This is on top of 350 million dollars announced last week and takes the total relief provided since the drought began to bite in 2001 to 2.16 billion dollars.

The cabinet's decision to expand the exceptional circumstances funding would mean that more than half of Australia's farmland was now eligible for financial help, Vaile said.

The assistance was needed to encourage farming families to stay on the land, he said.

Australia is the driest inhabited continent in the world and medical groups have reported high rates of depression and suicide among farmers, with some analysts predicting many could be forced off the land.

"We don't believe the day will ever come when the Australian community would be prepared to turn its back on its farming community given the significant contribution that they make to our economy and certainly to the culture of Australia," Vaile said.

Treausurer Peter Costello told a separate news conference the drought would hit economic growth.

"The drought is worse than was expected. The drought will detract from growth," he said, adding that a "farm production recession" was on the way.

But he said farming was less important to the Australian economy than in the past, with the financial sector now a bigger component of gross domestic product than agriculture.

Crop analysts and traders estimate severe drought conditions could halve this year's wheat crop in Australia -- the world's third largest producer -- to less than 11 million tonnes from 25 million tonnes the previous season.

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