Foreign aid and drought compatible: Joyce

Barnaby Joyce has defended Australia's foreign aid budget as drought-stricken farmers criticise the government for sending money overseas while they struggle.

The former Nationals leader called for more water infrastructure within Australia for drought, but said the government had to sign the chequebook for both struggling farmers and foreign aid.

"We need to have support of island nations around us otherwise the Chinese government will just move in there and support them, and then you'll have another type of problem," Mr Joyce told reporters on Friday.

The federal government has announced $12,000 in grants for each affected farming family as 100 per cent of NSW was this week declared to be impacted.

Prime Minister Malcolm Turnbull said foreign aid, which was about 0.8 per cent of the budget, was an important part of Australia's diplomacy.

"We have been criticised for not increasing it to higher levels," he told Mix radio in Perth.

Mr Joyce is pressuring the premiers to meet in the heart of the drought-stricken area to develop a solution for what he's labelling a natural disaster.

"It's got to be somewhere they're not walking out onto green grass or a watered lawn," he said.