The Waiwhero wetland (16 ha) is one of the largest wetlands in the Rosedale Hills, 35 km north-west of Nelson, New Zealand. It has an extensive cover of Salix fragilis L. (crack willow) and has been hypothesised to be a source of groundwater recharge for the Moutere aquifers, an important local groundwater system. However the wetland could also be a groundwater discharge zone, because of the geological boundary that it straddles. The overall aim of this study was to determine the direction of groundwater flux of the wetland by measuring the water balance, with particular emphasis on the transpiration rates from the crack willow trees. The average daily transpiration (measurement was for 230 days) of crack willows in the wetland (6.4 mm/day) was close to twice the potential evapotranspiration (PET) for grassland (3.9 mm/day). The highest measured willow transpiration rate was 12.4 mm/day and the lowest was 0.8 mm/day. High transpiration from crack willows was due to the horizontal energy fluxes (advective energy), tree physiological characters and high soil water content. The study established that the wetland is a groundwater discharge zone with, on average for the two summer periods (2008 and 2009), the net groundwater discharge being 4.8 mm/day. The daily water balance results between two major rainfall events showed that the initial discharge source was from the surrounding hills and later stabilized at around 6 to 14 mm/day. It was believed to be a contribution from the shallow and deep aquifers or a combination of local region inflow and aquifers. The water balance showed that the main loss of water through the hydrological system of the wetland during summer was from the high transpiration of willows (7.7 mm/day). The extent of water savings estimated for the 16 ha wetland through a hypothetical situation of willow removal, and the assumption that it is filled with open water without any canopy cover, was 688 m3/day. However this water savings rate if applied to a large area of crack willow stands would be quite high. On similar lines it is important to understand the transpiration rates of other wetland tree species in New Zealand. This information would help in preparing regional council plans for the introduction of tree species in the wetland for better management of the water resources and sustainable ecosystem management.