James Horne, the deputy secretary of the Department of Environment and Water, said the Government wanted to spend $150 million on water purchases from willing sellers this financial year, but "may spend more if some of the projects for closure of irrigation districts come to pass".

The Wakool district, on NSW's side of the Murray River, is one area where farmers are talking of selling entitlements as a group.

Dr Horne told a Committee for the Economic Development of Australia lunch in Sydney yesterday, groups had said: "We don't think we have a future in irrigation.

"What sort of deal are you prepared to give us if we close … this irrigation district and become dryland farmers?"

Where buy-backs hurt rural areas, "the need for structural adjustment will be considered", Dr Horne said.

NAB - the banker to a third of farmers - yesterday urged governments to get on with the job of sorting out water in the Murray-Darling Basin, saying the co-operation needed for change is still unsatisfactory.

NAB's head of agribusiness for NSW, Tim Keith, said: "Every day there's a delay, communities, irrigators and farming families suffer; not just economic losses, but … health and emotional wellbeing."

Dr Horne said much was being done, but it is "a very long and difficult task".

In buying back vast amounts of water, the Government had to be careful it did not distort the water market by "bidding up the price".

Dr Horne also said that to reduce the large amount of water lost to evaporation at the Menindee Lakes in western NSW, the Government was looking at pumping water from the Darling River into underground aquifers, where it could be stored for use by Broken Hill.

The official forecast for the winter grain crop harvest was scaled back again yesterday, to 19.9 million tonnes.

This was due to a lack of spring rain across South Australia, Victoria and southern NSW