Around Christmas 2000, heroin users in Sydney and other large capital cities in Australia began reporting significant shortages in the availability of heroin. Initial research conducted by the National Drug and Alcohol Research Centre early in 2001 confirmed the existence of the heroin ‘drought’ in one major heroin market. This bulletin presents the results of a more detailed study into the scale and effects of the Australian heroin drought on heroin use, heroin expenditure, heroin overdose, entry into methadone treatment, use of other illicit drugs and crime. The study results indicate that the heroin drought in NSW has led to sharp falls in heroin use, expenditure on heroin and the number of heroin overdoses. The drought also appears to have prompted some heroin users to seek methadone treatment and others to consume more of other drugs, such as cocaine. No lasting effects of the drought on heroin-related property crime have been observed.