Objective:To determine the economic cost of asthma to the New South Wales community.Design:Direct costs (both health‐care and non‐health‐care) plus indirect costs (loss of productivity) were estimated from various sources to assess retrospectively the dollar costs of asthma. Intangible costs (such as quality of life) were not included.Setting:Estimates of costs were made at all levels of medical care of asthma patients, including inpatient and outpatient hospitalisations, emergency department visits, and visits to general practitioners and specialist physicians, plus costs of pharmaceuticals, nebulisers and home peak‐flow monitoring devices. The cost of time lost by the patient attending for medical visits and loss of productivity due to absence from employment as a result of asthma were also included.Results:The total cost of asthma in New South Wales was $209 million in 1989. This was made up of $142 million in direct health‐care costs, $19 million in direct non‐health‐care costs and $48 million in indirect costs.Conclusion:Although we believe that our estimate is an underestimate of the true dollar cost of this disease to the community, it represents $769 per asthmatic person per year, assuming a current prevalence rate for asthma in New South Wales of 6%. The cost effectiveness of any new treatment of asthma should be estimated to ensure that the economic cost to the community does not rise unnecessarily.