1. Growth, density and δ13C of wood and leaf area were measured in two adjacent stands of 6 year-old Eucalyptus globulus growing in the 600–700 mm year–1 rainfall region of south-western Australia. Study sites were identical except for differences in the availability of water owing to physical properties of soil profiles and location of sites within the landscape.
2. Abundance of 13C (expressed as δ13C) in wood of trees growing on the drought-prone site (– 24·8‰±1·4) was greater than in other trees (– 25·8‰±1·2, P<0·001) throughout the 6 years and, with further development, the δ13C signatures of wood may become useful indices of drought-susceptibility in plantations within a few years of establishment. The seasonal pattern of δ13C of wood appeared to reflect seasonal variation in water availability and duration of cambial activity.
3. Basic density of wood of trees growing on the more drought-prone site (496±14·0 kg m–3) was reduced compared to other trees (554±5·3 kg m–3, P<0·001). δ13C of wood across boundaries of growth-rings suggested that drought stopped cambial activity resulting in less production of late wood and less dense wood.
4. The stand growing on the drought-prone site had reduced growth, wood yield and leaf area but identical specific leaf area. Annual growth was correlated with the previous season’s rainfall. Together, these results suggested that within the same evaporative climate, drought reduces growth primarily by reducing leaf area and that there is a lag between onset of drought and reduced productivity.