Traditional hydrological risk estimation has treated the observations of hydro-climatological extremes as being independent and identically distributed, implying a static climate risk. However, recent research has highlighted the persistence of multi-decadal epochs of distinct climate states across New South Wales (NSW), Australia. Climatological studies have also revealed multi-decadal variability in the magnitude and frequency of El Niño/Southern Oscillation (ENSO) impacts. In this paper, examples of multi-decadal variability are presented with regard to flood and drought risk. The causal mechanisms for the observed variability are then explored. Finally, it is argued that the insights into climate variability provide (a) useful lead time for forecasting seasonal hydrological risk, (b) a strong rationale for a new framework for hydrological design and (c) a strong example of natural climate variability for use in the testing of General Circulation Models of climate change.