The Federation Drought began in 1895 and reached its peak in 1901 and 1902.

During the drought river systems across the nation suffered, notably the Darling River which virtually ran dry at Bourke, New South Wales. In Victoria, the Murray River ran dry through the towns of Mildura, Balranald and Deniliquin causing river transport to suffer or cease.

Except for Queensland, most parts of the nation received reasonable rain in 1900 and early 1901, however very dry weather set in again across eastern Australia during spring 1901. The drought broke mid December 1902 when heavy rain fell in Victoria. Rain extended to New South Wales and southern Queensland, while northern Queensland had reasonable falls from December onwards.

Economic depression and labour strikes added to the effect of the drought. As a result of the drought sheep and cattle numbers fell from 91 to 54 million, and 11.8 to 7 million respectively. Rabbit numbers increased to plague proportions, resulting in some farmers losing everything and walking away from their properties.