The driest start to a year in five decades and a dimming outlook for better-than-average rainfall in coming months have prompted the Berejiklian government to declare all of NSW to be in drought.

The spreading and intensifying dry spell also prompted federal Labor to weigh in, pledging to create a $20 million fund to spur regional economies and support local jobs, and calling for assistance to be distributed faster.

Gabriella Phillips, with camels on her family's farm near Muswellbrook in the upper Hunter. Credit:Marina Neil

The NSW declaration was prompted less by rainfall deficiencies - which eased slightly this week after showers in some regions - than by a further deterioration in water availability for farming.

"Both soil moisture and plant growth across the state continue to be below average to extremely low, across the state," a spokeswoman for Niall Blair, the minister for primary industries, said.