The Northern Australia Land and Water taskforce, charged with investigating the potential to develop the vast, wet region, urged caution because too little was known about the area.

The taskforce tried to dampen enthusiasm for large, short-term agricultural development, but said a lack of data prevented it from categorically approving or ruling out many of the long-held ambitions for the north.

The region, which has very high, but seasonal, rainfall, has long been coveted by the agricultural sector and has been touted as a possible water source for drying cities in the south.

But without better understanding the region, Australia could not afford to rush its development, said the taskforce chairman, Joe Ross.

''We can't repeat the mistakes of the past … we need to be sure that development in any form is sustainable.''

While urging caution over agricultural expansion, Mr Ross said there were opportunities to increase farming.

''It is possible for quite large growth in horticultural and agricultural industries, but in a smaller mosaic-style framework.''

The broadacre style of farming common in the south was unlikely to be sustainable in the north.

The president of the National Farmers' Federation, David Crombie, said northern Australia would not be a food bowl on the scale of the Murray-Darling Basin, but it had great potential.

Mr Ross conceded the lack of data meant the report could not categorically debunk calls for water from the north to be used to meet demands in the south.

The taskforce did not commission any new data on the region's water systems to inform its report, relying instead on one CSIRO study and a collation of existing environmental studies.

Mr Ross said the report was at least fostering ''rational debate'' about the region's future.

The taskforce, which included representatives of farming, mining, indigenous and environmental interests, urged the government to urgently improve drinking water supplies and improve research. In response, the government indicated it was keen to expand farming and research in the region.

The Parliamentary Secretary for Northern Australia, Gary Gray, said the government would seek to double or triple the region's agricultural and horticultural production. The Water Minister, Penny Wong, said $2.4 million would be spent on research.