Water Minister David Littleproud has dismissed suggestions a new independent umpire to police the Murray-Darling Basin was created because the regulator failed.
Basin state and territory governments have unanimously agreed to back the federal government's proposal to put a new inspector-general in charge of tackling water theft and other integrity issues.
The position wouldn't replace the Murray-Darling Basin Authority but is slated to hold the regulator to account.
Mr Littleproud said the new role responded to widely documented compliance issues, including some allegations of water theft which are before the courts.
"This is about making sure there's an overarching body that can give confidence between the states," he told Sky News on Monday.
He said NSW, where serious allegations of water theft have surfaced, had acted swiftly to lift its game around compliance.
"I have to throw a bouquet to them," the minister said.
"There was widespread reports about some challenges that took place in their jurisdiction and they acted swiftly."
The inspector-general will have the power to investigate suspected water theft, as well as ensure that efficiency and recovery projects are delivered across the river system.
Compliance issues could be referred to state and federal anti-corruption bodies, with some charges attracting jail time or fines.
"You've got to have a tough cop on the beat that's fair and gets the job done," Mr Littleproud said.
Northern Basin Commissioner and former federal police commissioner Mick Keelty will become the interim inspector-general until federal parliament passes legislation to create the role.
The basin covers about a seventh of Australia and provides 40 per cent of agricultural production.
Australian Associated Press