Aim. To estimate how much governments in Australia spend on reducing and dealing with illicit drug problems. Methods. Government documents and supplementary information sources were used to estimate drug-related expenditure for the financial year 2002-03, in Australian dollars. Public sector expenditure on reducing drug problems ('proactive expenditure') was classified into four policy functions: prevention, treatment, harm reduction and enforcement. Expenditure related to the consequences of drug use ('reactive expenditure') was included as a separate category. Results. Spending by Australian governments in financial year 2002-03 on all drug-related activities was estimated to be $3.2 billion. Proactive expenditure was estimated to be $1.3 billion, comprising 55% on enforcement, 23% on prevention, 17% on treatment, 3% on harm reduction and 1% on activities that span several of these functions. Expenditure on dealing with the consequences of drug use was estimated to be $1.9 billion, with the majority the result of crime-related consequences. Conclusion. Several insights result from estimating these expenditures. First, law enforcement is the largest drug policy component, with Australian governments also spending significant amounts on treatment and prevention programmes. Secondly, apart from the prevention component, Australia's drug policy mix is strikingly similar to recent international estimates. Finally, expenditures associated with dealing with the consequences of illicit drugs are large and important for assessing drug-related public sector expenditure. [Moore TJ. The size and mix of government spending on illicit drug policy in Australia. Drug Alcohol Rev 2008;27:404-413]