The funds have been granted to the eWater Cooperative Research Centre, which says the "next generation" technology will accelerate the development of a vital new forecasting tool for water use in the Murray-Darling Basin.

"RiverManager is a necessary part of the sustainable use of the Murray-Darling Basin," Professor Gary Jones, CEO of eWater CRC said.

"Current forecasting models are straining to cope with the demands being made on them including climate change and new technology.

"RiverManager will take us forward to the capability we need, for the demands made on our rivers in the next 10 or 20 years."

RiverManager, is a forecasting tool that allows users to model the amount of water in any river network and then manage complex allocations to get the best possible trade offs between water users and the environment.

According to the CRC, RiverManager's other functions include the prediction of climate effects on river environments, measurement of ground water and salinity, and the ecological responses of the river environment.

Water Minister Penny Wong said the tool would assist the new Murray Darling Basin Authority to implement water plans and cap water use.

"This new tool will help us deliver ... better-informed decisions about how to manage the Murray-Darling Basin as a single entity in the national interest," Sen Wong said.

"It will help the Authority evaluate the costs, benefits and trade-offs required to put the Basin Plan into action."

She said it also provides the opportunity for water planners, managers and operators to manage the Basin’s surface water and groundwater as a single, integrated system.