"Historic" cooperative measures to save the Murray-Darling Basin are being given legal force by the federal government.

Environment Minister Peter Garrett introduced a bill today that implements agreements between the Commonwealth and affected state and territory governments to rescue Australia's greatest river system.

Broadly, it gives the commonwealth overriding responsibility for the ailing waterway, while the states continue to manage water within their catchments and retain an advisory role on other matters.

"This is much needed, long overdue reform in governance that will put the Murray-Darling Basin on the right footing to face the challenges that lie ahead," Mr Garrett said.

New South Wales, Victoria, Queensland, South Australia and the ACT are to pass complementary legislation.

The bill transfers the powers of the Murray-Darling Basin Commission to a new body, the Murray-Darling Basin Authority, Mr Garrett said.

The authority will prepare a basin plan that will set diversion limits on surface and groundwater to ensure the rivers' long-term health and safeguard the needs of the communities that rely on them.

The authority would have enforcement powers.

A properly functioning water market would be essential to help irrigators manage with less water, Mr Garrett said.

The bill will give the Australian Competition and Consumer Commission a key role in monitoring and enforcing compliance with water charge and market rules.

Mr Garrett said the drought, climate change and the consequences of past decisions and practices were placing an enormous strain on the basin.

Basin management had been characterised by tension between governments and competing interests, particularly between upstream and downstream users.

"It is time for the Commonwealth to provide national leadership for present and future generations," Mr Garrett said.

The challenge was to secure a sustainable water supply in the face of a changing climate and the pressures of economic development.

"Cooperative partnerships between the commonwealth and state and local governments, farmers, industry and the community are the key to addressing this challenge," he said.

Debate on the Water Amendment Bill 2008 was adjourned.

AAP