The dam wall for the 9300-megalitre Camden Rivulet Dam has been completed after seven months of work on the site east of Targa.
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The project is a key part of the $57.3 million Scottsdale Irrigation Scheme which is expected to start supplying water to farmers from February next year.
The dam is already holding 5300 megalitres of water.
Acting Prime Minister Michael McCormack visited the site on Thursday where he congratulated the 87 local farmers who used water sales to contribute $12 million to the project.
Mr McCormack said it was an example of farmers working together with the state and federal governments to improve water security.
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"These sorts of projects don't happen without hard work, they don't happen without community effort, they don't happen without people such as Michael Coote and his local farmers backing themselves, investing themselves in their future, making sure that there is a pipeline to prosperity," he said.
The project includes 92 kilometres of pipe linking Camden to Waterhouse, involved 130,000 cubic metres of dirt to build the dam wall, 1300 cubic metres of concrete for the spillway and a 1200-millimetre outlet pipe under the dam wall.
The federal government provided $25 million and the state government contributed $20 million.
Mr McCormack said Tasmania's willingness to use dam infrastructure should be an example for mainland states.
"If this model can be replicated throughout the nation, we'll drought proof our nation for future droughts," he said.