Meeting in Canberra yesterday, the ministers also agreed that in future "farm family welfare assistance should require a level of mutual responsibility".

This suggests that the Government will want farmers to be able to show they have taken steps to prepare for drought before they are eligible for assistance.

The so-called "exceptional circumstances" declarations and subsequent payments have delivered billions of dollars to farmers since the early 1990s, but have been contentious for a range of reasons.

Last month the Productivity Commission criticised the "exceptional circumstances" system, saying it "lacks transparency", is "divisive within and between communities" and could discourage self-reliance.

Instead of focusing on "lines on maps" to determine who got drought assistance payments and who missed out, governments should concentrate on "addressing the specific needs of farming families, farming businesses and farming communities", the ministers said in a statement released last night.

They agreed on a number of key principles that would guide the reform of drought assistance, including:

• Government support for farm businesses will be based on a willingness among those businesses to prepare for the impacts of climate change and drought.

• To access the Commonwealth's income support payment system, farmers should receive a temporary exemption from the normal assets test.

• Government policies should assist and encourage farming communities to prepare for drought and enhance their sustainability.

• The crucial role of farmers as the nation's food producers must be strongly recognised.

National Farmers Federation chief executive Ben Fargher said yesterday: "If we can get away from lines on maps and get a system where we can provide all farmers with appropriate programs to manage and prepare for drought, that will be very positive."