Although constrained by Federal financial dominance, State governments can, nevertheless, significantly shape a number of aspects of health policy within their own jurisdiction. New governments often seek to implement both substantive and symbolic policy changes. This is often also accompanied by alterations to organisational structures and personnel with a view to making implementation more effective. This article chronicles the continuities and changes in health services policy in the first year of the Liberal-National Coalition State Government in Victoria. These include institutional changes, key ministerial and bureaucratic appointments, health workforce issues, health services funding decisions, public and community health, and relations with the Federal Government. The decision-making style of the new government is also discussed. The authors regard the economic imperatives of Victoria's severe deficit as the dominant influence in all areas of public policy, including health services policy, although certain ideological predilections have also been evident. They further argue that the new government has primarily sought legitimacy by appealing to what it regards as its mandate to rectify Victoria's 'economic crisis' by reducing public expenditure and reforming managerial practices in the public sector.