The Productivity Commission will examine Australia's water reforms in a new inquiry designed to guide governments through the tricky policy area.
The commission will assess adjustments made through the national water initiative and other changes agreed to by state and federal governments.
The initiative aims to increase water use efficiency, provide investment confidence, guarantee security for rural and urban communities, as well as help the environment.
Treasurer Josh Frydenberg said the federal government would continue working with states and territories to improve water management.
Aerial image of Wivenhoe Dam near Brisbane in Queensland Australia releasing water from the spillway Source: Getty Images
"A national, unified response at all levels of government is essential to face the current and future challenges of managing water," he said in a statement on Friday.
The commission completed its last regular review of the national water initiative in April last year.
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