The incremental costs and effects of annual faecal occult blood test screening in Australia were modelled for a hypothetical cohort of 1000 persons offered screening or not offered screening. Incremental costs and effects were estimated as the differences in direct health care costs (Australian costs) and years of life remaining between the annual-screen group and the control (no screen) group, based on the published results of the Minnesota randomised controlled trial. The cost per life year saved was $24,660. The greatest source of variability in the cost-effectiveness ratio is the effectiveness of screening. The 95 percent confidence interval for cumulative mortality in the annual-screen group is 3.86 to 7.9 per 1000, assuming the control rate is fixed at 8.83 per 1000. With this confidence interval, the cost per life year saved ranges from $12,695 to $67,848. The cost-effectiveness ratio increases to $48,000 if no mortality benefit is assumed beyond the end of the trial follow-up period, 13 years. The results are sensitive to the cost of colonoscopy (at $400 per colonoscopy, the cost per life year saved is $12,319) and the false-positive rate. The cost-effectiveness of colorectal cancer screening is comparable with that of other screening programs but further evidence is needed on the efficacy of screening. Whether the benefits of colorectal cancer screening outweigh the harm and costs needs to be more certain before more resources are committed to mass screening. Health policy planners should initiate planning for Australian pilot projects in the event that the efficacy of screening is confirmed by two current studies.