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Billy Freeman and Joe Hildebrand

NSW Premier Bob Carr today said the state's long-running drought may stretch for another two years as one NSW city faced warnings that it would run out of water within a year.

Mr Carr told parliament that the prospect of another El Nino had increased over the past month, and such an occurrence would prolong the drought for years.

"We face another El Nino event," he said.

"Warming in the central Pacific, reduced trade winds and a negative southern oscillation index all point to this and that would prolong the drought for years."

El Nino is a warm current of weather that has had severe atmospheric consequences in recent years.

The southern NSW city of Goulburn has been warned it will run out of water within 12 months if there is not a dramatic increase in rainfall.

Goulburn Council's water services manager Matthew O'Rourke said Goulburn's water supply was at dangerously low levels and expected to run out by April or May next year without significant rain.

"We're at critical levels at the moment," Mr O'Rourke said.

"We will implement the next level of water restrictions on October 1 and if there is no rain we anticipate that within a year we will run dry."

He said the upcoming summer season would only make things worse.

"Summer every year is damaging because it's a big draw on our water supply," he said.

"It's water that we don't get."

The city of 22,500 people is currently looking at back-up plans in the event of low rainfall, including a pump station and a pipeline to redirect water.

"That would be a short-term, emergency measure that would keep us going under heavy restrictions, which is what we have now," Mr O'Rourke said.

"It would last us about a year, but we would hope that within a year or two the drought would be lifted."

Mr Carr said the government was drilling for ground water in 22 locations across the state in an effort to ease the water crisis, which he said was now the worst in 60 years.

In Goulburn, social activities such as local sporting events have also suffered with many venues unable to be maintained because of the lack of water.

Goulburn has two dams, Pejar and Sooley, both of which are running desperately low on water.

Pejar is the larger of the two and is currently at just 20 per cent capacity, while Sooley is filled to 55 per cent of its capacity.

Mr O'Rourke said Goulburn needed to keep its average rainfall between now and April next year for the dams to stay at current levels.

"If our average rainfall situation is maintained, then we'll remain at our current level (of water)," he said.

"We won't recover anything but we won't lose anything either. But unless it rains, we'll run out."

Mr Carr said the government would provide up to $7.7 million for alternative water supplies in drought-affected communities and called on the federal government to automatically roll out exceptional circumstances declarations to these areas.AAP NEWSFEED