We present the first analysis of water use in the Australian economy to account for inter-state trade, exports and consumption patterns, across all economic sectors and incorporating a temporal analysis. This is achieved by using the environmentally extended input-output technique, combining state-level input-output and water accounts from the Australian Bureau of Statistics. Results show that the three big eastern economies (New South Wales, Victoria, Queensland) rely mostly on water used within their jurisdictions. Approximately one-third of water consumption is for exported commodities, with the biggest export flows of virtual water being associated with agricultural production. Comparing results across the years (2000–2011), the water consumption associated with the provision of goods and services has decreased by 32% for exports, and by 38% for domestic markets. To date in Australia, the focus for improved trans-boundary water management (within Australia) has been on improved mechanisms for sharing physical allocation of water; these results provide the trans-boundary economic dependencies related to water availability. Recent innovations in the compilation of economic input-output models create an opportunity to progress this analysis, exploring in detail the economy–water interlinkages. It is our intention that the paper shows the value of analysing water flows using the multi-regional input-output techniques.

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