Understanding and projecting drought, especially in the face of climate change, is crucial for assessing its impending risks. However, the causes of drought are multifaceted. As the environmental research paradigm pivots towards machine learning (ML) for predictions, our investigation contrasted multiple ML techniques to simulate the Standardized Precipitation Evapotranspiration Index (SPEI) from 2009 to 2022, utilizing various potential evapotranspiration (PET) methods. Our primary focus was Australia, the world’s driest inhabited continent. Given the challenges with ML model interpretation, SHAP (SHapley Additive exPlanations) values were employed to decipher SPEI variations and to gauge the relative importance of precipitation (Prec) and PET in six key Australian cities. Our findings revealed that while different PET methods resulted in distinct mean values, their trends remained consistent. Post the Millennium Drought, Australia experienced several drought events. SPEI discrepancies based on PET methods were minimal in humid regions like Brisbane and Darwin. However, for arid cities, the Priestley–Taylor equation-driven SPEI differed notably from other methods. Ridge regression was the most adept at mirroring SPEI changes among the assessed ML models. Furthermore, the SHAP explainer discerned that PET-related climate variables had a greater impact on SPEI in drier cities, whereas in humid cities, Prec was more influential. Notably, the research emphasised CO2′s role in influencing drought dynamics in humid cities. These insights are invaluable for enhancing drought mitigation strategies and refining predictive models. Such revelations are crucial for stakeholders aiming to improve drought prediction and management, especially in drought-prone regions like Australia.