i think recycled water is a good idea in the long run, but other options should be implemented first.
eg. water tanks installed, firstly for gardens, pools, drinking water and the like.
install greywater systems, similarly for the gardens.
Improve water wastage, especially on farms and in industry, could do this by improving irrigation methods, technology on farms, plant and rear native plants and animals, reducing water wastage in transferring from dams.
And ofcourse implement water restrictions to encourage people to be more sensible about how they use water, be more careful not to waste it.