The decline of woodland birds in southern Australia has motivated considerable research, identifying which species, habitats and regions are most affected, but the mechanisms driving these declines remain unclear. Applying findings from plant ecology, hydrology and soil science, I evaluate how availability of water and nutrients has been altered by agricultural development and how those changes have affected woodland food webs. Selective clearing of woodlands on fertile soils and overgrazing of remaining native vegetation have lowered productivity, whereas the storage of water has shifted from within the soil to surface reservoirs. I suggest that these changes have had a profound impact on below-ground decomposer communities, leading to fewer ground-dwelling invertebrate prey and reduced insectivore numbers. This productivity-based hypothesis is congruent with many previous findings, explaining the susceptibility of ground-foraging insectivores to changing land-use (via nutritional limitation), the sensitivity of southern woodlands (via summer drought stress), and the decreased resilience of eucalypt woodlands (via lower litter-fall and greater sensitivity to eutrophication). I detail six testable predictions extending beyond birds to microbial communities, plants, and other woodland-dependent animals. Finally, I explore the implications of this hypothesis, highlighting the value of remnant habitat on productive land to the long-term persistence of woodland bird populations.