Australian aged care services have undergone a series of substantial reforms in recent years under the rubric of the Aged Care Reform Strategy. Overall, there has been a progressive refinement of the targeting of available services on those most in need, defined in terms of both disability levels and financial resources. A key component of this process has been a deliberate reduction in the relative emphasis accorded to nursing home care within the aged care system. This has been accompanied by increases in the resources directed toward less intensive forms of residential care (hostels) and community based services. This paper explores the actual consequences of these intentional policy changes in terms of the availability of nursing home and hostel care, and the changing characteristics of nursing home residents. The results suggest that a more substantial reduction has occurred in the availability of nursing home care than has hitherto been suggested, with consequent decreases in the proportion of aged persons in nursing homes. The effect has been particularly marked amongst women and the very old. These findings raise policy questions about the appropriateness of current and planned future levels of provision.