Arthritis and musculoskeletal conditions may not be a large cause of mortality but are significant contributors to morbidity and disability in Australia. They are highly prevalent, particularly among those aged 65 or over. Their treatment and management have considerable costs and the health care required is different from other major health conditions. In Australia, the direct health expenditure for arthritis and musculoskeletal conditions exceeded $4.6b in 2000-01, ranking third below cardiovascular diseases and neurological disorders. Much of the expenditure was on health care in community settings. Expenditures on the use of pharmaceuticals and procedures are also on the rise. This bulletin details these expenditures, with emphasis on osteoarthritis, rheumatoid arthritis, osteoporosis, back pain and other rheumatic disorders. Various health sectors in which the monies are spent are also described.