We have been asked to provide some information on government and regulatory affairs in Australia. It is interesting to note that regulatory affairs in Australia have followed much the same path as those in the USA as outlined by Zito and Hurley in the first installment of this column. However, in order to understand the Australian experience in regulatory affairs, it is necessary to have a brief outline of our method of government and how this relates to the provision of health services. Australia is governed by a federation of state and territory governments answering to a central Commonwealth government. State governments, funded by Commonwealth government grants, provide health services. Traditionally pathology services were provided by the laboratories of public hospitals to both inpatients (private and public) and outpatients. In 1970 the Commonwealth government introduced a system to reimburse patients for the scheduled fee of services provided by medical practitioners and specialists outside the public hospital system. Public hospital laboratories also billed the Commonwealth Medicare Benefits Scheme (Medicare) for services provided to private patients. The health system became a money earning business and by the early 1970s, a significant sector of pathology services were provided by private laboratories.