BACKGROUND: Resource shortages and 'unmet need' are two economic problems reported in the Australian mental health sector. 'Unmet need' arises with a 'structural imbalance', the non-correspondence between the use of mental health services and the extent of need for those services. Another problem reported in literature is 'met non-need', people who use mental health services and do not have a diagnosis of mental illness. AIMS OF STUDY: To develop an approach to measure the resource shortage and the structural imbalance by using (i) data on consumers of mental health services ('service utilisation'), (ii) data on those who do not consume such services ('service non-utilisation'). These data are cross-classified with data on (i) people who do have a diagnosis of mental illness (proxy of 'need'), and (ii) people who do not have a diagnosis of mental illness (proxy of 'non-need'). METHOD: A conceptual framework (using 'polar' cases), which is often used in economics, is employed to define perfect 'structural balance' and perfect 'structural imbalance'. This framework allows the measurement of the degree of structural imbalance. Enumeration involves the cross-classified population sub-groups of 'need' and 'service utilisation' in tabular form, conceived of by reference to Yerushalmy's cross-classification approach for determining the sensitivity and specificity of diagnostic procedures in medicine. Venn diagrams are also applied for resource shortage evaluation. The study relies on the data of the Australian Bureau of Statistics 1997 epidemiological survey, the Australian national survey, Mental Health and Wellbeing: Profile of Adults. RESULTS: Clear evidence of resource insufficiency is found. The study shows also an extensive structural imbalance. A total of 1,477,500 subjects affected by mental disorders are found in the 'unmet need' category. This group (receiving no mental health services) represents 62 per cent of people with a diagnosis of mental disorder, and 11 per cent of the Australian population. On the other hand, a group of 591,600 people consume mental health services and do not meet the criteria of mental illness. This group is 4.4 per cent of the Australian population. DISCUSSION AND LIMITATIONS: In the absence of a measure of expenditure, this study adopted 'people' as a proxy for expenditure. The available data do not enable us to determine how much 'met non-need' is due to the 'Worried Well', or to those who use government-subsidised services for other reasons (sport, executive performance etc). IMPLICATIONS FOR HEALTH POLICIES: Commitment to quantification within the mental health sector is a relatively recent habit by the Australian Government. Policy formation often simply follows scandals to cope with adverse publicity and evidence-based policy is needed. Preliminary evidence of this study indicates resource insufficiency in the Australian mental health sector. This is a policy issue to be distinguished from the 'unmet need' and 'met non-need' arising from structurally imbalanced resource allocation. Separate policy targets require separate policy instruments.