The Government says it believes New Zealanders will see significant water quality improvements within a generation.
In her report released on Thursday, the Parliamentary Commissioner for the Environment warned that without significant intervention, almost every river and lake will have deteriorated by 2020.
Jan Wright said the increased pollution was the result of land being converted into dairy farms which cause more nutrient and effluent run-off and this will have a significant impact on waterways and kill birds, fish and insects.
Environment Minister Amy Adams said on Thursday the Government has a package of reforms that will lead to more productive and sustainable use of freshwater resources and help alleviate Dr Wright's concerns.
Primary Industries Minister Nathan Guy said the Government is also heavily investing in research to tackle the nitrogen run-off problem on farms.
Jan Wright said modelling shows that between 1996 and 2020 an area the size of Taranaki would have been converted into dairy farms. She told Radio New Zealand's Nine to Noon programme on Thursday that without significant intervention there would be more deterioration of waterways by 2020.
"The stress on water quality, that nutrient stress is ... increasing, despite all the efforts that are being made to mitigate, to reduce the nitrogen and phosphorous getting in. And it's very unfortunate, I'd hope the modelling had showed otherwise, but the nitrogen in particular is very, very hard to mitigate."
Dr Wright said more land conversions would result in more degraded lakes, cloudy estuaries, algal blooms at swimming spots and a decline in fish and bird species.
Canterbury and Southland were expected to be the worst affected.
Dr Wright said the problem was not the fault of a single generation, but the Government needed to address the issue if it wanted to stick to its promises of improving freshwater quality.
Report supports farm link to pollution - ecologist
A Massey University ecologist says those who deny a link between dairy farming and water quality have lost the argument.
Dr Mike Joy said independent comment like Dr Wright's had been a long time coming.
"In an ocean of denial and coverup and spin, to have a nice, clear, concise, honest piece of research like that is so good, because it just says it clearly what we've been saying for ages: that the inevitable results of intensification are more impacts on freshwater."
'We have to have limits'
Fish and Game chief executive Bryce Johnson said the new report showed the dairy industry was out of control.
"It's expanding into places that are not environmentally sustainable. The industry actually knows that and to Theo Spierings' credit, a couple of weeks ago, it was great that he acknowledged that New Zealand is now eight to ten years behind what's happening elsewhere.
"We've just got to now get the Government, central and regional, and industry to take responsibility for the outcome of this report and cause change.
"We have to have limits. There is no way we can avoid limits on dairy farming and I don't think New Zealanders are now ... rebelling against that. They simply say we want to have limits, we want water to be swimmable, fishable and safe for food gathering and this report vindicates why we need to have that."
Federated Farmers water spokesperson Ian McKenzie believes the report will be yet another blow to dairy farming's image.
"I think the public already are blaming the dairy farmers for the world going to hell in a basket, so I don't think this changes public perception. It perhaps might reinforce the public's perception which may not be entirely helpful.
"The dairy industry is doing a huge amount to change its influence on the environment. We think we have been making real progress over the last six to 12 months. This is going to be seen as a major step backwards in terms of public perception."
