A major change in the Australian residential aged care system has been the recent shift in emphasis away from the more intensive nursing home type care toward the less intensive hostel level of care. Under the Aged Care Reform Strategy, the benchmark for nursing home type care has been set at 40 beds per thousand persons aged 70 and over, and for hostel type care at 52.5 beds per thousand persons aged 70 and over, to be achieved by the year 2011. This paper presents projections of hostel and nursing home utilisation from 1993 to 2021, based on current age and sex specific utilisation rates, and compares them with projected levels of supply. The findings suggest that there may be a general shortage of residential care from the turn of the century. They also highlight a likely shortage of nursing home type care for high dependency aged persons, particularly in the period from 2006 to 2016.