Environment experts warn more than a quarter of Australia's rivers are in danger of drying up and stringent restrictions on water use now extend nation-wide.

At the core of the 10-year water plan is a strategy to save the nation's longest river system, the Murray-Darling, which runs north-south through four states and is the lifeblood of Australia's most important farmlands.

"This has been a tremendous day for the future security of water supply in this country," Prime Minister John Howard told reporters, after Australia's national and state governments agreed to the A$500 million ($350 million) plan.

Australia is one of the biggest global farm exporters, shipping A$30 billion a year worth of produce to the world.

A reduction in the water flow in the Murray and Darling rivers, which stretch 3,500 km (2,175 miles), has in recent years seen sections of the river system dry up, leaving farmers struggling to survive the worst drought in 100 years.

One of the major problem facing the Murray-Darling system is that the nation's large cotton farms, which use vast amounts of water for irrigation, are situated at the head of the system, reducing flow to farmers further down the rivers.

The flow of water has reduced so much in recent years that the mouth of the Murray into the Southern Ocean has silted up.

"The big challenge is to save the stressed, over-irrigated inland areas of this continent," said Bob Carr, premier of New South Wales state.

"We are now committed to a 10-year plan which sees a pouring back of the over-irrigation and the allocation of water for environmental purposes," Carr said.

Under the new plan irrigators have agreed to reduce the amount of water they draw and a national water commission will be created to oversee a national water market, which will regulate water used by thirsty agricultural industries. More than 600 times the amount of water in Sydney Harbour is already commercially traded a year on private water exchanges.

"This (plan) paves the way for strong sustainable agriculture," said Peter Corish, president of the National Farmers Federation.