SYDNEY (AFP) - Australia announced a large aid package to help drought-parched communities on Thursday (Nov 7), as the government faced allegations it has bungled the response to a crisis made worse by its own climate policies.

Prime Minister Scott Morrison unveiled a package of low-cost loans worth around A$1 billion (S$934 million), designed to help farmers struggling with the latest "big dry".

Swathes of Australia have gone months without adequate rainfall, forcing farmers to truck in water at exorbitant cost, sell off livestock or leave their land to lay fallow.

The crisis has threatened whole towns and villages and Australia's much-mythologised Outback way of life.

According to Australia's Bureau of Meteorology, the past 18 months have seen the lowest levels of rainfall on record for much of New South Wales and South Australia states, as well as parts of the Northern Territory and Western Australia.

September rainfall was "very much below average for most of Australia", the bureau reported, with some areas getting 40 per cent less rainfall than normal.

Compounding the misery, many communities have also had to contend with bushfires that have cut through the countryside and need to be fought with already dwindling water supplies.

The loans are designed to support "farmers and graziers who know they have a future in the sector, and are committed to getting to the other side of this drought", Mr Morrison said.

Agricultural suppliers and other business servicing the sector will also be eligible for loans of up to half a million dollars.

Mr Morrison has come under fire for his response to a crisis that has been months in the making.

Rural members of his conservative ruling coalition had called on him to do more and provide more funds.

Meanwhile, his support for coal mining and his scepticism over climate change have fuelled allegations that the government is trying to solve a problem it is simultaneously making worse.