In this study, we have examined the ability of a regional climate model (RCM) to simulate the extended drought that occurred throughout the period of 2002 through 2007 in south-east Australia. In particular, the ability to reproduce the two drought peaks in 2002 and 2006 was investigated. Overall, the RCM was found to reproduce both the temporal and the spatial structure of the drought-related precipitation anomalies quite well, despite using climatological seasonal surface characteristics such as vegetation fraction and albedo. This result concurs with previous studies that found that about two-thirds of the precipitation decline can be attributed to the El Ninõ–Southern Oscillation (ENSO). Simulation experiments that allowed the vegetation fraction and albedo to vary as observed illustrated that the intensity of the drought was underestimated by about 10ĝ% when using climatological surface characteristics. These results suggest that in terms of drought development, capturing the feedbacks related to vegetation and albedo changes may be as important as capturing the soil moisture–precipitation feedback. In order to improve our modelling of multi-year droughts, the challenge is to capture all these related surface changes simultaneously, and provide a comprehensive description of land surface–precipitation feedback during the droughts development.