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10.8 Mental Health


The Australian Bureau of Statistics (ABS) defines mental health as a ‘state of wellbeing in which individuals can cope with the normal stresses of life, work productively and fruitfully, and are able to make a contribution to their community’. Mental illness, on the other hand, describes a number of diagnosable disorders that can significantly interfere with a person's cognitive, emotional or social abilities (ABS, 2013).

The 2007 National Survey of Mental Health and Wellbeing conducted by the ABS found that almost half (45 per cent or 7.3 million) of Australians aged 16 to 85 years reported that they would have met the criteria for a diagnosis of a mental disorder (a mood disorder, such as depression, anxiety or a substance use disorder) at some point in their life. An estimated 3.2 million Australians (20 per cent of the population) had a mental disorder in the 12 months prior to the survey (ABS, 2007).

At the more acute end, a survey conducted in 2010 of people living with psychotic illness estimated almost 64,000 people in Australia aged 18 to 64 had a psychotic illness and were in contact with public specialised mental health services each year (Department of Health and Ageing, 2011).

Rationale for government intervention

Mental illness can have severe effects on the individuals and families concerned. Social problems associated with mental illness include poverty, unemployment and homelessness.

The Australian Institute of Health and Welfare’s (AIHW) burden of disease and injury in Australia 2003 study indicated that mental disorders constitute the leading cause of non-fatal disability burden in Australia, accounting for an estimated 24 per cent of the total years lost due to disability (AIHW, 2007).

Mental illness also has broader societal impacts. According to the Organisation for Economic Cooperation and Development (OECD), Australia has one of the lowest rates of employment participation by people with lived experience of mental illness (OECD, 2011). The annual cost of mental illness in Australia has been estimated by the ABS at $20 billion, which includes the cost of loss of productivity and labour force participation (ABS, 2013).

Australian governments provide services to support people with mental health issues and their families to live productive and healthy lives. In 2012, the Council of Australian Governments (COAG) launched a Roadmap for National Mental Health Reform, noting:

Our long term aspiration is for a society that: values and promotes the importance of good mental health and wellbeing; maximises opportunities to prevent and reduce the impact of mental health issues and mental illness; and supports people with mental health issues and mental illness, their families and carers to live contributing lives.

All governments are committed to reducing stigma and discrimination in society; significantly reducing suicide rates; and ensuring that people affected by mental health issues and their families have access to appropriate services and supports, stable and safe homes, and are able to participate successfully in education and employment.

Current structure of mental health programmes

An estimated $6.9 billion was spent on recurrent mental health-related services during 2010-11 (or $309 per Australian) (AIHW, 2013). Of this, $4.2 billion came from the States, $2.4 billion from the Commonwealth and $257 million from private health insurance funds (refer to Chart 10.8.1).

Chart 10.8.1: Funding sources for recurrent mental health-related services

This chart shows that funding for mental health services comes from State and territories (61 per cent);  the Commonwealth (35 per cent) and private health insurance funds (4 per cent).

Source: Australian Institute of Health and Welfare, 2013.

The States provide hospital-based, specialised, clinical and community-based mental health services that target people with severe and persistent mental illness. These services are provided directly by the States and through partnerships with non-government organisations (Council of Australian Governments, 2012).

The States also play a role in mental health promotion and prevention, as well as reducing stigma and discrimination associated with mental health. They have primary responsibility for the planning and delivery of public health and hospital services, early childhood and education services, housing, drug and alcohol services, and law and order measures.

The Commonwealth’s principal role is to support primary care through Medicare (for example, via the Better Access to Psychiatrists, Psychologists and General Practitioners initiative) and target the needs of people with common disorders, such as mild or moderate anxiety and depression.

People with severe mental illness are also supported by the Commonwealth through the primary health care system and psychiatrist services. The Commonwealth also delivers some community and social support services (often in partnership with non-government organisations).

The Commonwealth provides funding to the States for the delivery of health services, including hospitals.

The Commonwealth also has primary responsibility for employment services and the provision of income support for people with psychiatric conditions and other disabilities, and their carers.


Expenditure on mental health services has increased by 5.7 per cent per Australian over the five years to 2010-11 (AIHW, 2013).

Commonwealth expenditure on both Medicare services and pharmaceutical prescriptions has increased.

  • In 2011-12, $851 million was paid in benefits for Medicare-subsidised mental health related services. These costs increased by an average annual rate of 8.5 per cent per Australian between 2007-08 and 2011-12.
  • In 2011-12, $854 million was spent on mental health-related subsidised prescriptions, equating to 8.8 per cent of all subsidised prescriptions. These costs increased by an average annual rate of 2.1 per cent per Australian between 2007-08 and 2011-12.

Expenditure on State and Territory specialised mental health services has also increased from $165 per Australian to $190 between 2006-07 and 2010-11, an average annual increase of 3.6 per cent.


Since the early 1990s governments have committed to a range of progressively wider mental health policy and planning initiatives (generally accompanied by significant increases in expenditure), including the:

  • National Mental Health Strategy (1992), including the first five-year National Mental Health Plan (and three further plans in 1997, 2003 and 2009);
  • COAG National Action Plan for Mental Health (2006-11);
  • COAG National Partnership Agreement Supporting National Mental Health Reform (2012);
  • development of COAG’s 10 year Roadmap for National Mental Health Reform (2012); and
  • establishment of the National Mental Health Commission (2012) and a number of state-level commissions (Medibank, 2013).

For example, in 2006, as part of the COAG National Action Plan, the Commonwealth introduced the Better Access initiative. This initiative gave patients Medicare-subsidised access to psychologists and other allied health providers after the preparation of a Mental Health Treatment Plan by a general practitioner. Implementation of this measure has driven growth in Medicare subsidised services with an average annual increase of 11.2 per cent over the five years to 2011-12 (see Chart 10.8.2) (AIHW, 2013).

Chart 10.8.2: Medicare-subsidised mental health-related services, over time

This chart shows the growth in Medicare-subsidised mental health-related services between 2007-08 and 2011-12.

Source: Australian Institute of Health and Welfare, 2013.



The mental health system is complex and fragmented. Funding and service delivery responsibilities are overlapping and uncoordinated. Mental health services are not well integrated with broader health, welfare and social services. There is also an absence of information to demonstrate whether the right amount of money is being spent and in the right areas of mental health.

A submission to the Commission from the Mental Health Council of Australia noted that

despite constant data collection and reporting for over 20 years, as a nation we still cannot get a clear picture of Australia's mental health system - what it is, how much it costs, how it interacts with other systems, and most importantly whether it is efficiently and effectively meeting the needs of consumers and carers.

A 2013 white paper from Medibank called for urgent reform of Australia's mental health system noting the complexity of the mental health system.

Australia's mental health system lacks a clear end-to-end system design. The nature of mental illness increases the likelihood that consumers will interact frequently with multiple parts of the healthcare system. Yet the system is characterised by fragmentation and insufficient coordination. This is compounded by similar problems with social services (including employment services) and the support payment system.

The number of service providers illustrates the complexity of the system. In 2008-09, there were 156 public hospitals providing mental health care, 150 residential facilities, 990 community services, and 50 private psychiatric hospitals. There are hundreds of mental health NGOs (with estimates ranging from 400 (in 2008) to 798 (in 2011)) and there are currently 36 private health insurers. This is in addition to the numerous other service providers who deliver mental health services (Medibank, 2013).

Potential areas for reform

National Mental Health Commission review

In September 2013, the Government announced that the National Mental Health Commission would be undertaking a national review of mental health services to assess the efficiency and effectiveness of Commonwealth, State and non-government services. The review has been tasked with ensuring that services are properly targeted and not duplicated, and that programmes are not unnecessarily burdened by red tape. The review will identify gaps in both mental health research and workforce development and training. It will also consider the challenges of providing services in rural, regional and remote Australia.

In keeping with its principles, the Commission considers that the review should identify ways to better target mental health funding for the most vulnerable and identify opportunities for coordinating and integrating mental health services with broader social and health services. The review should also examine how fragmentation in the services system and overlapping roles and service delivery responsibilities can be reduced.


Australian Bureau of Statistics (ABS) 2007, National Survey of Mental Health and Wellbeing, cat.no. 4326.0, Canberra.

Australian Bureau of Statistics 2013, Gender Indicators, Australia – Mental Health, cat.no. 4125.0, Canberra.

Australian Institute of Health and Welfare (AIHW) 2007, The Burden of Disease and Injury in Australia 2003, cat. no. PHE 82, AIHW, Canberra.

Australian Institute of Health and Welfare 2011, Mental Health Services – In Brief 2011, cat. no. HSE 113, AIHW, Canberra.

Australian Institute of Health and Welfare 2013, Mental Health Services – In Brief 2013, cat. no. HSE 141, AIHW, Canberra.

Council of Australian Governments (COAG) 2012, The Roadmap for National Mental Health Reform 2012-22, COAG, Canberra.

Department of Health and Ageing 2011, People Living with Psychotic Illness 2010, Canberra.

Medibank Private Limited and Nous Group 2013, The Case for Mental Health Reform in Australia: A Review of Expenditure and System Design, Medibank Private, Sydney.

Mental Health Council of Australia (MHCA) 2013, Submission to the National Commission of Audit 2013, MHCA, Canberra.

National Mental Health Commission 2012, Strategies and Actions 2012-2015, Sydney.

National Mental Health Commission 2013, A Contributing Life – The 2013 National Report Card, Sydney.

OECD 2011, Sick on the Job: Myths and Realities about Mental Health and Work, OECD Publishing, Paris.