources. All capital cities except for Perth source a low proportion of water from recycled water and desalination sources emphasising the need for diversification across all cities. 

Source: Infrastructure Australia analysis of BOM 2025, National performance report 2023–24: urban water utilities data (p28) National performance report 2023–24: urban water utilities, part A 
*Desalination water was not provided to their full capacity due to sufficient availability of other sources in 2023-24
Note: Percentages may not add up to 100% due to rounding. 

Recycled water provides a sustainable fit-for-purpose alternative water source for various end uses, including irrigation and industrial demand. Use of recycled water also helps manage wastewater more efficiently, lowering discharge into waterways and minimising pollution risks. By closing the water loop, recycled water supports resilience against droughts and climate variability and plays a critical role in meeting future urban water demand in Australia.

Two full scale purified recycled water schemes using wastewater have been constructed in Australia. These are the Groundwater Replenishment Scheme in Perth and the Western Corridor Recycled Water Scheme in South-East Queensland.¹²⁶ Perth’s Groundwater Replenishment Scheme is the only operational recycled water for drinking scheme operating in Australia. The scheme utilises Managed Aquifer Recharge, which is the process of adding a water source (such as recycled water) to aquifers under controlled conditions for withdrawal later. One of the key reasons for the success of Perth’s Groundwater Replenishment Scheme was the investment of almost 20 years in scientific and social research, community engagement, and collaboration with regulators.

The New South Wales Government is planning to expand purified recycled water across the state, noting that in the future purified recycled water could be used to supplement drinking water, providing up to 25% of Sydney’s water needs by 2056.¹²⁷ Infrastructure Victoria has recommended that the Victorian Government should pilot a recycled drinking water facility as a pathway to boost water security.¹²⁸ To-date, recycled water networks have been established to varying degrees in all Australian capital cities except Darwin. Research by the Water Services Association of Australia has mapped out the future of purified recycled water worldwide,¹²⁹ illustrating that recycled water projects represent a priority for investment by governments and a viable option for providing reliable water supply.

In Australia’s capital cities, desalination plants have been providing a climate-independent source of water reliably for over a decade (Table 18).¹³⁰

Desalination provides water security in times of drought to ensure continuity of supply. For example, Adelaide’s reservoirs are sitting at their lowest levels in more than twenty years and areas have been facing ‘localised’ water shortages, which has prompted the South Australian Government to restart the Adelaide Desalination Plant at Lonsdale to boost water supplies.¹³⁶ The plant can supply about half of Adelaide’s current water needs.¹³⁷

Beyond providing drought resilience, desalination is also being considered by many state governments as a means of increasing water supply to support growing communities and reduce dependence on rainfall. Desalination plants in Perth have the capacity to provide almost half of the city’s water needs and construction of a new desalination plant is underway to address increasing demand and declining rainfall.¹³⁸ Sydney Desalination Plant supplies 15% of the city’s drinking water and was constructed with an expectation to double its current capacity in future.¹³⁹ Proposed expansions to the Gold Coast Desalination Plant are progressing through business case stages.¹³¹ Infrastructure Victoria has also recommended the Victorian Government start planning to expand Victoria’s desalination capacity.¹²⁷

The Australian Government invests in water infrastructure, including desalination, through the National Water Grid Fund (NWGF). The primary intent of the NWGF is to co-fund projects to ensure financial viability, enabling delivery of critical infrastructure where states, territories or industry partners could not proceed alone. The fund is administered by the Department of Climate Change, Energy, the Environment and Water (DCCEEW) and projects must meet all the National Water Grid’s Investment Framework eligibility criteria. For example, eligible projects must increase the security, quality and/or availability of water for regional and remote communities, and/or productive use.

Urban water infrastructure for the sole benefit of residents in major cities is currently ineligible for the NWGF, as the National Water Grid Investment Framework considers these costs should be borne by utilities and rate payers. However, given the role of desalination in supporting growth and climate resilience across urban, regional and remote communities, and the high cost of this type of infrastructure – which can be cost-prohibitive for state governments alone – there may be a case for Australian Government involvement, within or separate to the NWGF.

Australia’s water supplies are facing pressures from increasing demand as well as climate-related factors. Within urban areas, this is constraining population growth and housing development, particularly within fast-growing cities.

Diverse water supply, particularly climate-independent sources, provide sustainable and resilient water supplies for rapidly growing populations. The 2026 Infrastructure Priority List includes the Darwin region water supply (Adelaide River Off-Stream Water Storage) proposal as an immediate priority for planning investment. This proposal aims to provide additional water supply and storage capacity to the Darwin region over the long term, providing security for consumers, businesses and agricultural users.

While most major cities already have desalinated water supply, further investment is needed in desalination infrastructure to provide greater resilience and support population growth. The 2026 Infrastructure Priority List includes Perth and south-western coast water security as a priority for future investment in the 2-4 year pipeline. This proposal includes providing increased supply of potable and non-potable water for Perth and productive uses on the south-western coast. This could include a mix of more conventional water sources, as well as more innovative reuse and recovery options, to provide additional sources of climate-independent potable and non-potable water. This would support greater diversification in Perth’s and the south-western coast region’s water supply sources and increase their resilience to climate change impacts.^xii

Melbourne, Sydney, and South East Queensland have a long-term pipeline of alternative water projects for planning and delivery, including desalination. However, a substantial investment is expected to be required to ensure these alternative water sources are delivered in time to support expected urban growth.

Regional and remote communities across Australia face persistent water security challenges, with variable climate conditions and limited infrastructure affecting reliability and community resilience. The Productivity Commission’s Inquiry Report on National Water Reform 2024 notes that some regional and remote areas still do not have access to safe drinking water supply. Research provides evidence of drinking water supplies in multiple communities regularly having levels of analytes (such as uranium, arsenic and nitrate) that exceeds Australian Drinking Water Guidelines.¹⁴⁰ One of the key objectives of the National Water Grid Fund, the Australian Government’s infrastructure investment program to improve water access and security, is to provide safe and reliable water for regional and remote communities.

Regional and remote areas face considerable challenges, including reliance on a single source of supply, limited resources, a lack of scale and unreliable information on services.¹⁴¹ Water treatment solutions that are used in cities are often not economically viable for regional and remote communities, and so tailored and innovative solutions require ongoing engagement and investment.¹⁴² Regional water service providers also face distinct operational challenges, serving a highly dispersed population, and their water supply infrastructure may need to extend across comparatively large distances, meaning the costs are greater.¹⁴³

First Nations peoples are disproportionately impacted by the shortfall in water services in remote areas¹⁴⁴ with issues relating to water and wastewater services compounding historical hardships and reinforcing disadvantage. Research indicates that water quality may be having severe health impacts for First Nations people.¹⁴⁵ Many remote communities report concerns related to the smell and taste of their water supplies as well as contamination. This is backed up by evidence from health and epidemiological studies, plus water quality reports from utilities and service providers, which reveal that water quality issues are persistent, and in some cases getting worse, in remote communities.¹⁴¹ In addition, past approaches to address the problem have not always adequately considered the dynamics of these communities. These include cultural needs and preferences, the ongoing maintenance and reliability of infrastructure solutions, and the impacts of an extreme climate on infrastructure and user behaviour.¹⁴³

Previous research into drinking water quality data from across Australia has shown that over 25,000 people in 99 small towns with populations below 1,000 accessed drinking water services that failed to meet health-based guidelines at least once in 2018-19 – of those locations, 40% were remote First Nations communities.¹⁴⁶ Water Services Association of Australia’s 2022 report notes that there are over 500 remote communities without any water quality monitoring¹³⁹ and that there is no comprehensive national monitoring or reporting on water quality – the picture is incomplete within some state and territory jurisdictions, and non-existent at a national level.¹⁴¹

Investment in secure water supply infrastructure within regional and remote areas is a national priority. One option includes investment in water treatment to support the use of recycled water for drinking, or irrigation – this can enable redistribution of water across catchments for other purposes, including cultural uses by Traditional Owners. Victoria’s Werribee water system reconfiguration proposal on the 2026 Infrastructure Priority List is an example of this – further details on this proposal are contained in the Securing water for the economy section.

Long-term reliability and security of supply is a critical enabler of industry investment and growth for water-intensive industries across Australia. Increasing demands from water-dependent industries, such as agriculture,^111,147 mining and manufacturing,¹⁴⁸ is being added to by emerging industries including hydrogen,¹⁴⁹ critical minerals,¹⁵⁰ and data centres.¹⁰⁴ 

Without investment in additional water infrastructure capacity can constrain economic growth, with some cities already experiencing challenges in meeting demand from the residential construction industry.¹¹⁰ Identifying and planning for future investments in new or upgraded water supply, treatment, processing, storage and distribution infrastructure needs to be a future focus. Planning and delivering additional capacity will provide access to secure, reliable water where and when it is needed to support economic growth and industrial development opportunities. In addition, investment in existing and emerging technologies to improve water resource planning and network efficiency will enable greater utilisation of existing assets.

Dams play a critical role in providing irrigation for agriculture. Across Australia, water suppliers and asset operators continually assess, monitor and maintain dams to ensure these long-life assets meet engineering standards and safety requirements.¹⁵¹ The Australian Government has made significant investment in the safety of water assets. This includes a commitment of $600 million to the Paradise Dam Improvement Project in Queensland.¹⁵²

This is important given most suitable dam sites have already been developed and with climate change and population growth, there is limited ability for construction of new dams to support increasing water demands.

Total national water consumption by industry increased by 11.5% in 2023–24, reflecting higher irrigation demand and increased reliance on water utilities during drier conditions. The agriculture, forestry and fishing industry remains the dominant water user. Industry prices are also strongly influenced by agriculture, meaning industry price movements often track seasonal conditions and irrigation demand.¹¹¹

Data centres are also influencing water demand. Data centres mainly use water for cooling and heat rejection, and while their consumption is currently modest compared to other industrial users, demand is concentrated in urban areas and is expected to grow in Australia over the coming years.¹⁰⁴ 

Future facilities will be more powerful and need more cooling.¹⁵³ Data centres also have high reliability requirements, meaning a very low tolerance for water service interruptions.¹⁵⁴

Estimates of data centre water use vary based on the size and growth rates of data centres themselves, and their ability to adopt water recycling technologies and cooling system innovations. 

Table 19 shows estimated average data centre water consumption rates based on data centre size and assumed water use levels. Depending on Water Use Effectiveness (WUE), hyperscale data centres (around 250 MW) can consume up to the equivalent potable water of 5,000 to 35,000 households annually. Sydney Water forecasts 90 billion litres a year will be required the meet the demand of all proposed data centres by 2035, representing around 15-20% of current supply.¹⁰⁴

Source: Infrastructure Australia analysis based on maximum and minimum upper bound Water Usage Effectiveness levels (GL/year) reported in Water Services Association of Australia, 2025, “DATA CENTRES AND WATER IN AUSTRALIA: A resource for sustainable data centre development”, Figure 16, and an average annual household water consumption of approximately 160 kilolitres (kL) per household (reflecting the 156–166 kL range reported for Victoria and NSW in Water Account, Australia, 2023-24 financial year | Australian Bureau of Statistics

While predicting future water use with certainty is difficult, increasing localised pressure on already constrained water systems reinforces the need for long-term supply planning and system modernisation. Circular economy initiatives such as heat recovery, water recycling and water positive design are opportunities for data centres to reduce their potable water use.¹⁵⁵ The data centre project in Marsden Park (New South Wales) proposes to achieve a WUE of 0.1 L of water per kWh of energy used, consuming an equivalent of around 275 households’ annual water use.^xiii Data centres are expected to invest between $500 million and $1.1 billion in recycled water infrastructure by 2030 in Australia.¹⁵⁶

Water reuse, which involves reusing all types of water including stormwater and greywater, is playing a growing role in water security strategies, particularly during dry periods. However, despite this growth, water reuse remained a small share of total water consumption – less than 2% nationally – in 2023-24. Key users of reused water include agriculture, forestry and fishing, supporting irrigation during dry conditions.¹¹¹ Water reuse and adopting a fit-for-purpose approach to water consumption, instead of highly treated drinking water for all uses, will help to ensure water resources are conserved for essential needs. Future opportunities for circularity in water will be reinforced by the new National Water Agreement.¹⁵⁷

Providing access to reliable water for agricultural and industrial uses, as well as the development of emerging industries, is a national priority. This will support economic growth and productivity uplift. The 2026 Infrastructure Priority List identifies the following proposals as priorities:  

Ord-East Kimberley irrigation expansion – upgrades to infrastructure within the Ord River Irrigation Area would provide opportunities to unlock new land for agriculture. This proposal is identified as a priority for future investment in the 2-4 year pipeline to support economic growth and support jobs, including for local First Nations communities. 

Northern South Australia productive water security – proposal to provide a new, climate-independent water source within South Australia’s Upper Spencer Gulf and Far North regions is identified as a future investment opportunity. This proposal is identified as a future investment opportunity in the 2-4 year pipeline and would facilitate the development of mining and renewable industries, supporting economic growth and reducing environmental impacts of extraction from groundwater sources and the River Murray.  

Werribee water system reconfiguration – includes proposed upgrades to assets within the Werribee water system in Victoria to support the use of recycled water within the catchment’s irrigation districts. This proposal is an immediate priority for planning investment to support a secure, reliable and fit-for-purpose water supply. 

Investment in existing water supply assets to ensure they remain safe and reliable should also be prioritised. The 2026 Infrastructure Priority List identifies the Paradise Dam improvement project in Queensland as an immediate priority for investment. Further investment in this proposal by the Australian Government, beyond the $600 million that has already been committed,¹⁵¹ would ensure the dam complies with Queensland Government dam safety regulations and provides supply to meet growing demand for productive agricultural use. 

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xii    Infrastructure Australia recognises that scope elements of the Perth and south-western coast water security proposal may not be eligible for Australian Government funding under the National Water Grid Investment Framework given they are focussed on urban water infrastructure for Perth, as a major city, and non-productive uses of water. Australian Government investment in this proposal may require the creation of a new funding pathway(s). 

xiii     Infrastructure Australia estimate with data centre operating at full capacity 504 MW draw based on information from Southern Hemisphere’s biggest data centre gets the green light | NSW Government and CDC Data Centres Breaks Ground on New State-of-the-Art Data Centre Development in Marsden Park Industrial Precinct | CDC