With the rapid ageing of the Australian population, dementia has emerged as a major health and economic challenge. Consensus exists that the number of people with dementia will grow significantly because the prevalence is strongly correlated with age. However, there are substantial gaps in our understanding of the impacts on the dementia "epidemic" of changes in non-demographic risk factors and of our knowledge of the economic implications. Only a few prevalence-based studies have been conducted to examine the health economics of dementia in Australia. These studies have suggested that considerable resources are absorbed by dementia care, yet there is a lack of integrated models that simultaneously explore epidemiologic and economic perspectives incorporating the impact of preventive and early intervention initiatives. This study reviews the current evidence on the economic implications of dementia in Australia and approaches taken to project the future costs of dementia.