The recent drought has highlighted the finite nature of Australia's divertible water resources. According to Australia's recently completed National Land and Water Resources Audit, development of water resources in southern Australia has reached or exceeded sustainable extraction limits. Similarly, 161 out of 538 groundwater management units are either totally allocated or already over allocated. Whilst mining only uses about three per cent of diverted water resources, water scarcity may be a major factor that determines whether potential mines can be developed in the future. Furthermore, the development of extraction and processing facilities that limit water use and maximise the re-use the waste water streams will be even more fundamental features of the mining industry in the 21st century than they are at present. There are encouraging examples where innovative water re-use technologies are significantly reducing the water used per unit of mined product. Whilst mining in the areas of Australia draining to the tropical seas may be less constrained by a current lack of water (60 per cent of divertible water resources drain into the Timor Sea, Gulf of Carpentaria and north east Coral Sea), it is highly probable that there will be increasing demand for these waters from the irrigation industry, whilst pressure will also be applied to ensure that environmental flows that benefit the coastal fishing and prawn industries are maintained. In the Great Artesian Basin, current research is demonstrating that the groundwaters are being recharged at rates considerably lower than current extraction. Whilst some other groundwater basins in arid and semi-arid Australia have currently untapped resources, these water are often relatively saline and/or may be intimately linked with key ecosystems in discharge areas. This paper presents an overview of the current state of our water resources and examines some of the key water use issues including allocation, use and reuse, environmental flows and competing demands on the resource that will ensure that water issues remain high on the policy agenda for mining, irrigation and other water users.