Australia faces recurring challenges due to its highly variable climate, characterized by periods of drought and heavy rainfall events. Climate change exacerbates these events, impacting agriculture, rural communities, and ecosystems. Drought policy, historically crisis-driven, focuses on farm welfare but commonly neglects broader socio-economic impacts and preventative measures. Recent policies emphasize ad-hoc responses rather than long-term risk management. The Millennium Drought in the 2000s, plus other serious droughts, are a stark example of the country’s vulnerability, prompting temporary relief measures and highlighting the need for sustainable policy frameworks. Although current drought policies recognize the importance of risk management and adaptation, they lack cohesion and fail to address the underlying causes of financial distress among farmers. Alternative solutions (such as Revenue Contingent Loans) have been proposed and aim to balance fiscal responsibility with adequate support for farmers. Policy revisions should focus on evidence-based approaches to manage farm poverty and promote resilience across the agricultural sector. Moving forward, a comprehensive approach to drought policy should prioritize risk-sharing mechanisms, promote sustainable agricultural practices, understand behavioural economic issues, reprioritise supporting farm exit for those that need it and address broader socio-economic issues.