Water use in the Murray Darling Basin will be scrutinised in an independent review following allegations of water theft in NSW, the federal government says.
The basin-wide review of compliance with regulations governing water use follows allegations in an ABC Four Corners report that billions of litres earmarked for the environment have been diverted for cotton irrigation in NSW.
The Turnbull government says it will seek the basin states' agreement for an independent examination by the Murray Darling Basin Authority of whether state laws, water licence conditions and statutory instruments are appropriate and being met.
It will also look at the adequacy of water measurement and monitoring arrangements, and whether governance arrangements are strong enough to prevent water theft or misuse.
"Strong compliance regimes are just as important for irrigators as they are for the environment and basin communities," Prime Minister Malcolm Turnbull and Agriculture Minister Barnaby Joyce said in a joint statement on Sunday.
NSW welcomed the review, said it would assist the authority and reaffirmed the state's commitment to the basin plan.
But South Australia, which wanted a judicial inquiry, said the authority-led review was "toothless".
"The allegations go well beyond any compliance issue and need a full judicial inquiry that will fully investigate the NSW Department of Primary Industries and ensure public servants at the highest level are not undermining the Murray-Darling Basin Plan and jeopardising the future water use for the nation," Water Minister Ian Hunter said.
The Turnbull government announced the review after Mr Joyce was recorded telling farmers in Shepparton that the Four Corners investigation into alleged water rorting was trying to "create a calamity".
"It's about them trying to take more water off you... shut more of your towns down," he said in the recording obtained by Fairfax.
NSW last week said it was looking into water theft allegations at properties in the state's north, whether a senior official helped irrigators undermine the basin plan and whether a major investigation into water management breaches was stymied.
Additionally, the Australian auditor-general was examining how the federal agriculture department monitors the performance of NSW under a national Murray Darling agreement.
The independent review would present its findings by the end of the year, the Turnbull government said.
