Droughts are a feature of the Australian agricultural scene. Most farmers develop successful strategies to grapple with drought. The purchased fodder and interest rate subsidies used in the 1982-83 drought are analysed. As partial input subsidies, they had serious flaws in meeting goals of efficiency, equity and welfare support. Alternative policies to provide incentives for rational private decision making and to provide direct welfare support are discussed and advocated as a preferable approach to future droughts.