This paper reports the costs of providing a new model of maternity care compared to standard care in anAustralian public hospital. The mean cost of providing care per woman was lower in the group who had the newmodel of care compared with standard care ($2 579 versus $3 483). Cost savings associated with new model of carewere maintained even after costs associated with admission to special care nursery were excluded. The cost saving wasalso sustained even when the caesarean section rate in the new model of care increased to beyond that of the standardcare group.