A new $5 billion drought-proofing fund will be established after Labor decided to back the legislation, despite criticising where the money is coming from.
The Future Drought Fund will initially be worth $3.9 billion, later rising to $5 billion, with the ability to dole out $100 million-a-year from 2020 onwards.
The money will be available for projects that promote drought resilience, preparedness and response.
Opposition frontbencher Katy Gallagher has confirmed Labor will not block the passage of the bill, which is being debated in the Senate on Tuesday.
"We don't want to be painted as a party that opposes support for farmers," she told parliament.
Labor had previously opposed the legislation because the money was being redirected from the dormant Building Australia Fund, a pot of money slated for roads and rail.
Senator Gallagher accused the government of misrepresenting the bill as urgent to score a political point over Labor.
"Most farmers, most farming communities who are living through this drought, when it becomes clear that this is the government's answer to some of these major issues I think they will be deeply disappointed," she said.
Agriculture Minister Bridget McKenzie said the fund would be a long-term investment to build resilience through innovation and research.
She rejected claims it could be used as a Nationals' slush fund, saying the government had already spent $6.3 billion on the current drought.
"Drought programs and future resilience is key, not just for a slush fund but in building and seeking to secure a safe prosperous regional Australia," Senator McKenzie said.
Greens senator Janet Rice said drought would be a harsh ongoing way of life for Australian farmers.
"If we ignore climate change and only throw money at drought we might as well be putting a bandaid on a bullet wound," she said.
The minor party wants the fossil fuel industry to pay for the future fund through a 10 per cent royalty on projects subject to the petroleum resource rent tax.
Senator McKenzie labelled the Greens the "ultimate hypocrites".
"They say they support farmers and farming but the reality is they do not want to see farming in this country," she said.
Australian Associated Press
Sign up for our newsletter to stay up to date.