Prime Minister Scott Morrison has intervened to boost the government's food relief budget to ensure a charity that feeds 710,000 people a month retains its funding.
Foodbank was facing the prospect of cutting its services to the needy after it was told about a redistribution of the relief budget which amounted to a funding cut of more than $250,000.
"I have listened and decided to increase the Food Relief budget by $1.5 million over the next 4.5 years," Mr Morrison announced on Twitter on Tuesday.
"This maintains Foodbank's funding at $750K/yr, with Second Bite and OzHarvest funded as announced last week."
Mr Morrison has also asked Social Servies Minister Paul Fletcher to place more focus on delivering relief in drought-affected areas.
"Important that food relief in drought areas is delivered in a way that does not undercut local businesses. Minister will work with providers to get the right plan in place," he said.
Foodbank on Monday said its Key Staples program - which makes sure essential supplies like rice, bread and vegetables get to needy people - would be at risk with its federal government funds cut from $750,000 to $427,000 a year.
The program sees food manufacturers produce food using spare production capacity, while suppliers donate or subsidise ingredients, packaging and delivery.
"We are dumbfounded," Foodbank chief executive Brianna Casey said.
The government's total funding for food relief was to remain the same, but be split between three providers rather than two from next year.
Social Services Minister Paul Fletcher on Monday urgently asked his department for advice on why Foodbank was only notified of the funding change just weeks before the demanding Christmas season.
He also sought advice on options to provide additional funding to Foodbank to "assist in managing the transition to the new arrangements".