The entire state of New South Wales is now impacted by drought as extreme measures including water restrictions are tightened in a bid to combat the crisis.

According to the Department of Primary Industries, 61 per cent of NSW is either in drought or intense drought, while nearly 39 per cent is drought affected.

"This is tough," NSW Primary Industries Minister Niall Blair said yesterday. "There isn't a person in the state that isn't hoping to see some rain for our farmers and regional communities," he said.

A drier-than-expected June and July has left many farmers with failing crops, a short supply of water and diminishing livestock feed.

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In some regions, water restrictions have been tightened to the point that residents can only do a maximum of two loads of washing a week and take three-minute showers.

Less than 10mm of rain was recorded in the western, northwest, and central areas of NSW over the past month and drier-than-normal conditions are forecast for the next three months across the majority of the state.

The combined drought indicator — which takes in rainfall, soil water, plant growth and long-term climate data — shows no part of NSW is recovering despite some recent rain.

The drought is being felt by livestock across the state. Photo / Supplied
The drought is being felt by livestock across the state. Photo / Supplied

"Producers are now faced with some very difficult decisions on whether to graze sown crops or rely on potential rainfall in the next two months in order to increase yield production," Blair said.

Prime Minister Malcolm Turnbull this week toured drought-stricken communities to announce A$12,000 ($17,765) grants for each affected farming family. The NSW Government has also doubled its funding commitments to struggling farmers with a total of A$1 billion pledged towards the growing crisis.

On the more extreme end of the scale, residents in the small town of Murrurundi in the state's Upper Hunter Region have been placed on level-six water restrictions which limits them to two full washing loads of clothes a week and three-minute showers.

The restrictions are intended to buy residents another three or four months of water, with the town otherwise expected to completely run out within weeks.