A 12-year plan to restore Australia's largest and most complex river system to a sustainable level will fail, affecting the environment and 2.3 million people living on it.
The independent authority overseeing the $13 billion Murray-Darling Basin Plan admitted there is no way it could hit legislated targets by June, 2024.
Nearly half of the 36 supply-side projects will certainly or likely not meet the deadline while very little progress has been made on efficiency measures aimed at enhancing environmental outcomes, it said on Tuesday.
That position has worsened since the July, 2022 update.
"Implementation of the basin plan is at a critical juncture," Murray-Darling Basin Authority chair Sir Angus Houston said.
"It is important that the challenges inhibiting the full delivery of the basin plan are quickly addressed to provide a clear pathway forward."
The update confirmed federal Water Minister Tanya Plibersek's "worst fears" and meant an extension had to be negotiated with states.
Ms Plibersek was coy on the length of the extension but said it would not be as long as five years.
"We know what we need to do in a number of cases," she said.
"We need to get our skates on and do it."
Water buybacks - paying farmers to reduce their water take - would continue to be a critical element of the plan.
The plan was essential to the health of inland Australia and without it plants and animals faced extinction, while communities faced dried river beds for hundreds of days at a time, the minister said.
Irrigators welcomed the extension, saying communities would be spared the devastation that came from water buybacks.
National Irrigators Council chief Isaac Jeffrey said the buybacks would "hurt all Australians" at the checkout as higher water prices and lower production put upward pressure on the cost of living.
The opposition backed the extension while dismissing suggestions the coalition sabotaged the plan while in government.
But Green groups warned delays would risk terrible damage to the environment during the next drought.
"With the United Nations declaring an El Nino and Australia facing a dry spell, right now is the worst possible time to deprive wetlands and wildlife of the water they will need to survive tough times ahead," Conservation Council of South Australia chief executive Craig Wilkins said.
The management of the river system, which runs through four states and sustains dozens of towns and cities, was overhauled in 2012 after years of overuse and the devastating millennium drought.
It aimed to reduce annual water diversions from rivers to farms, towns and other consumers by about 20 per cent or 3200 gigalitres, through measures including floodplain management, water delivery improvements and water buybacks.
About 2100GL has been reduced so far.
The basin authority on Tuesday expressed particular concern about NSW, whose failure to implement water resource plans had left the federal water watchdog powerless over large swathes of the basin.
Four years after 20 NSW water resource plans were due, only five are operational.
Eight plans are under review and another seven were recently withdrawn from the review process over concerns about the quality of the previous state government's consultation with First Nations and other communities.
"Some of these plans had no hope of accreditation by the (basin authority) and were withdrawn by the new NSW government so they could be fixed and urgently resubmitted," NSW Water Minister Rose Jackson told AAP.
Five of the outstanding plans would likely be resubmitted within two months while the other two required more complex changes, she said.
All other states and territories' water resource plans are in operation.
