The Henderson Dam on Flinders Island was officially unveiled to the community on Monday afternoon following a two-year construction process.
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The $9.9 million dam located in Whitemark was completed in May 2022, and has now recorded a decent amount of rainfall.
The structure provides a critical water supply system to the residents of Whitemark and has undergone extensive upgrades to double the dam's storage volume.
Mayor of Flinders Island, Rachael Summers, said previously before the dam was built, residents faced the prospect of water shortages and restrictions.
"It's great that people aren't going to have to worry about water security anymore, they are not having to rely on a water tank going into summer," Cr Summers said.
The upgrades made to Henderson Dam have doubled the dam's storage capacity, substantially increasing the flood capacity.
Tasmania Premier Jeremy Rockliff said the project was an example of getting things done for the local communities.
"That's what we're about, growing the economy, providing for a caring community, but also ensuring that rural communities get the services they deserve," Mr Rockliff said.
"Flinders island is unique and a special part of the world. We need to ensure the infrastructure is there to not only support the existing and growing population, but increase the numbers of this population," he said.
Mr Rockliff said the dam would double in capacity and would also reduce the risk of having restrictions when it comes to dry periods of weather.
Treasurer Michael Ferguson said Tasmanian businesses were contracted throughout the project which provided a stimulus to the local employment sector.
"An average of 15 field personnel made up the workforce of this project, which contributed to an economic boost for the island," Mr Ferguson said.
Mr Ferguson also said he was excited to see the Flinders Island economy prospering.
"There is a real sense of vitality on this Island that is so refreshing and encouraging," he said.
Ms Summers said Flinders Island Council would continue to be part of the state's booming agricultural and tourism industry.