The money will bring to 1.25 billion dollars the amount of federal government assistance to help farmers survive the severe drought gripping nearly half the nation, Prime Minister John Howard said.

The package offers tax cuts and increases interest rate subsidies on farmers' debts from 50 percent to 80 percent.

Another measure, subject to parliament passing legislation, will make it easier for farmers to claim income support by allowing them to earn an extra 10,000 dollars without affecting their eligibility benefits.

The conservative government, which holds power in coalition with the rural-based National Party, also announced an additional six million dollars for face-to-face counselling services to help farmers and their families cope with the drought.

Another three million dollars will be given to the Country Womens' Association to help it aid "farmers and their families who may otherwise be reluctant to apply for assistance," Howard said.

Australia, the world's second biggest exporter of beef and wheat, has been battling drought for more than two years.

The agriculture ministry said the first four months of the year saw the highest temperatures and the second lowest rainfall on record. Meteorologists see little likelihood the drought will lift in the next six months.

The long dry has been blamed for slashing exports, slowing the country's hitherto buoyant growth and costing tens of thousands of rural jobs.

Howard said the programme was designed to help farmers remain on their properties. He rejected calls from one of the country's most eminent scientists for unsustainable farms to be abandoned.

Professor Peter Cullen, who is a member of a group of scientists devising a national water strategy for the dry continent, said that as much as 10 percent of agricultural land was unsustainable for farming and rural workers should be encouraged to leave the land with dignity.

But Howard said many of those working the most marginal lands had already left.

"People have been going off the land now for decades. And at some point if you want to retain a critical mass, you've got to be willing to work to retain the critical mass," he said.

"You must be getting to a point where many people who would otherwise be efficient, profitable farmers are being beaten down by this terrible drought."

Howard said the drought package, which also boosted a programme to attract young people to agriculture, was not just a financial incentive.

Farming was "part of this country's identity and part of the character of this country," Howard said.

"There has to be a determination to preserve a viable farm sector in this country. I do not accept you can just relentlessly say, 'We'll let them all go, doesn't matter, doesn't matter.' I think that is an attitude of mind which misunderstands the nature of this country and its history."

Howard also blasted criticism that Australian farmers were oversubsidised, saying the assistance they received was marginal compared to that received by agricultural workers in Europe and the United States.

"By world standards Australian farmers are brutally exposed to the cold gusts of the marketplace in a way that the farmers of other countries are not," he said.

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