State and Territory governments are primarily responsible for the management of water resources within their jurisdictions. The Commonwealth has played a role in funding the acceleration of reform, leadership and coordination, and management of some transboundary resources where agreed by relevant jurisdictions. While Australia’s water resources are generally regarded as well managed, our need to do so is also greater than most countries. There is scope to further improve the water sectors’ effectiveness and efficiency, including through consistent and coordinated regulatory and management arrangements that are aligned with the NWI. Reform of the water sector has been ongoing over several decades, reflecting the fundamental importance of water to our economy and the significant challenges involved in managing a shared natural resource often impacted by periods of scarcity. A national approach to water reform started in 1994 through the landmark COAG water reform framework and has continued through subsequent initiatives such as the NWI (2004), the Water Act 2007 (Cwth) and the Murray-Darling Basin Plan (November 2012). The Inquiry into the reform of Australia's water resources sector will also fulfil the statutory requirement for the first of the Productivity Commission's triennial assessments of progress towards achieving the objectives and outcomes of the NWI required by section 88 of the Water Act 2007 and should be read in conjunction with that Act. The findings and outcomes of the 2014 Triennial Review of the NWI undertaken by the National Water Commission are also relevant to the Inquiry. Under the Water Act 2007, the Productivity Commission is also responsible for five-yearly inquiries into the effectiveness of the implementation of the Murray-Darling Basin Plan and the associated Basin state water resource plans, with the first inquiry to be completed by 31 December 2018.

The Inquiry should assess progress towards achieving the objectives and outcomes of the NWI. The Commission should draw on published reports, available data sources and information requested from NWI parties. As the NWI was agreed in 2004, the scope of the Inquiry is broader than that explicitly required by legislation. The Inquiry should also examine whether the water reforms agreed in the NWI, along with any other subsequent reforms adopted by COAG, are achieving their intended outcomes. In undertaking the Inquiry, the Commission should assess:

• progress in jurisdictional adoption of NWI principles

• the outcomes to date of the NWI and related water reform efforts, taking account of other drivers of reform

• progress against the recommendations in the National Water Commission's National Reform Assessment 2014, and

• the extent to which the NWI reforms are adequate to support government responses to emerging or changing water management challenges, including in the urban sector.

The Commission should also consider:

• the potential and realised benefits of NWI implementation

• the scope for improving the NWI, addressing current and future challenges

• broader water policy issues and the role of the NWI in improving outcomes, in particular: – the interaction of water policy with other policy areas such as energy, agriculture, planning, urban supply – whole-of-cycle water management – provision to regional, rural and remote communities, and – the economically efficient provision of water infrastructure.