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Well the reason that dams are built is so communities have access to fresh water. In order for those dams to both catch and store that water they require trees in order for the natural cycle of precipitation to occur.
http://en.wikipedia.org/wiki/Precipitation_(meteorology)
I just remember it from Form 1 science in High School back in the mid-80's.
Similar to the diagram below I found on wikipedia.
http://en.wikipedia.org/wiki/File:Water_cycle.png
So if we log around the catchments then science states that less rainfall will occur. Melbourne has had the lowest rainfall and also the lowest water storage on record. Now either this is a once in a century event or de-sal plants will be built in Victoria which will "supposedly" solve the problem. I think they are planning one right now down near Leongatha. FYI
If your still not clear on what I'm talking about, this website has some great info about clearfell logging near Victorian water-catchments.
http://www.vicrainforest.org/Melbwater.php
Im no expert just using common sense but there needs to be reasonable clearance around populated areas. If that had been the case here we may have had a bushfire and not a firestorm holocaust, though the conditions on the day meant it would have been one hell of a bushfire in any case.