Regional Capitals Australia (RCA) has welcomed a new Productivity Commission inquiry examining National Water Reform, to shine a spotlight on the funding gap facing regional capitals.
RCA says the inquiry creates an important opportunity identify how the nation is leaving many regional communities to bear the brunt of pressure on water resources from population growth, ageing infrastructure and climate volatility without direct access to the support they need.
RCA Chair Cr Josh Black said regional communities were being asked to drive national priorities such security across food, energy and defence as well as a growing population, yet were locked out of the funding pathways needed to secure the water that underpins these priorities
“We are particularly concerned that our communities will be left with critical water shortages due to the growing demand on our current supply if this issue is not addressed,” Cr Black said.
“A disconnect between accessing funding and delivering the water our communities and nation need to thrive is becoming a significant barrier to regional growth and national productivity in a time when we need it most.
“We don’t have a shortage of water projects in regional Australia, we have a system that locks out regional leaders ability to put forward their projects forward for funding,” he said.
RCA’s 2026–27 Pre-Budget Submission highlights the scale of the challenge:
- 44% of regional capital cities are already experiencing significant water shortages annually;
- 77% of councils say water infrastructure upgrades are their top priority; and
- More than half of Australia’s water demand is driven by agriculture and primary industries.
At the same time, demand is accelerating across multiple fronts:
- Population growth in regional areas continues to increase pressure on local water systems;
- PFAS problems are continuing to threaten water security without the appropriate research and development into treatment options;
- Renewable Energy Zones and major infrastructure projects are increasing industrial water demand; and
- Agriculture remains highly water-dependent and critical to food security objectives.
Many regional communities are also operating with single-source water systems and ageing infrastructure, leaving them exposed to drought, climate shocks and system failure.
Cr Black said the consequences are already being felt.
“We are seeing housing projects delayed, industry expansion constrained and communities asking a very simple question: where will our future water come from?” he said.
“You cannot deliver housing, grow regional economies or support renewable energy zones without securing water supply first.”
RCA is calling on the Federal Government to address this structural gap by:
Allowing direct local government access funding associated with to the National Water Grid Investment Framework
Establishing a transparent process to identify and prioritise regional water projects
Recognising water as critical enabling infrastructure for housing, industry and energy transition.
“If we don’t fix this now, water will become another binding constraint on Australia’s growth.”