A NSW opposition plan to sell NSW Lotteries to help pay for drought projects would amount to a gamble on the security of the state's water resources, Premier Morris Iemma says.
Opposition Leader Peter Debnam wants to sell NSW Lotteries, from which the government earned $381 million in 2005/06, to help pay for a $1 billion drought-proofing water fund.
It's expected a coalition government would earn around $800 million from the sale, details of which Mr Debnam will finalise after consulting with the community and the lotteries industry.
Mr Iemma said it was impossible for anyone to predict exactly how much money the proposed privatisation might raise.
"Mr Debnam has linked water security to the fate of a sharemarket float," he said.
"And that's a gamble I'm not prepared to take."
Prime Minister John Howard today backed Mr Debnam's proposal, describing it as "imaginative policy".
"I think the trade of government ownership of lotteries and investment of up to $1 billion in water recycling and water projects in this state is a very good trade indeed," Mr Howard told reporters.
"I think it's an imaginative policy and it has my very strong support and endorsement."
The coalition's proposed drought-proofing fund would be used to fund water recycling, storm water harvesting, dam enhancement and fixing leaks in water pipes.
Mr Debnam said the government would continue to enjoy a healthy revenue flow from a privatised NSW Lotteries.
"We can have a revenue flow from it, we can protect the retailers and we can protect the percentage payout to punters," he told reporters.
Mr Debnam today appeared to soften his opposition to the construction of a desalination plant at Kurnell in southern Sydney.
"It may actually be a measure of last resort," Mr Debnam said.
"Now, I think the problem is the Labor Party has painted themselves into a corner."
Mr Debnam conceded a coalition government would be in a difficult position if Labor signed contracts for the construction of a desalination plant before the March 24 state election.
The opposition would wait and see what progress the government made on a Sydney desalination plant, he said.
A review panel headed by National Water Commission chairman Peter Cullen has backed the state government's plan to build a desalination plant if Sydney dam levels drop to 30 per cent.
The panel warned the 30 per cent trigger point may soon be reached and that the government should be prepared for climate change in eastern Australia to continue.
Meanwhile a report released by federal parliamentary secretary for water Malcolm Turnbull has found that a groundwater source located between Sydney's Centennial Park and Botany Bay could provide 12 million litres of water a day towards the city's water supply.
The state government said comprehensive health risk assessments and community consultation would have to take place before a decision was made on using the water.