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CANBERRA - Australia is facing its worst drought in 1000 years.

The prediction, made at an emergency summit on Australia's mounting water crisis, is 10 times worse than earlier forecasts and prompted urgent action to secure drinking water supplies for Adelaide and rural towns.

South Australian Premier Mike Rann said the prediction was worrying. "We are into uncharted territory," Mr Rann said.

His state government is making plans for an emergency weir on the lower Murray River to ensure Adelaide's water supply.

Adelaide relies on the Murray for up to 90 per cent of its water in drought years.

The weir would restrict flows into Lake Alexandrina, where most of the water would evaporate.

Mr Rann said the drought was "a frightening glimpse of the future with global warming".

The Federal Government announced a A$200 million ($233.53 million) drought assistance package, taking its spending on the big dry to A$2.3 billion ($2.68 billion).

The new aid - the third federal drought package in as many weeks - will give an estimated 5000 small businesses the same relief payments available to the drought-stricken farmers whose trade they rely on.

Prime Minister John Howard, who called the summit, said businesses that made at least 70 per cent of their income from the farm sector would be eligible for aid.

Mr Howard said: "This country does face the worst drought in living memory."

The summit - also involving Victoria, NSW and Queensland - agreed to draw up plans to secure water supplies for a year from June 1, 2007.