In 2002 Australia experienced widespread drought, with over 70 per cent of the country experiencing serious to severe rainfall deficiencies for the period April to October. During this period images of parched landscapes were frequently shown on television, and the Farm Hand drought appeal launched, with the backing of business, to raise funds to assist drought-affected farmers. Since 1992, Australia has had in place a National Drought Policy based on principles of self-reliance and risk management. This policy reflects the neo-liberal economic policy approach, which has dominated Australian policy since the 1980s. Severe drought tests the will of policy makers to hold to this policy line as agrarian sentiments are stirred and political pressure is brought to bear to change policy settings. This article describes the history of drought policy in Australia and the challenges facing policy makers.