Deputy Prime Minister John Anderson warned Friday that a crippling drought could wipe one-third off growth next year.
His pessimistic prediction coincided with the weather bureau suggesting the chance of a drought-causing El Nino effect this year had doubled.
That forced the agency in charge of rural forecasts to tear up its previous projections which were used by Treasury in Tuesday's tax-cut budget.
Anderson told The Weekend Australian that if conditions worsened it would be hard to meet this week's budget forecasts,
The drought of 2002 and 2003 is estimated to have wiped 1 percentage point off economic growth when the gross value of farm production fell by 23 per cent.