AbstractA rectangular grid digital elevation model (DEM) for Australia, with a horizontal resolution of 1/40 degree of latitude and longitude (approximately 2.5 km), has recently been calculated from continent‐wide coverages of point elevation and stream line data using an elevation gridding technique which incorporates a drainage enforcement algorithm. An automated drainage basin analysis of this DEM is in close agreement with existing basin analyses, both for the better surveyed coastal areas with well‐defined relief, and for large areas of low relief that make up much of the interior Lake Eyre basin and the Murray‐Darling basin. The analysis of the arid western plateau region differs from the currently accepted analysis but is in broad agreement with a previous analysis of palaeodrainage systems based on topographic and geological information. The drainage analyses is used to calculate cumulative distributions of spatially distributed, hydrologically significant, terrain parameters for the Murray‐Darling and Derwent River basins. The adequacy of the resolution of the DEM for continental hydrological analyses is assessed by comparing drainage basin analyses and cumulative distributions of terrain parameters at resolutions of 1/40th and 1/20th degree of latitude and lo