If no rain comes by mid-May, Howard said he will cut off water that is presently allocated for irrigation in the Murray-Darling River basin.
 
The basin covers an area the size of France and Spain and accounts for 41 per cent of Australia's agriculture.
 
Howard said there would be water only for "critical urban supplies," and that some farmers with riverside properties could draw water for their own domestic use, but not for crops or livestock.
 
"This is very much in the lap of the gods," he said.
 
Ten-year drought
 
Parts of Australia have been in the grip of drought for a decade. It is expected to wipe up to one per cent off the A$940bn ($789bn) economy in 2006-07.
 
The drought has already severely reduced production of major irrigated crops.
 
Cotton lint production has plummeted to 250,000 tonnes in 2006/07 from 597,000 tonnes the year before, and from 819,000 tonnes worth almost A$2 billion in 2000/01, before the drought.
 
Drought has also been affecting Australia's wine grape production, which is estimated to be down by 30 per cent in 2007 to 1.3m tonnes, the smallest harvest since 2000.
 
Rice production has also collapsed, to 106,000 tonnes in 2006/07 from 1.6m tonnes before the current dry season.