This essay delves into the prospective effects of drought on the macroeconomic equilibrium of Australia. It begins by defining drought and its influence on supply-side variables, particularly agriculture, energy, and related sectors. The essay analyzes macroeconomic equilibrium using aggregate demand and supply curves, illustrating how drought acts as a negative supply shock, leading to decreased output, inflation, and shifts in the equilibrium. The analysis includes diagrams depicting these shifts and discusses historical droughts in Australia, providing evidence of their impacts on GDP, agricultural production, and the balance of payments. The essay also examines government intervention, such as financial assistance to farmers and fiscal policy adjustments, and how these measures can modify the macroeconomic impact of drought. The conclusion reiterates the adverse effects of drought and emphasizes the importance of effective government policies in mitigating its severity and restoring economic stability.