Gloucester has become the second town in the Hunter Region to run out of water

"They say that 1965 was a tough year but this is the worst I have seen it, by far," the veteran farmer, whose family have owned the 184 hectare property since the 1860s, said.

"We have just had the driest year on record, it's hotter and there is more evaporation. It's gone on much longer than other droughts. Really the last six or seven years have been dry."

Welcome to 2020, known to some as the 'new normal'. It's also the year the Barrington River, which provides water to Gloucester township and surrounding properties, is down a to trickle for the first time in living memory.

Mr McRae's son James, who manages the farm, is about to invest $10,000 to drill a 40 metre bore to search for groundwater in an area that has historically boasted some of the state's most celebrated farmland.

"I never thought we would need to be drilling bores here," he said.

"The idea that we could run out of water is extremely stressful."

No matter who you ask in Gloucester the answer is the same - something is seriously wrong.

The evergreen foothills of the world-famous Barrington Tops are drenched in a smoky haze from fires that have been burning consistently throughout the Manning region since November.

The branches of mighty eucalyptus trees appear dull and listless. They are also snapping off at an alarming rate posing a potentially lethal threat to anyone near them.

"Usually we can't see the sky through the trees at the back of our place, now it's just sticks," said retired school teacher Mark Howland, who lives about six kilometres from town.

"It used to feel like we lived under a rain shadow up here, but not any more."

His wife Debbie describes the once lush grass around their house as "weet-bix world"

"The trees are dying because there is no groundwater. It's depressing, the life is being sucked out of the place."

And it's not just the natural environment that is affected.

Giant cracks are appearing in numerous older buildings as the subsoils beneath dry out.

"We have lived here for 34 years and this as never happened before," long-time Gloucester resident Julie Lyford says pointing to a 10 millimetre wide crack that runs from the ceiling to the floor of a bedroom in her house.

Bureau of Meterology data shows the average rainfall for Gloucester is 978 millimetres. The town received 466 millimetres of rain in 2019, the lowest since records began for the area in 1888.

In addition, 7.2 millimetres was recorded in December compared to the average of 102.4 millimetres.

Although unprecedented, few were surprised when the Barrington River stopped flowing across the Rocky Crossing causeway just before Christmas.

Karen Cooper, who travelled with friends to the once postcard perfect swimming spot on New Year's Day, said she was dismayed at the deterioration of the environment.

"I have been coming here since I was 12, I'm 59 now and I have never seen it like this. The water has always flowed through here," she said.

Like elsewhere in the Mid Coast region, Gloucester entered level four water restrictions in early November. But the dire state of the river meant the township of 2500 has joined Murrurundi as the second Hunter community to become reliant on having water trucked in to survive.

Mid Coast Council, with the assistance of a state government subsidy, sends water tankers from the Tea Gardens aquifer to Gloucester several times a day to replenish the town's water supply.

"We will continue to access any water that is available from the river but until we get some rain, the Gloucester water system will become more reliant on water carting each day," Mid Coast Council director of infrastructure and engineering services Robert Scott said.

"We really need to reduce water usage in Gloucester to the minimum so that we can keep up with carting."

Water tanks, which have traditionally proved to be an attractive investment in a town like Gloucester, are also running dry.

The Howlands, who are totally reliant on tank water, spent $180 on 10,000 litres in September. The cost of a refill has since gone up to $400.

"It usually only takes a shower for the water to run-off the roof and top-up our tank but we haven't had anything," Ms Howland said.

While some are pinning their hopes on drought-breaking rains in autumn, the reality is no one really knows how long the current situation will last.

What is known is the impact on the town's businesses is severe.

In addition to adjusting to a downturn in visitors, businesses have also been asked to cut their water consumption by 50 per cent and consider reducing hours of operation.

For their part, patrons and staff at the Roundabout Inn are saving their ice cubes to provide water for the pub's plants.

"This is the worst we've seen it; we've had droughts before but we've always had water," publican Stewart Carruthers told the Newcastle Herald last month.

Trudy Schultz, who manages a dozen holiday properties in Gloucester, estimated Christmas visitor numbers were down by 50 per cent on previous years.

"We want to stay positive but the truth is it's hard; as soon as the fires began in November we had 11 cancellations," she said.

"We invested in a marketing campaign to let people know there are other attractions besides the river like bush walks, the museum and wineries. It's reassuring to hear the people who have come say they had a great time."

It has been a tumultuous decade for the Gloucester community that has fought off two attempts to create major fossil fuel projects near the town.

AGL sought to establish a coal seam gas pilot project on the outskirts of Gloucester about a decade ago. The project, which was plagued by technical and pollution problems, was abandoned in 2016.

Last year the community also won an historic Land and Environment Court case to prevent the proposed Rocky Hill coal mine from proceeding.

In addition to noting the significant adverse environmental and social impacts that would have resulted, Justice Brian Preston found the mine would have directly contributed to climate change.

"In short, an open cut coal mine in this part of the Gloucester valley would be in the wrong place at the wrong time," he said.

But despite those wins, the current drought is looming as the community's biggest challenge yet.

"No one has experienced this before; we need to work together so we come out the other side," Ms Lyford a former Gloucester councillor and mayor said."

About 150 people attended a forum titled 'Let's talk about climate change' hosted by the Gloucester Sustainable Futures group in October.

The group is planning a similar meeting to discuss how the drought is affecting the community.

"It's about bringing people together. If this is the new normal how do we respond as a community?," Ms Lyford said.

"Lack of water is a great leveller; we need to take the politics and divisions out of this and talk about how we move forward."

Back at the dairy, James McRae, the fifth generation of his family to manage the farm, isn't looking beyond the next 12 months.

Prudent planning and management plus locking in a sustainable milk price has seen the dairy remain to viable to date, but he admits things are getting tougher.

"For the next year we will be ticking over in survival mode, after that is unknown," he said.

"We are going to start to push our debt levels up to more uncomfortable levels."