Droughts adversely impact rural and urban communities, industry, primary production and, thus, a country's economy. Drought monitoring is directed to detecting the onset, persistence and severity of the drought. In this study, meteorological drought indices such as the Standardized Precipitation Index (SPI), the Reconnaissance Drought Index (RDI) and deciles were assessed to investigate how well these indices reflect drought conditions in Victoria, Australia. The Theory of Runs was also used to identify the drought deficit. The study uses 55 years (1955–2010) of monthly precipitation and reference evapotranspiration data for five selected meteorological stations in Victoria, Australia. Results show that drought characterization using SPI and RDI provides a standardized classification of severity thus exhibiting advantages over deciles. As RDI considers both rainfall and potential evapotranspiration in calculations, it could be sensitive to climatic variability. For characterizing agricultural droughts, the application of the RDI is recommended. The use of the SPI was shown to be satisfactory for assessing and monitoring meteorological droughts. The SPI was also successful in detecting the onset and the end of historical droughts for the selected events.