Water resources in Melbourne and the central region of Victoria are vulnerable to climate-driven hydrological changes and to changes in population, water use and priorities from a social, economic and environmental perspective. The climate-driven vulnerability is due to both climate variability and climate change. The annual variability of Australian streamflow is well in excess of the global average (McMahon et al., 1992) and management frameworks are generally in place to deal with expected historical levels of climate variability. Considerations have also been made to manage the expected range of projected climate change. However, climatic conditions in Melbourne and the central region of Victoria over the last 13 years have been outside historical levels of variability and even outside the expected range of changes in temperature, precipitation and streamflow projected for 2050 (Jones, 2009). This has resulted in a range of challenges for water resources management.

In 2005 Melbourne Water and CSIRO completed one of the first studies in the world that examines the implications and impacts of climate change on water, sewerage and drainage systems in an integrated assessment (Howe et al., 2005). Following on from this study, Melbourne Water is currently implementing a climate change adaptation program including risk identification and integration of climate change projections into water supply-demand, drainage and sewerage strategies (Rhodes et al., 2010).

However, translating climate science and climate change projections into water resource planning and management decisions remains a challenge. There is an inherently complex and non-linear uncertainty cascade from emission scenarios, through Global Climate Model (GCM) outputs, downscaling techniques for assessing local impacts, down to the hydrological modelling of catchment response Bates et al. (2010).

Since 2005 Melbourne Water has undertaken much work to understand and adapt to the changed hydro-climate conditions. This paper focuses on the water supply sector and highlights the nature of the prolonged dry conditions experienced in Melbourne’s water supply catchments since 1997; the range of research actions undertaken to improve our understanding and assess the impacts of climate change and variability; water resource strategic planning undertaken to respond to the changed and uncertain climate and reduced streamflow; the challenges in translating these observations and climate science into water resource management and planning; the development and implementation of Melbourne Water’s Climate Change Adaptation Strategy and Action Plans, and future direction towards a “water sensitive city”.