The need for optimal water management in the Murray--Darling basin has been heightened by the major drought in South-Eastern Australia during 2006--08. One possible way to find an optimal management policy is to formulate and solve an appropriate mathematical programming problem. The program will include decision variables that determine when to release water from key locations along the river, a set of constraints to ensure urban and commercial water demands are met and a set of constraints defined from a fundamental water accounting model. Particular attention will be paid to the water accounting model for the two major dams of the basin, Dartmouth and Hume, where we have began testing our model against the historical flow data. We will highlight observed changes in the flow patterns of the basin over the past 100 years and discuss some of the implications. We will also discuss possible objective functions for the proposed mathematical programming problem.