The Wombat Forest is a very important water catchment, containing the headwaters of six major river systems. The Moorabool, Werribee and Lerderderg Rivers flow to the south, and the Loddon, Coliban and Campaspe to the north.
The high rainfall in the catchment makes it one of the most significant sources of water in Western Victoria. Many communities, such as Melton, Bacchus Marsh and Daylesford rely almost entirely on water from the Wombat Forest catchments. It is also an important source of water for Ballarat and Geelong.
Extensive logging in these catchments has produced areas of thick eucalypt regrowth causing a decline in water yields as young growing trees use more water than mature trees reducing the amount of water available for stream flows. Fortunately commercial logging in the Wombat Forest has ceased however research shows that it can take in excess of 100 years for water yields to return to pre-logged levels. Water yields from forests slowly increase after 30 years of age as water use starts to decline in association with reduced growth rates.