The Federal Government-funded survey of rural and regional Australia shows financial hardship is widespread, suffered by a quarter of 8000 households questioned in the past year, but farms are in the eye of the drought storm.

Two-thirds of people working on farms in drought-affected areas said their financial position had slipped in the past three years.

More than one-third of farmers reported farm production was at its lowest level to date, according to the survey by the Australian Institute of Family Studies. And levels of mental health problems were twice as high among drought-affected farmers.

Deputy director of the institute and study leader Matthew Gray said the results gave the first clear picture of the impact of the drought on family wellbeing. ''What we found was quite high rates of financial hardship and people saying things have gotten considerably harder in rural and regional Australia, and the effect is biggest on farmers,'' Dr Gray said.

''This is further proof this is a really major issue for the country and it's going to become increasingly important to work out how we are going to deal with these issues.''

Climate change projections predict drought will become increasingly common into the future. The Bureau of Meteorology says there is no end in sight for the big dry, with drought becoming worse in central Australia and persisting across much of the country.

The report, to be presented at a conference in Melbourne on Friday, includes several measures of wellbeing like financial hardship, felt widely but most heavily by farmers.

Drought reduced the income of farmers by about $3200 a year, compared with $2800 for people working in other industries.

The picture was different for mental health where the burden was felt mainly by farmers and the unemployed. ''Of those farmers currently in drought, 17 per cent had mental health issues, compared to 8 per cent of those who hadn't been in drought in past three years,'' he said. ''And for unemployed people the rate was 21 per cent in drought areas compared with 14 per cent elsewhere.''

The institute said the preliminary findings would be used to better inform policy-makers. AAP