The mental health system is making us sicker

Australia has a mental health crisis, but not the one we think. Despite decades of soaring expenditure-funding has more than doubled in real terms-our national mental health hasn't improved. Suicide rates remain stubbornly high. Psychiatric drug use is at record levels. And each year, more people are diagnosed as mentally ill than the year before.

We're spending more and getting worse. That paradox should trouble us.

The problem isn't a lack of compassion or commitment. It's that we've built a system that produces patients rather than health. By medicalising normal distress, tying support to diagnosis, and rewarding ongoing treatment over recovery, we've created a diagnostic-industrial-government complex, a self-reinforcing system where everyone benefits from more diagnoses except the patient.

Consider the incentives. Clinicians need billable diagnoses to claim Medicare rebates. Schools access additional funding when students are labelled. Universities grant exam accommodations based on diagnostic status. Pharmaceutical companies expand markets. Advocacy groups grow membership. Governments get to appear responsive. And distressed individuals learn that the gateway to help requires adopting a medical identity.

The result? ADHD prescriptions have exploded from 500,000 annually in 2010 to 4.5 million in 2024. Autism diagnoses increased 350% between 2009 and 2022. One in five Australians now meets the criteria for a mental disorder in any given year. Among young people aged 16-24, it's approaching 40%.

Yet for all this diagnostic expansion, population well-being hasn't improved. The proportion of adults reporting high psychological distress has increased from 11% in 2011-12 to 15% by 2022-23. Something is badly wrong.

Are we just getting better at diagnosis?

That's the conventional explanation, but the evidence doesn't support it. If awareness and reduced stigma were the main drivers, we'd see proportional increases across all conditions. Instead, psychoses, the most stigmatised disorders, show stable prevalence, while autism, ADHD, and anxiety surge dramatically.

The expansion is concentrated precisely where diagnostic boundaries are most ambiguous and institutional incentives are strongest. The youngest children in each school year, for instance, are diagnosed with ADHD at twice the rate of their older classmates. That's not biology. That's developmental immaturity being pathologised because we set arbitrary school entry dates and expect all children to meet the same behavioural standards regardless of age.

Meanwhile, those with genuinely severe conditions are being failed. According to the Australian Productivity Commission, roughly half of all Medicare-subsidised mental health services go to people with mild or moderate symptoms, while those with severe, life-limiting psychiatric illness often receive fragmented care or none at all. A person with schizophrenia and a university student stressed over examinations compete for resources from the same pool. This is compassion without proportion.

The 'Thriving Kids' test case

The Australian government's recently announced 'Thriving Kids' program, a multi-billion-dollar early intervention initiative, represents a critical test. It could support families without diagnostic labelling, expect developmental catch-up, and measure success by how many children avoid long-term dependency. Or it could become another pipeline channelling children into permanent therapeutic identities. How we design it will reveal whether Australia is ready for genuine reform.

What reform looks like

Reform requires five fundamental shifts:

First, replace diagnosis-based eligibility with functional assessment. Allocate support based on what people can or cannot do, not whether they tick boxes in a diagnostic manual.