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Logging could cost Melbourne $40 million a year in lost water resources, a report has found.
Doctors for Native Forests found forestry in catchments northeast of Melbourne could result in billions of litres of water being kept from the city's reservoirs in coming years.
Researcher Dr Nigel Strauss said the report found old growth forests used little water compared with regrowth trees that absorb large amounts from the ground.
"There is an urgent need to address catchment logging simply because the volumes of water lost are so huge," he said.
"Logging is the most damaging and most preventable activity in our water supply."
The report, funded by the Myer Foundation, found water lost to catchment logging was expected to reach 60,000 megalitres a year, equivalent to the water used by 250,000 households and worth $40 million at the tap.