Morris 1100 is right, we're allowed to water our gardens. With a 20L device for 3 hours, 3 nights a week. This doesn't make much sense to me. But it's ok, I haven't watered my gardens since... well, I can't remember ever watering a garden!

I don't enjoy gardening. And my neighbourhood is frequented by water management utes, who do nothing more than drive around looking for people using hoses (which are banned). Washing cars (at home) is also banned (unless you use dew!). And you have to have 3 of 4 water saving devices (aerator taps, AAA Shower Heads, dual flush toilets, AAAA washing machine) and a pool blanket to be allowed to fill your pool (I've filled mine once - just a little bit - since October. Pool is currently massively overfull after the rain).
Qld may have done well in the 60's to plan ahead for water needs, but it doesn't mean that any government in the last 15 years anywhere in Qld has had any sort of vision for the future. Water's just the latest crisis up here... And there are scandals up here as to the government's use of water. There's a massive leak in the Southbank Pool, several public pools are being drained and refilled over the winter, and none of the pools have pool covers when not in use. As much as pool covers can be a pain to use, they really do save a lot of water lost through evaporation.
Recycling is, to me, a very short term solution. And, despite the propaganda we get, not necessarily the safest one. I say that because I don't trust the water we get at the moment, I can't imagine what will happen when it's not originating from as clean a source (the sky, via dams). Anyone who's ever been able to compare SEQ water to any other water will agree with me! It tastes disgusting. The big problem with recycling, though, is that you can't recycle 100% of what you use. Most places around the world use less than 10% recycled water (Toowoomba proposed 25%). So it doesn't really add that much of a supply. You can only reuse a portion of what comes back through the system, and not all water leaving the system (going to homes) comes back - a lot goes into gardens.

So it really is a finite resource, and not a good one.
I reckon WA and NSW have picked the right option. So much of Australia's population lives right on the coast, it only makes sense to desalinate. There are now cheaper desalination techniques, and some investment into making them more efficient wouldn't be a bad thing, either. Yes, current setups produce a super-salinated discharge, but surely there could be investigation as to how to harvest the salt from it..? In northwestern WA, they do this - they let tidal waters onto large areas, then block it from the ocean, so the water stays and evaporates off over the next few days. They then collect the salt. I don't see why we couldn't do a similar thing with the discharge (space constraints being the biggest problem on the east coast). If we could change over to a desalination model, then the dams could become what they really were originally intended for - flood controllers! And if we built big enough desalination plants, we could actually start refilling the dams as required in drought conditions to allow some water to flow down the rivers. Which is really something neglected by most city folk, as Mike's pointed out.
Maybe I'm naive, but I think that makes some sense...
Oh, one other thing Mike's pointed out, domestic use is small compared to business. But not only that, beverage manufacturers use a lot of water. Cola manufacturers use about 1.5L of water to make 1L of product.

There's a new brewery up here which uses 2.3L of water for every 1L of beer.

The older brewery up here uses more like 4 - 5L of water for every 1L of beer!

Food for thought...