This page was first published in December 2014 and has now been archived.

On this page

Research tells us
Getting the support we need
What we spend
Building the community sector
How people fare in care
Not just health care
Economic impact
Education completion
Physical health of people with a mental illness
Suicide and self-harm
Where we go next


NSW has the second lowest per capita spending in Australia on support for people who experience mental illness, and we spend a higher proportion of that budget on inpatient hospital care.

But we know that hospital care is more costly and, in most circumstances, less effective or no more effective, than care offered by community-based teams while people continue to live at home. 

Admitting people to hospital, even if their health improves, dislocates them from their family, friends, work or education, which can have real negative consequences as they seek to readjust after a period of illness.

Even for people with severe mental illness, the average hospital stay in 2013 was about two weeks, confirming that they usually live in the community.

A balanced approach to mental health care sees the community as the key place where services are provided, with hospitals playing an important role as a back-up. NSW lacks this balance.

Our challenge is to radically realign mental health support, while ensuring we improve access to care – and maintain and improve the skills, knowledge and goodwill of the thousands of excellent professionals who work within our system.

Research tells us

Information about mental illness in Australia

  • One in five Australians experience mental illness in one year
  • About one in two people experience mental illness in their lifetime
  • 707 people died by suicide in 2012
  • 2.7 million work days are lost each year because of mental illness
  • 54% of the NSW mental health budget is spent on inpatient care.

Getting the support we need

We know that in NSW many people do not get the mental health care they need.

  • Among Australians who had a mental illness in the past 12 months, only 35% received any formal care. We know little about whether they need or want help, or why they don’t seek care.
  • The number of Medicare-funded psychology services has increased in recent years, but the percentage of the population seen by NSW public mental health services has been static.
  • Rates of mental health care use are uneven across NSW, and services are harder to find outside of the cities.

NSW needs to create easier pathways for people to get the care they need much earlier, so they do not become acutely unwell.

Services provided by the NSW government are principally inpatient hospital admissions and outpatient services. Despite recent funding increases, largely directed towards hospitals, there is no evidence that more people are being cared for by those services.

The Commonwealth Government provides mental health services through Medicare-funded consultations with general practitioners, psychiatrists and psychologists. These services have seen a massive and rapid expansion, particularly since the start of the Better Access program in 2006, which for the first time provided Medicare rebates for psychology consultations. The percentage of the NSW population receiving mental health services under Medicare increased by more than 4% to 7.3% in the five years to 2012.

However, we do not know whether the program is extending care to people who did not previously receive any. Nor do we know much about the quality of care provided under Better Access or its impact on the course of mental illness.

The same is true for other Commonwealth-funded mental health supports. We cannot determine the degree to which the Personal Helpers and Mentors, headspace and Partners in Recovery initiatives may extend support to people who might otherwise not have sought or found it.

Recurrent expenditure on specialised mental health services 2011-12

Table on recurrent expenditure on specialised mental health services

In NSW approximately 54% of the mental health budget is spent on inpatient care, 34% on community-based care, 5% on non-government organisations 5% on other indirect expenditure and 2% on specialist community residential care.

We spend the least per capita on public community-based mental health services and on mental health services provided by community-managed organisations. Other states are spending more on services designed to keep people healthy and out of hospital.

What we spend

Mental health in the 2013–2014 financial year accounts for $1.45bn out of a total NSW Health budget of $17.9bn or about 8% of total spending.

This does not include costs in other government agencies, such as the justice system, corrective services, education, police, disabilities and home care, community services and Aboriginal affairs.

In 2011 – the most recent year for which consistent national data is available – NSW directed almost 54% of its total mental health budget towards services in psychiatric hospitals or psychiatric wards of public hospitals, the highest proportion of any state. The national average expenditure on these services was 43% and in Victoria 31%.

NSW also spent least on community mental health care – $65 per capita across the population, versus a national average of $74. Additionally, most of what is defined as community mental health care in NSW operates from a hospital campus rather than a base in the community.

What this means is that NSW is spending most of its money on the most expensive type of care, responding only once a person is acutely unwell.

Table about spending on mental health services in Australian jurisdictions

Spending per capita on mental health services by State and Territory in 2010-2011:

Queensland - $81.95
NSW - $64.87
ACT - $88.82
Victoria - $67.06
South Australia - $83.07
Western Australia - $95.46
Northern Territory - $90.79
Tasmania - $71.07

National average - $74.17

Building the community sector

The NSW mental health system also relies heavily on services run by government. Per capita in 2011, NSW directed the smallest proportion of any jurisdiction – 6% of its total mental health spending to support community-managed mental health services, though growth is higher than the national average.

The community-managed sector is characterised by a strong local focus and the ability to be flexible and responsive to the needs of consumers, families and carers and has the potential to become a bigger provider of the psycho-social recovery services people may require when they experience mental illness.

These services can help people gain or regain the ability to live as independently in the community as they wish, including assistance with daily living activities such as shopping, cleaning and cooking, and counselling and connection to leisure and training programs.

There is a need to develop new community services as alternatives to hospitalisation. At the same time, we need a better understanding of the performance of the community-managed sector and its impact on mental health and wellbeing in NSW.

How people fare in care

For people admitted to state and territory public psychiatric inpatient units 72% are assessed as having a significant reduction in their symptoms by the time they leave. Still, most remain unwell at discharge, pointing to the need for continuing care in the community. And for 4%, their health worsens while 24% leave hospital with no significant change in their condition.

But knowledge about the impact of care is imperfect and incomplete. Formal data generally emphasises the clinician’s perspective, not the person’s viewpoint, and a diagnosis of mental illness can define people and encourage them to depend on services.

Australia is yet to implement a set of holistic indicators, to reflect the experience of people with a mental illness, emphasise their autonomy and normalise the concept of recovery – that people can get better.

Housing, education completion and social inclusion are central concerns for people with a mental illness, but are not reported in NSW. Employment status is collected only for people who use public hospital mental health services.

Also, there is a need to classify the type of mental health services provided by the community-managed sector, recording its client interactions and the results.

All services need to be able to demonstrate clearly the consequences of the support they provide. Expanding the measurements we use to assess progress is a key challenge in NSW.

Public community mental health services in NSW tend to operate from a hospital campus rather than from within the community.

Not just health care

We need to understand more about investment directed at people with a mental illness right across government, to better meet people’s needs and to target resources where they make the most difference.

The Department of Family and Community Services calculates 31% of its clients are affected by mental illness. The cost of providing services to these clients is estimated at $1.8bn a year.

  • Just under half of NSW’s 10,000 prison inmates in 2009 reported having been assessed or treated for a mental health problem.
  • NSW Police attend about 100 mental health-related incidents every day, about 2% of total police activity. NSW Police will provide mental health intervention training for 10% of all operational police by the end of 2015, to improve their response to people experiencing mental distress. 
  • Total housing costs associated with mental illness have not been calculated, but NSW allocated $118m to the Housing Accommodation and Support Initiative (HASI) alone, between 2007 and 2011. More than 1000 packages of care are being provided under this program.
  • Schools are recognised as important locations for addressing student wellbeing, because of their reach and familiarity to students and families, and the opportunities they afford for mental health promotion and prevention. In 2011, the Department of Education and Communities employed nearly 800 full-time school counsellors and district guidance officers.

It is hard to think of a NSW government agency that does not have a material interest in working to improve our response to mental illness.

Economic impact

About 680,000 work days a month are lost in Australia for mental health reasons – half for depression.

Mental illness accounts for about $2.7bn in lost productivity in Australia each year. If NSW mirrors the rest of Australia, about 225,000 work days are lost each month because of mental illness. The impact on the NSW economy is colossal.

These figures do not include lost productivity from unemployment because of mental illness. The rate of unemployment among people with a mental illness is much higher than among the general population.

Education completion

Education and training opportunities protect against mental health problems.

Participation in education is critical to maintaining a young person’s trajectory towards a fulfilling life, building skills and improving employment prospects. Mental illness in young people can lead to poor academic performance and higher 
drop-out rates.

One-third of Australians who experience psychosis have no school or post-school qualification, compared with a quarter of the general population, and their rates of achieving TAFE, trade certificate or higher education qualifications are also substantially lower. One in five struggles with literacy, and the main source of income for 85% is a government payment.


In 2009 the employment participation rate of Australians with a disability was 54%, compared with 83% for people without a disability. People whose disability was psychological had the lowest participation rate (29%), and the highest unemployment rate (19%). This disparity in part results from prejudice towards people with mental illness.

In the OECD countries, the employment rate is between 55% and 70%. Australia has one of the worst unemployment rates for people with mental illness.


The University of NSW report, Down and Out in Sydney, states that 75% of participants in the study of the Sydney’s inner-city homeless population had at least one mental illness compared with 20% in the general population. Extrapolating from national figures, about 30,000 people may be homeless in NSW. Effective solutions must address the reasons people with mental illness lose tenancies or are not offered suitable housing.

Physical health of people with a mental illness

We know that people affected by schizophrenia have a life expectancy of up to 25 years less than the general population.

Between 35% and 40% of adult smokers have a mental illness.

We also know of the intimate and dangerous relationship between severe mental illnesses and a range of physical health problems, such as heart disease, diabetes and stroke. While medications play a critical role for many people in supporting recovery, we must acknowledge their effects on physical health.

Suicide and self-harm

Suicide still occurs too often in NSW, though the rate has fallen slightly in the past decade. In 2012, 707 people died by suicide. In the past 20 years, the rates of self-harm have increased among young women aged 15–24, in contrast to both men and the general community whose rates have remained stable. The reasons are poorly understood.

Where we go next

The mental health of people in NSW is too important to merely continue the strategies of the past, which have largely failed to create alternatives to hospital care, or provide the support needed afterwards. A lack of service integration has diminished NSW’s capacity to keep people out of hospital and living well in the community. As well as health services we need the involvement of community services, housing and employment support.

The community must become the locus of care, and any new approach to accountability must have at its heart a commitment to measure personal experiences of support. There can be no clearer feedback on the performance of our mental health system.

Related links

Strategic Plan and Report


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Last updated: 22 August 2017