The Napthine Government has unveiled a number of new wastewater treatment plants around the state for smaller towns that have been relying on septic tanks.

Mr Walsh says Moyhu and Harrietville will be next in line to benefit from innovative wastewater treatment plants.

He says having improved systems opens up smaller towns to attract more development.

"What you see with these towns once they do have a sewer system in, there's usually further development in the town and more people there the school gets more students, town businesses get more business and the town grows," he said.

The executive manager for planning and infrastructure with North East Water, Kevin Freeman, says two options for waste water management for Moyhu were deemed too costly last year.

Mr Freeman says the authority is now investigating a third option that involves the use of septic tank effluent drainage.

He says if the Moyhu system is successful, it could be used at Harrietville.

"Small towns do pose a big challenge to not only North East Water but also to communities right across Victoria," he said.

"There's huge amount of investment and infrastructure required to bring those up to the same sort of conditions other large centre would have."