The notion of owning a resource such as water is nonsensical and comparable to owning air, Environment Minister Nick Smith says.
"This sort of notion that someone has a proprietor ownership, doesn't help set a frame work by which we can sensibly manage one of New Zealand's most important resources," he told Nine to Noon.
Dr Smith said New Zealand has 500 trillion litres of freshwater flowing through its lakes, rivers and aquifers and said we only use 10 trillion litres of that.
Most of the 10 trillion litres is used on irrigation and then drinking, washing and industry.
"We only use about 2 percent of New Zealand's huge natural resource."
The minister also said arguments against extracting water to sell as bottled water overseas was a non-event as the amount of water taken by bottling companies was "diddly squat".
Dozens of companies have resource consents with councils throughout the country to use New Zealand water, often for commercial gain. Politicians have argued royalties should be paid on the water, while locals and interested parties, such as the Māori trustees of Porotī Springs, are calling for an end to the resource consents.
Dr Smith said Māori had interests as land owners and were major players in horticulture, agriculture and other industries but they would not be given any preferential or financial rights over water. But he agreed Māori should be part of decision making processes.
"How do we ensure that iwi are involved in the decision making process around freshwater that is made by our councils on a catchment on catchment basis?
"What we're saying is that iwi have an absolute legitimate right to have a say in the way in which New Zealand manages its freshwater. Those balanced judgements around setting those quality standards and the system by which we make a decision on allocation."
Currently the allocation system is based on first in first served, and the minister said the government was working on that system and said it was not the best way to allocate water. He said there had been much discussion on how much of the management of the water should be left to regional councils.
"I'm somewhat frustrated, my view is New Zealand has got to lift its game in managing freshwater, that the regional councils have proven unable to make some basic rules to improve the way we manage it."
However, he said he was pleased that over the last 25 years the discharge from town, factory and farm pipes has been cleaned up and believed the law in that regard was working well. Dr Smith said point source discharge had been reduced by 90 percent.