Since European settlement of Australia began in 1788, drought has been viewed as a major natural threat. Despite warnings by scientists (e.g., Ratcliffe, 1947) and many public inquiries, government policies have, in the past, encouraged closer land settlement and intensification of cropping and grazing during wetter periods. Not surprisingly, drought forms part of the Australian psyche and has been well described in poetry, literature (e.g., Ker Conway, 1993), art, and the contemporary media (newspapers and television). Droughts have resulted in social, economic, and environmental losses. Attitudes toward drought in Australia are changing. Government policies now consider drought to be part of the natural variability of rainfall and acknowledge that drought should be better managed both by governments and by primary producers. Nonetheless, each drought serves as a reminder of the difficult challenges facing primary producers during such times. We begin this chapter with a brief overview of drought in Australia and its impacts on agricultural production, the environment, rural communities, and the national economy. We outline some of the ways governments and primary producers plan for and respond to drought and describe in detail an operational national drought alert system. Australia has mainly an arid or semiarid climate. Only 22% of the country has rainfall in excess of 600mmper annum, confined to coastal areas to the north, east, southeast, and far southwest of the country (http://www.bom.gov.au/climate/ahead/soirain.shtml). Australia also has high year-to-year and decade-to-decade variation in rainfall due, in part, to the influence of the El Niño/Southern Oscillation (ENSO) phenomenon (http://www.bom.gov.au/climate/ahead/soirain.shtml). The Interdecadal Pacific Oscillation (IPO) also contributes to the rainfall variability at annual and decadal scales and modulates ENSO impacts on rainfall (Power et al., 1999). The current geographic boundaries of agricultural production were reached in the late 19th century, and the entire agricultural region has experienced drought, in some form, over the past 100 years. Protracted dry periods occurred during the period from late 1890s to 1902 in eastern Australia, during the mid to late 1920s and 1930s over most of the continent, during the 1940s in eastern Australia, during the 1960s over central and eastern Australia, and during 1991–95 in parts of central and northeastern Australia.