Labour says it will use the revenue generated by water royalties to clean up rivers, streams and lakes in partnership with councils, but charging royalties does not assume ownership.
Labour MP Phil Twyford told the BusinessNZ conference that his party would not shy away from the water rights issue.
"We don't think that in the 21st century the fact that water falls from the sky in Auckland or Wellington doesn't mean we should manage the use of that. We need a modern way that manages all the demands that we place on water as a society and economy," Twyford said.
"We all own water, and some people have interests in water - that are not necessarily property rights. We need a system to better manage those interests. We can't shy away from this issue. And as a country I think we are up for the task of having this conversation about how we manage and negotiate our way through this."
Twyford said Labour was committed to that process, including working with iwi and the Waitangi Tribunal if necessary.
"And if there's one thing we have learned from the Foreshore and Seabed process was that when you deny people access to the rule of law, things don't generally end up that well."