Australia is indeed a sunburnt country, and is arguably becoming increasingly sunburnt. If most climate predictions are correct, much of Australia will experience droughts even more often. This paper uses the Rural and Regional Families Survey to explore the economic and financial implications of drought in regional Australia. Drought has significant negative economic impacts, with large effects on the experience of financial hardship and deterioration in household financial positionÑ especially for farmers and farm managers who reported that the current drought had reduced property output substantially. The study also identifies some heterogeneous patterns of mobility within many drought-affected households. It is important that policy makers understand the complex processes of adjustment that occur in times of drought in order to enable them to prepare for the changes that will take place if our worst fears about climate change are realised.