Figures released by the Australian Bureau of Agricultural and Resource Economics (ABARE) show Victoria, South Australia and Western Australia performing strongly.

But incomes fell in Tasmania, New South Wales and Queensland as the drought pushed up fodder costs and cut milk production.

Colin Mues, from ABARE, says high prices paid by dairy processors made a big difference to the bottom line.

"The main factor driving that was higher milk prices through improvements in the dairy market," he said.

"Production was fairly steady, it went down marginally at a national level but there was a fairly uniform improvement in prices across all states and I think that's been the key factor driving it and the price increases were, you know, between 3 and 5 per cent."

But dairy farmers in Western Australia refute ABARE's figures.

Source: abc.net.au