The money is for the "continuation of essential support services for affected farmers", according to Minister for Primary Industries, Ian Macdonald.

Nearly a quarter of NSW is classed as marginal when it comes to drought.

"This funding also ensures ongoing assistance for small businesses affected by drought through the Business Drought Assistance – Payroll Tax Relief Program for the 2007/08 financial year, payable in 2008/09," Mr Macdonald said.

Mr Macdonald said with only a 45-50pc chance of average rainfall being received in current drought affected areas, it was clear the transport subsidy scheme would need to remain in place in coming months.

"(It) will assist in the essential transport of livestock to and from agistment, to sale or slaughter, and the transportation of fodder and water supplies," he said.

Transport subsidies have been in place since mid 2002.

The NSW Farmers' Association has welcomed the State Government's decision, with president Jock Laurie saying thousands of farmers across NSW are still doing it tough, as they head into yet another bleak winter.

"It is clear that assistance is still desperately needed with around 200 applications been lodged each week for these transport subsidies," he said.

"They provide vital support to farmers to ensure the welfare of livestock, by making it easier for producers to access fodder, water and agistment."

Mr Laurie says the announcements are even more crucial given the current review of the 26 areas in NSW that are due have their Exceptional Circumstance declarations expire on 30 September this year.