Prime Minister John Howard said farmers in affected areas would receive an extra 350 million dollars (262 million US) on top of the 1.25 billion dollars in relief provided since the drought began to bite in 2001.

The seven-year drought, the worst in the history of this driest of all inhabited continents, threatens to drive the vital agriculture sector into a recession, the government warned last week.

"If ever a country in a strong financial position owed something to some of its citizens -- this nation owes to the farmers of Australia the support they need to get through this terrible drought," Howard told a news conference.

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.

Shares in the country's monopoly wheat exporter AWB fell sharply in early trading on the Australian Stock Exchange, dropping 5.76 percent to a record low of 2.66 dollars shortly after midday.

The apparent early onset of a hot and dry summer has sent fears of a deepening water crisis soaring, dragging Howard's conservative government reluctantly into a fresh debate about the effects of global warming.

"You cannot resolve the water crisis long-term in this country without resolving the global warming issue," opposition Labor Party leader Kim Beazley told reporters after Howard's aid announcement.

Australia has refused to ratify the UN 1997 Kyoto Protocol aimed at reducing greenhouse gas emissions and is a major exporter of fossil fuels, which are blamed for producing the gases responsible for rising temperatures worldwide.

Howard has said the government will not change its policy and sign the Kyoto Protocol but has begun talking up the prospect of introducing another controversial energy source to Australia -- nuclear power.

"I'm in favour of Australia developing nuclear power for peaceful purposes," Howard said in a television interview at the weekend.

"It's clean and green and, in an age where we're worried about global warming, we should be looking seriously at nuclear power as an option because it's clean and it doesn't emit greenhouse gases."

Australia holds 40 percent of the world's known uranium reserves but has never adopted nuclear power and the government would face strong opposition to its introduction.

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