Australians have done little to curb water usage despite the worst drought in living memory, with households in the desert-dominated country still using water at a rate 30 percent higher than the OECD average.

The problem is most acute in large cities, such as Sydney, Melbourne and Adelaide, which account for well over two-thirds of Australia's 20 million population.

With reservoir levels below 50 percent in all of Australia's major cities except Brisbane, experts have warned something must be done.

Sydney, the nation's largest city, has near-record low dam levels as it continues to expand, with experts saying the bulk of the country's population on the coastal fringes do not realise the extent of the problem.

In response, the Victoria state government has proposed hefty fines and even jail terms for individuals or companies that persistently flout water restrictions.

University of New England water policy research expert John Wolfenden said drawing ever-increasing amounts of water from river systems reduced waterways to a trickle, leaving them vulnerable to toxic algal blooms and devastating fragile marine ecosystems.

"Demand by far exceeds supply and the problem is getting worse," Wolfenden said, pointing out the annual flow of Australia's largest river system, the Murray-Darling, was now less than one day's flow of South America's Amazon.

A report by the government scientific body CSIRO this year said water shortages would intensify in the country portrayed by poet Dorothy Mackellar as the "wide brown land".

It warned by 2030 there will be reduced rainfall and around double the number of very hot summer days in some states.

Proposed solutions to the problem fall into two categories, massive engineering projects to dramatically increase water supply or initiatives to reduce demand and ensure water is used more efficiently.

Some of the schemes put forward by the engineering camp over the years have bordered on outlandish, including towing freshwater icebergs from Antarctica and stimulating rainfall by creating artificial mountains in the desert or building a giant whisk to send seawater skyward.

The latest idea, released this week by the Farmhand Foundation, a group set up by prominent business leaders two years ago in response the drought, is for a national water grid that can pipe water from areas with excess rainfall to areas in need.

The cost of the project, which Farmhand estimates would take a century to build, is 300 billion dollars (216 billion US), plus a maintenance bill of six billion dollars a year.

Farmhand chairman Bob Mansfield, a one-time top executive at companies such as telecoms giant Telstra and fast food icon McDonalds, said Australia's biggest problem was not lack of water but the fact that it falls in the wrong place, particularly the country's tropical north during the cyclone season.

"The truth is that we have plenty of water in this country, it's just that we don't have it where we need it," he said.

"We need vision, and we need the vision to plan and fund a national water grid that will harvest more water where it falls and move it to where it is needed."

But Wolfenden said planners needed a more subtle approach to solving the problem, suggesting Australians still took a "European" attitude to water usage and ignored Australia's reality.

"There's no quick fix," he said "The old days of dam it, divert it and dominate it are over. We need to find a way to use water that works more harmoniously with the Australian environment."

Australian Water Association chief executive Chris Davis said the answer lies in controlling demand for water.

While he sees a role for desalination plants to turn seawater into drinking water, Davis said more low-key innovations such as preserving so-called "grey water" from treated sewage would have a huge impact.

"We need to make people aware of what a precious resource water is and stop them from taking it for granted," he said.

TERRA.WIRE