As river systems face drought and climate change, the increasing use of water from underground aquifers has become "an unacceptable risk", the National Water Commission said yesterday in its annual report.

"Communities and farmers are very heavily reliant on groundwater," the commission's chief executive, Ken Matthews, told the Herald. "But, because groundwater is out of sight it has often been out of mind."

While the monitoring of groundwater use from big and small aquifers, including the Great Artesian Basin, is improving, farmers and communities must cut back their use.

"As the most urgent priority, concerted action must be taken to return overallocated systems to sustainable levels," the report says.

Two years after the federal and state governments agreed to the national water initiative and five months after the Minister for Climate Change, Penny Wong, announced the $12 billion water plan, the commission said that reform of Australia's water supply had been slow and no state government "can yet claim a fully effective water planning system".

The Federal Government has allocated $82 million to a national groundwater action plan and the NSW Government has been paying farmers in the Gwydir, Namoi, Lachlan and Macquarie valleys and elsewhere to adjust to cutbacks in their allocations.

Mr Matthews said the biggest issue in the management of the nation's water was the overallocation of water rights from rivers and aquifers combined with climate change.

The report also identifies several other priorities including the need to employ more experienced environmental water managers in rural Australia.

These people needed to be "identified, respected and effective" in their communities.

The NSW and Federal governments are investing more than $200 million in two programs to help restore the State's ailing wetlands and the report praised the scientific programs attempting to monitor the wetland flows.

The commission also continued to press for its policy of raising the price of water including pushing for more independent water pricing.