At present consumption levels, the city will face an annual water shortage of 200 billion litres (53 billion gallons) by 2030.

"Sydney is using more water than is sustainable," the New South Wales (NSW) state government's "Water for Life Plan" said.

The city's 1.5 million households used over 500 billion litres (132 billion gallons) of water in the year to June 30, 2004 -- equivalent to the contents of Sydney Harbour.

But now capacity at Warragamba Dam, which supplies about 80 percent of Sydney's fresh water, has dwindled to just 37.2 percent.

"There would have been about three and a half years of water left in the water storage system," said Marion Bennett, head of Sydney's water directorate.

Despite record monthly rainfall across Sydney in February, Warragamba Dam has filled little, as the 1960s-built dam northwest of the city is in a rain shadow.

Sydney's 10 smaller dams are also less than half full.

Australia is the driest inhabited continent on earth and Australians are among the world's highest water users.

The island nation is only partially recovering from its worst drought in a century and Sydney is one of the hardest hit areas. The NSW water plan says the city can expect even less rain and more frequent droughts.

The Sri Lanka-based International Water Management Institute ranks Australia as a nation facing "economic water scarcity" by 2025, which means that to meet future water needs it will have to increase supplies by at least 25 percent over 1995 levels.

SEARCH FOR WATER

Under Sydney's 25-year water plan, authorities have rejected building a new dam, saying it would cost more than A$2 billion ($1.6 billion) and inflict major environmental damage.

Instead, as an initial step, deep-water pumps are being built to reach lower into dams to access an extra 30 billion litres (8 billion gallons) of water each year.

The city may also turn sea water into tap water. A team of international experts recently gave the green light for a A$2 billion ($1.56 billion) desalination plant in Sydney, said NSW Energy and Utilities Minister Frank Sartor.

"We can't afford to risk Sydney's water supply by turning our back on desalination and just praying for rain," said Sartor.

Authorities are also considering transferring water from the Shoalhaven River, 150 km (90 miles) southwest of Sydney, tapping groundwater reserves, reducing consumption, and recycling.

"There is no silver bullet," scientist Peter Cullen, ranked Australian Environmentalist of the Year in 2001, told Reuters. "What any city should do is to look at a full range of options rather than grab just one solution."

WATER USAGE

Sydney's 4 million people, known for their outdoor lifestyle, often take water for granted, wasting it at open-air beach showers, washing cars, hosing down driveways, refilling swimming pools and watering thirsty lawns.

Water consumption is down 20 percent in 10 years, with stringent water restrictions introduced in 2003. Yet residents still have a high level of water usage.

Households account for the lion's share, or 70 percent of consumption, with industry absorbing 12 percent and businesses 10 percent. Each resident consumes on average 350 litres (92 gallons) a day.

Sydney already recycles 14 billion litres (3.6 billion gallons) of treated waste water a year and plans to capture and recycle more -- from the rain that flows from roofs and streets to bathwater and irrigation -- to produce tens of billions of litres of extra water.

PRICE OF WATER

Price is also part the water crisis -- and its possible resolution. Government officials and environmentalists agree that the vital commodity has come too cheaply for too long, creating the belief that supplies are limitless.

According to the Organisation for Economic Cooperation and Development (OECD), consumers in Denmark and Germany pay three times more than Australians for their water.

Sydney's 25-year plan says water has been "historically undervalued" and calls for "smarter water pricing".

"The days of looking at building another dam to secure the city's water supply are well and truly over," said Bennett.

"Pricing is the main economic tool to ensure that people realise the value and scarcity of water," she said.

But any rise in the price of water will be politically sensitive. An application in March by the government's Sydney Water company for a 4.6 percent annual price rise met with widespread public criticism.

"We've used all the cheap solutions -- the next range of options is bound to be more costly," said Cullen, the environmental scientist.