The lowering of the restrictions comes on the back of decent rainfall figures throughout January and a promising forecast for February and March.

MidCoast Council infrastructure and engineering services director, Rob Scott, said an average of 186mm had been received across the 19 rain gauges in the Manning catchment over the last 36 days.

"It's a great relief to see some regular and good rainfall returning after what has been one of the driest periods ever seen in the MidCoast region and NSW," he said.

The Bootawa storage currently sits at around 72 per cent capacity and council is continuing to pump from the river system when the water is clean enough.

Mr Scott said the water had been particularly dirty and contained high phosphorous levels following the drought but council was in a good position to treat it.

"Fortunately the Bootawa Treatment Plant has great capability to treat water to a very high quality compared to many other areas of NSW," he said.

"This allows us to extract and use water that otherwise might have to be let go."

Gloucester is also being supplied from the Barrington River again after having water trucked in for the first three weeks of January.

The Karuah River at Stroud is also flowing again and Bulahdelah's water storage has received a significant top up.

Meanwhile, Tea Gardens continues to rely on its aquifer supply.

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Mr Scott said the severe water restrictions had impacted the economy and caused considerable inconvenience to residents.

He believed dropping down to Level 2 restrictions would strike an appropriate balance between water conservation and easing pressure on local businesses and livelihoods.

"Together with the increase in supply from the Nabiac Aquifer, we now have some operational flexibility to supplement the water supply system, so we're able to ease the burden of water restrictions on our customers and our local businesses for now," Mr Scott said.

"We want to thank everyone; the whole community has pulled together to conserve water during this extended drought."

Asked if the decision to ease water restrictions was premature, Mr Scott said the predictions indicated significant rain was very likely in the coming weeks.

"The forecast we've got is that we're certainly looking like getting back to normal rainfall conditions for this time of year," he said.

"It's unlikely we'll see anything like we saw last year."

But he advised the region wasn't out of the woods.

"With hot weather continuing for a couple of months yet, it's important for everyone to continue to be water conscious," he said.

What Level Two restrictions mean for you...

Level 2 restrictions mean you can use handheld hoses for up to 30 minutes every second day, before 9am or after 4pm.

You can also use garden irrigation systems, or sprinklers, for 15 minutes only, as part of the 30 minute allocation.

If your house number is an even number, water on the even days of the month; for houses with odd numbers, water on the odd days of the month, and there's no watering at all on the 31st day of any month.

This includes topping up home pools.

And if rain is on the way - don't water outdoors at all. Saving water saves you money.

In addition, use buckets, with trigger hose rinsing for washing cars and boats.

If possible, always wash vehicles and flush boat motor engines on grassed areas - this will help keep your lawn alive.

Outdoor cleaning of driveways, paved areas, windows, walls and roofs should all be undertaken using buckets only.

The restrictions apply to households, businesses and public areas - with council restricting their watering of parks and public areas also.

For more information on water restrictions, click here.

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