Prime Minister Tony Abbott has no plans to divert any of the Indonesian aid budget to drought-affected Australian farmers but he says the government is planning to help.
The prime minister is tipped to visit drought-hit Queensland and NSW next week to announce a jobs package.
The package is expected to cost up to $60 million and fund projects in local government areas heading into a third successive year of drought.
Tasmanian independent Senator Jacqui Lambie and others say the government should redirect some or all of the $600 million aid to Indonesia for Australian farmers as retaliation for the execution of two Australian drug traffickers this week.
Mr Abbott said the upcoming announcement would not be at the expense of "any other good things".
"We will be doing it because it makes sense," he told Sydney radio 2GB.
Mr Abbott said the government would add to the current assistance it provides in concessional loans and income supplement for farmers.
"What I am looking at and will have more to say about shortly is something that will stimulate economic activity in the towns and regions which are currently badly hit by drought," he said.
Work projects to be funded through the new assistance package could range from road works to wild dog fencing and laying fibre-optic cable.
Mr Abbott extended a warning to banks.
"The government takes a very dim view of banks which foreclose on businesses that would be viable but for the drought," he said.
Agriculture Minister Barnaby Joyce has been in talks with all drought-affected local councils in Queensland and NSW in recent months to discuss potential "shovel-ready" projects.
As of April 1, three-quarters of Queensland was drought declared.
NSW no longer has drought declarations but over the past year to March, northwest and central-west NSW have particularly been affected by below-average rainfall.
In February 2014, Mr Abbott visited drought-hit areas of Queensland and NSW and announced a $320 million relief package.
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