Some cities have faced a ban on outdoor water use as restrictions have been tightened in recent years.

But the National Water Commission thinks such restrictions are unfair and there are better ways of cutting water use as the country grapples with drought.

"The commission regards long-term temporary water restrictions as an inequitable and inefficient way of balancing supply and demand," the commission said in its water proposal, released today.

The proposal says changing water pricing is the best way to encourage conservation.

It recommends "scarcity pricing", which means households pay more for water in dry times, and less when it's wet.

Peak pricing could also be introduced.

Governments would not intervene to keep prices low.

And renters, who usually do not pay for water, could have to fork out.

To facilitate this, flats and units could have their own water meters and bills, instead of being metered en masse.

The commission also wants the tiered pricing system - where households that use less water pay a lower rate - to be scrapped. There would be a flat rate per kilolitre instead.

National water commissioner Chloe Munro said reform was needed.

"Getting our water prices right will encourage wiser water use, (and) ensure that new sources of water supply are brought online in a timely fashion," Ms Munro said.

"Scarcity pricing may be a more efficient way of balancing supply and demand and could significantly reduce the need for water restrictions."

The commission is an independent statutory body whose role is to drive water reform.