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Sarah Teelow has died in hospital following a water ski accident in the Bridge to Bridge race on the Hawkesbury river on Sunday.
The 20 year-old champion water skier from Wellington crashed when she was five kilometres into the race and sustained spinal and head injuries.
She was treated at the scene by emergency crews and was flown to Royal North Shore Hospital.
Teelow was placed on life support but died on Monday night.
The national body for ski racing confirmed Teelow's death, describing her as one of the "sport’s most accomplished young competitors".
"The ski racing fraternity is deeply saddened by Sarah’s passing and extends its condolences to her family. Ski Racing Australia is co-operating with police and maritime authorities in their investigations," said Kristie Middleton, the chief executive of Ski Racing Australia.
The driver and observer on the boat towing Teelow are in shock following the accident.
''They can't believe what has happened,'' said Ray Patterson, the father of Darren Patterson, who was in the boat observing Teelow. ''There is no rhyme or reason to it. Darren has 25 years' experience as an observer.
''It's just an awkward fall. It's not dangerous. It's no more dangerous than playing football.''
Mr Patterson said the driver, Danny Knappic, had just returned from the World Water Ski Racing Championships in Spain where he competed with Teelow, who won the formula 2 category.
There have been six other deaths caused by water ski accidents in Australia in the past five years, figures released by the Australian Bureau of Statistics show. It is not known at what speed Teelow was travelling but skiers reach speeds of up to 140km/h in the race.
The Bridge to Bridge race runs along the Hawkesbury River, from the mouth of the river to Windsor.
Ken McManus, a spokesman for Marine Rescue NSW, who supplied five safety vessels for the event, said the conditions were good and there were no excessive winds.
Mr McManus said there was another accident near Butterfly Farm, at the Windsor end of the river, shortly after Teelow's fall. ''Another skier came off but there was no serious injury,'' he said.