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  • Dr Martin Whitely

Productivity Commission advises Morrison Government to end headspace's youth mental health monopoly.

Updated: Apr 25, 2023


Another important national mental health story broken by PWA - To support PsychWatch Australia with a Donation click here.


The recently released Productivity Commission’s draft mental health report, includes a bombshell recommendation, so far overlooked by Australian media. Recommendation 24.2 on page 106 states:

  • In the short term (in the next 2 years) the Department of Health should cease directing PHNs [Primary Health Networks] to fund headspace centres, including the headspace Youth Early Psychosis Program, and other specific service providers. PHNs should be able to continue funding headspace services or redirect this funding to better meet the needs of their local areas as they see fit. In the medium term (over 2–5 years) there should be no requirements that commissioning agencies (RCAs or PHNs) have to fund particular service providers. (The full text regarding recommendation 24.2 is copied far below.)

This recommendation threatens the monopoly that headspace has on Commonwealth Government funds for youth (aged 12 to 25 years) mental health services. It is a very sensible recommendation as there is very little independent, robust, evidence supporting the effectiveness of either headspace[1] (see Appendix 1 below) or its Youth Early Psychosis Program (see Appendix 2 below).

Since it was established in 2006, headspace has been scaled up with enormous fanfare. However at a population level, most measures of the mental health of young Australians, particularly rates of youth self-harm and suicide, have got considerably worse.

As highlighted in a previous PsychWatch Australia blog, over the last decade a number of leading Australian organisations and thought leaders, including Suicide Prevention Australia, Orygen, Professors Patrick McGorry and Ian Hickie, and headspace, have endorsed the off label use of antidepressants by young Australians. In fairness to headspace, unlike some other organisations, it has acknowledged FDA warnings for suicidality, and even the that most effective SSRI antidepressant, fluoxetine, is only "modestly effective for reducing symptoms of depression in young people". Nonetheless, headspace has argued that there were “even greater risks of not treating depression with any type of intervention”.[2] These high profile endorsements of the use of antidepressants by young Australians have - as I predicted in 2011 - been followed by a sustained increase in both youth antidepressant use and suicide rates.[3]

Despite its failure to deliver demonstrable benefits, expanding headspace is frequently marketed as the recipe for better outcomes, including reducing the per-capita rate of youth suicide. I contend this is because the chief architect of headspace, Professor Patrick McGorry, is an extraordinarily effective political lobbyist, marketer and media performer. Since he became 2010 Australian of the Year, Professor McGorry has dominated, our nation’s long overdue public debate about mental health policy. He has used his profile and infectious enthusiasm to persuade a conga line of Australian politicians and journalists - particularly at the ABC - to endorse and publicise his claims of ‘proven 21st century solutions’.

However, now there is a decade long history of headspace massively over-promising, and under-delivering. According to Professor Ian Hickie, even headspace CEO Jason Threthowan recently acknowledged that 'the brand is way ahead of the substance'. Nonetheless, the Morrison Government’s mental health 2019 election policy - Our Plan for youth mental health and suicide prevention - committed an “additional $375 million to expand and improve the headspace network”.[4]

headspace’s Youth Early Psychosis Program, previously known as EPPICS (Early Psychosis Prevention Intervention Centres), is a particularly worrying innovation. Again, despite the lack of a supporting evidence base, the Morrison Government’s has committed "$110 million to continue the Early Psychosis Youth Services [EPYS] program at six headspace centres nationally”.[4]

The driving force behind EPYS is Professor McGorry’s unshakeable belief that young people at ‘Ultra High Risk’ of psychosis can be identified and treated, and thereby prevented from developing psychosis and schizophrenia. Intuitively, it seems like a reasonable ‘stitch in time’ theory. However, the independent evidence indicates that there are three problems with the theory:

  1. The rate of false positives is extremely high. Proponents of the Ultra High Risk diagnosis claim a false positive rate of 64%[5], critics assert it is 92%[6]. Either way the vast majority of young people diagnosed as being at ‘Ultra High Risk’ of psychosis, never become psychotic.

  2. Even in those cases where the predictions are accurate, there is little to no independent evidence that the interventions that are on offer, help, in the long term.

  3. Labelling young people as being at Ultra High Risk of becoming psychotic is stigmatising, and may encourage the unwarranted use of antipsychotic medications, with substantial risks of life-shortening metabolic and cardiovascular damage.

Early Psychosis Services have survived two prior crisis that should have seen them starved of Commonwealth Government funding. In 2011 the Gillard Government made the first serious commitment of money; $222.4 million, half the cost, for the rollout of 16 EPPICS across Australia. These clinics were proposed with the dual purpose of diagnosing and treating young people at Ultra High Risk of Psychosis and treating those who have become psychotic.

Shortly after, the American Psychiatric Association abandoned plans to include an Ultra High Psychosis Risk Disorder (otherwise called Attenuated Psychosis Syndrome or Psychosis Risk Disorder) in the DSM5, often referred to as the Bible of Psychiatry. This was done in response to widespread evidence -based criticisms of the proposal, like those listed at 1 to 3 above.

In effect, this meant one of the services two key functions - diagnosing and treating Psychosis Risk Disorder - was discredited internationally, at about the same time Commonwealth Government funding was secured for this very purpose. Professor McGorry responded by making the astonishing claim - given that the second P stands for Prevention - that “EPPICs do not treat people with psychosis risk but only patients who have had their first psychotic episode".[7] Following that the Gillard Government Minister for health and Ageing, Mark Butler, indicated that EPPICS may not treat those perceived tyo be at ultra-high risk of becoming psychotic; which is in conflict with what he said in the May 2011 rollout.

It seems Minister Butler and the Gillard Government - a minority government reliant on the support of independents and the Greens - lacked the appetite for a fight with a former Australian of the Year and media darling. McGorry's plans survived that obstacle but hit a road block when individual state governments, sensibly in my view, declined to kick in half the funding. Nonetheless, the Gillard Government delivered some of the promised clinics. (To read the Hansard transcript or watch a video of a parliamentary speech I made in 2012 detailing these issues click here.)

The second averted crisis occurred in June 2016, when the Turnbull Government Health Minister Sussan Ley announced the staged closure of the seven Early Psychosis Services located at headspaces. It was planned that the money saved would be redistributed to Primary Health Networks to spend on a broader range of youth focused services. Minister Ley told the ABC the changes were part of a bank of recommendations made by some of the country's top mental health experts and the money would be allocated more effectively.

Orygen Youth Health's (headed up by Patrick McGorry) website describes his successful political lobbying response to this threat to in his own words:

That's when it really started to go pear-shaped,” Professor McGorry says. “At that point, a decision was made by senior bureaucrats and supported by the Minister [Sussan Ley] to wind this program up and hand over the funds to be used in a diffuse and “flexible” manner by the new and untested Primary Health Networks on completely non-evidence-based programs. Naturally, that caused huge problems for the patients that were already being treated, created serious risks and widespread distress, including for the dedicated staff that were trying to make those programs work.

“It was a completely outrageous decision, which flew in the face of arguably the best-quality evidence ever assembled for any model of mental health care. We tried everything politically to get it reversed in the lead-up to the 2016 election, but even with a fair bit of support with the coalition, we couldn’t get it reversed.”

In a last-ditch effort to save the programs, Professor McGorry addressed the National Press Club, accompanied by a young person from the program. The following Sunday, the Sunday Telegraph hit Sydney streets with the headline, “Mal, Can We Talk? Funding cuts prompt fears of youth suicide rise”, blazoned across the front. "Within hours of that article being released, the Prime Minister was on the phone to me saying, "What do we need to do to fix this?" And within two hours, they organised a personal meeting with Sussan Ley, her adviser, Kerryn Pennell, myself — with Treasurer Scott Morrison and Malcolm Turnbull joining on the phone,” Professor McGorry remembers.

In my experience this story is typical of Professor McGorry's political approach. He is brilliant at pulling at the heartstrings. Putting young people his services have 'saved' along-side him in front of the media, and peddling fear of a spike in youth suicide, if he doesn’t get his way, are standard McGorry practice. Although it is salesmanship not science, Professor McGorry is superb at it, and to date, it has almost always worked.

Professor McGorry has also frequently claimed his pet programs are supported by robust scientific evidence. In 2011 he coauthored a Blueprint to Transform Mental Health and Social Participation in Australia. This document was devoid of supporting detail - but stated Early Psychosis Services have "the largest international evidence base of any mental health model of care, demonstrating not only their clinical effectiveness but also their financial and social return on investment. This is a mature model simply requiring implementation in Australia.”[8] In 2012 I detailed to the Western Australian Parliament why I thought this claim "simply doesn't stack up". Seven years later, Professor McGorry is still making similar claims, and I still think they are bullshit.

That is why I think the Productivity Commission recommendation to end Early Psychosis Services protected status is timely. It invites a rerun of this debate.

This time our politicians and the media must get beyond Professor McGorry's former Australian of the Year status and scrutinise his Trumpian claim that EPYS has “the best-quality evidence ever''.

It is worth remembering that the Productivity Commission's draft report does not recommend defunding EPYS or headspace. Rather it seeks to encourage competition, and ensure money is well spent. So Professor McGorry and headspace would have an equal opportunity to convince the Primary Health Networks, and we taxpayers who ultimately pay the bill, that it is the interests of young Australians to fund headspace and Early Psychosis Services, rather than other youth programs.

For both headspace and Early Psychosis Services there are a number of unanswered questions that must be addressed in this process:

  1. Given Professor McGorry's history of experimenting with antipsychotics as a means of preventing first episode psychosis, how do we know there is safe prescribing, particularly of antipsychotics, to vulnerable young people at EPYS?

  2. How does headspace reconcile its past advice regarding antidepressant prescribing, with the real world Australian experience over the last decade of soaring rates of antidepressant use and suicide by young Australians?

  3. Will headspace commit to allowing a robust, independent and public audit and evaluation of headspace and EPYS diagnosis, prescribing and other treatment practices? And if so, does it expect results like the review of the Professor McGorry led Orygen Youth Health, that revealed the widespread 'too early' prescribing of antidepressants?[9]

These are crucial questions that demand independent scrutiny and the attention of both our politicians and the mainstream media. I think an honest, robust, arm's length assessment would recommend Early Psychosis Services are defunded. I have argued, and continue to believe that EPPICs were a vanity project, supported by a flimsy evidence base, that never should have been funded in the first place.

While I am highly critical of the headspace hype, the concept of a one-stop shop supporting troubled young people has merit. A reconfigured headspace, better integrated into other services, with a ‘personalised, listen and support’ focus, and not a ‘medicalised, diagnose and treat’ approach, could prove valuable. To achieve this an honest admission that the headspace rhetoric has never matched the reality is required.

More importantly there would need to be an ongoing commitment (tied to funding), for full public independent, audits and evaluations of diagnosis and treatment practices (including prescribing) at all headspace clinics. Theoretically this could happen, however, given that the current headspace board includes Professor McGorry, I think such a transformation is very, very unlikely.

Ultimately what I thinks doesn't matter. What matters is how the Morrison Government responds. Will it ignore the advice it commissioned from the Productivity Commission and throw another $375 million into headspace and $110 million into Early Psychosis Youth Services [EPYS]? Or will the Morrison Government open up the process to competition as the Productivity Commission recommends?

Of course the Productivity Commission 1,238 page report is only a draft prepared for 'further public consultation and input'. So it will be interesting to see if Professor McGorry makes a 'last ditch effort' to save headspace and Early Psychosis Services that is as successful as they have been in the past. PsychWatch Australia will keep you posted.


Appendix 1

headspace - the hype doesn’t match reality

Professor Patrick McGorry, has frequently asserted that headspace is supported by extensive evidence. However, two external evaluations of headspace conducted in cooperation with headspace, and one independent assessment, do not support Professor McGorry’s positive assertion.

The two evaluations conducted with headspace's cooperation both provided very weak evidence to support the effectiveness of headspace, let alone its cost-effectiveness. The first evaluation, Muir et al (2009), found “there was little tangible evidence of the extent to which services were evidence-based”.[10] The more recent evaluation, Hilferty et al. (2015), showed high levels of client attrition and raised concerns about poor engagement with Indigenous young people.[11] Media reports have also raised similar concerns.

Furthermore, even the weak evidence of positive outcomes in these two reviews is questionable, because both evaluations had significant methodological limitations. The Muir 2009 evaluation had no control group for comparison.[10] Hilferty et al.’s 2015 evaluation used two comparison groups.[11] The 18-25-year-old comparison group was recruited online from commercial access panels, with a very low response rate (p. 175), and was poorly-matched (p. 16). In addition, the headspace client survey group excluded clients who only attended once (p. 180), and girls/women were over-represented (p. 179).

The independent assessment conducted in 2015 by Professor Anthony Jorm, without headspace’s involvement, found “improvements seen in headspace clients are similar to those seen in untreated cases, and it would seem that the services provided may have had little or no effect”.[12] Apart from the weak evidence base, other concerns associated with the rollout of headspace include problems with workforce shortages and its failure to service those most at risk and respond to local conditions.


Appendix 2

More information on Early Psychosis Services

I believe the best demonstration of the fundamental flaw in Professor McGorry’s Early Psychosis model is a twenty minute excerpt from a Orygen Youth Health Service (headed up by Professor McGorry) training video on how to diagnose young people at ‘Ultra High Risk’ of becoming psychotic. I encourage all to watch the video and ask themselves if the Ultra High Risk diagnosis passes the common sense test?



[1] Jorm AF. Headspace: The gap between the evidence and the arguments. Australian and New Zealand journal of Psychiatry. 2016;50(3):195-6.

[2] Sarah Hetrick, Rosemary Purcell, Patrick McGorry, Alison Yung, Andrew Chanen, (2009) Evidence Summary: Using SSRI Antidepressants to Treat Depression in Young People: What are the Issues and What is the Evidence? Headspace, Evidence Summary Writers 2009 Orygen Youth Health Research Centre. Previously available at

See file:///C:/Users/177421E/Downloads/coe_evidence_summary_ssris_v2%20(3).pdf (accessed 18 March 2019)

[3] Whitely M, (2011) Hansard Western Australian Parliament [Wednesday, 25 May 2011] p3984d - 3994a$FILE/A38+S1+20110525+p3984d-3994a.pdf accessed 11 February 2019

[4] Liberal Party of Australia, (2019) ‘Our Plan for youth mental health and suicide prevention’ Available at (accessed 28 May 2019)

[5] Professor Alison Yung, Medical Journal of Australia 21 May 2012 Is it appropriate to treat people at high-risk of psychosis before first onset — Yes Available at

[6] Professor David Castle, Medical Journal of Australia 21 May 2012 Is it appropriate to treat people at high-risk of psychosis before first onset — No Available at (accessed 6 June 2019)

[7] Sue Dunlevy ‘Schism opens over ills of the mind’ The Australian June 16, 2011.

[8] Including, Connecting, Contributing: A Blueprint to Transform Mental Health and Social Participation in Australia, March 2011. Prepared by the Independent Mental Health Reform Group: Monsignor David Cappo, Professor Patrick McGorry, Professor Ian Hickie, Sebastian Rosenberg, John Moran, Matthew Hamilton (accessed 26 April 2011)

[9] Jill Stark, (July 8, 2012) The Sunday Age, Youth mental health team too free with drugs: audit Available at (accessed 16 February 2019)

[10] Muir K, Powell A, Patulny R, Flaxman S, McDermott S, Oprea I, et al. Headspace Evaluation Report: Independent Evaluation of headspace: the National Youth Mental Health Foundation (SPRC Report 19/19). Sydney: Social Policy Research Centre (SPRC), UNSW, Australia; 2009. P. 125 Available at (accessed 6 June 2019)

[11] Hilferty F, Cassells R, Muir K, Duncan A, Christensen D, Mitrou F, et al. Is headspace making a difference to young people's lives? Final Report of the independent evaluation of the headspace program. (SPRC Report 08/2015). Sydney: Social Policy Research Centre, UNSW, Australia; 2015. Available at (accessed 6 June 2019)

[12] Jorm AF. How effective are 'headspace' youth mental health services? The Australian and New Zealand journal of psychiatry. 2015;49(10):861-2. P. 862


Copy of pages 978- 979 (Volume 2) of the Productivity Commission's Draft Mental Health Report relating to recommendation 24.2

24.2 Restrictions on regional funding pools

At present, about 40% of the PHNs’ Mental Health Flexible Funding Pool covers centralised commitments, with about 32% devoted to headspace (including the headspace youth early psychosis program) and about 8% devoted to mental health programs for Aboriginal and Torres Strait Islander people. The remaining 60% is allocated at the PHNs’ discretion (Primary Health Network Advisory Panel 2018).

If governments were to adopt the Rebuild model (chapter 23), these services would fall within RCAs’ scope. This approach of hypothecating some funding for certain purposes was initially implemented as a transitional mechanism to ensure service continuity, but there are indications that it is becoming a permanent fixture of the PHN mental health program.

The Australian Government’s response to the 2014 review of the National Mental Health Commission said that PHNs would be provided with a ‘flexible’ funding pool, and made no mention of a quarantining of funding for particular purposes (DoH 2015). The Department of Health’s subsequent guidance to PHNs on child and youth mental health services stated that PHNs would be required to maintain the existing headspace network only until 30 June 2018 as ‘[i]n the longer term, PHNs will have greater flexibility in meeting the needs of local young people with, or at risk of, mild to moderate mental illness’ (DoH nd, p. 3).

However, the Australian Government has since announced additional hypothecated funding to PHNs until 2025-26 for existing headspace services and 30 new headspace centres (Australian Government 2019d). While a decision to maintain the existing controls for a longer timeframe could be interpreted as a lengthening in the transition period, the commitments to new centres amount to a tacit policy change of recentralising some control of PHN primary mental health programs.

Is this hypothecated funding justified?

The Commission’s framework set out in section 23.3 suggests two possible grounds for centralising control of PHN funds. First, it could be the case that providing the centrally committed services in one PHN’s region is beneficial to another PHN’s region (this is called a positive ‘spillover’ or ‘externality’). While the PHN in question would have no reason to consider these spillover benefits in its planning, the Australian Government would. There may be some validity to this point in relation to headspace, by virtue of its use of branding.

A recent academic paper suggested that headspace’s value partially derived from its consistent national branding: Having a strong and consistent national brand that clearly identifies and promotes headspace centres is crucial, and something that is quite unique for a mental health service. The national brand and communication strategies, including national media, position headspace as the peak organization for youth mental healthcare across Australia. The brand has become a trusted and credible source of information and support that is highly visible and valued by young people, families and communities throughout Australia. (Rickwood et al. 2019, p. 164)

This branding effect could suggest that one PHN’s choice to fund a headspace centre increases the value of headspace centres in other PHN catchments by further promoting the headspace brand. But to the extent that the value of having a headspace centre in a given location derives from the national media attention afforded to headspace rather than people moving around and becoming familiar with centres in other parts of Australia, these spillovers may be modest.

A second potential justification for centralising control of some PHN funds is that Australian Government is privy to information about valuable ways to use this funding that the PHNs are not. PHN capabilities are certainly not perfect — a review by the PHN Advisory Panel on Mental Health noted that: Three years on from their establishment, stakeholder input to this review suggests significant variability between PHNs with respect to their organisational capability and capacity to implement mental health reform. Some PHNs demonstrate significant progress and achievements as change agents and system integrators while others evidence less readiness for these roles, with a commensurate diminution in their progress. (Primary Health Network Advisory Panel 2018, p. 4)

That said, the Commission has not been presented with any evidence that suggests that the Australian Government is better placed than PHNs to make decisions about whether to fund headspace centres. In any event, if the Australian Government has these concerns, it is not clear why they would apply to headspace and not the services that PHNs choose to commission.

Some exceptions in favour of hypothecation

One exception to the arguments above relates to mental health programs for Aboriginal and Torres Strait Islander people. The Australian Government may be justifiably concerned that some PHNs would lack adequate cultural understanding and awareness to commission these programs were they not required to do so. For this reason, the Commission sees merit in maintaining the hypothecation of funding for mental health programs for Aboriginal and Torres Strait Islander people.

Another exception arises if a PHN is provided additional funding to undertake a trial of a particular activity. The path forward In light of these considerations, the Commission considers that the Australian Government should immediately cease hypothecating portions of the PHNs’ Mental Health Flexible Funding Pool for headspace services (including the headspace youth early psychosis program).

It should be a decision for PHNs whether, and to what extent, to fund headspace centres in their region, in preference to other services. And, were governments to adopt the Rebuild model, there should be no requirement that RCAs commission headspace centres either.

In making this recommendation, we are cognisant that the control that headspace National exerts over headspace centres may limit the scope for PHNs to adapt headspace centres as they see fit. headspace operates through a franchise model — individual headspace centres are operated by independent organisations, while headspace National ensures adherence to the headspace model.

Meanwhile, for other PHN-commissioned services, PHN’s perform this quality assurance role. In the short term (in the next 2 years) The Department of Health should cease directing PHNs to fund headspace centres, including the headspace Youth Early Psychosis Program, and other specific service providers.

PHNs should be able to continue funding headspace services or redirect this funding to better meet the needs of their local areas as they see fit. In the medium term (over 2 – 5 years). There should be no requirements that commissioning agencies (RCAs or PHNs) have to fund particular service providers.

Recommendation 24.2

In the short term (in the next 2 years) the Department of Health should cease directing PHNs [Primary Health Networks] to fund headspace centres, including the headspace Youth Early Psychosis Program, and other specific service providers. PHNs should be able to continue funding headspace services or redirect this funding to better meet the needs of their local areas as they see fit. In the medium term (over 2–5 years) there should be no requirements that commissioning agencies (RCAs or PHNs) have to fund particular service providers.

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