A water balance study of the Piccadilly Valley has indicated that almost 20% of annual rainfall, amounting to 2000 ML, recharges the fractured rock aquifers. The current usage of about 1200 ML represents just under 60% of this annual recharge. Total pumping in the area has decreased by just over 50% since 1970, due to a reduction in the area of vegetable irrigation and changes in land usage to vinegrowing. The water balance should be revised periodically to take into account such changes. The Basket Range Sandstone is the most productive aquifer in the valley, with yields of up to 20 litres/sec. All groundwater samples tested have low salinities, mostly below 500 mg/L, and show a trend of increasing salinity with depth. Since monitoring began in 1979, groundwater levels have been strongly controlled by rainfall, and show no evidence of pumping drawdown. Falling water levels in early 1995 were caused by one of the driest weather spells on record during 1993-94, and not by overpumping. Salinity monitoring of the valley's groundwaters has not been consistent and consequently, no trends are evident. However, higher salinities are observed beneath irrigated areas. Extensive sampling by AGSO has shown general groundwater quality to be very good, with only very few bores not meeting drinking water guidelines. Because of uncertainties over the effect of groundwater pumping on environmental baseflows, it is recommended that the sustainable yield be limited to a maximum of 75% of recharge, which for the Piccadilly Valley amounts to 1500 ML. This represents an increase of approximately 300 ML over the current use volume, which if developed, may have local impacts on groundwater levels. The effect of groundwater pumping on baseflows which could have environmental significance needs to be investigated with some urgency. Regular water level and salinity monitoring should continue, and the metering of all irrigation and industrial supplies should be carried out to allow accurate estimates of water use. Efforts should be made to increase irrigation efficiencies, especially for vegetable irrigation.