Developing from the practices of 19th-century asylum-based medical practitioners known as alienists, psychiatry transformed itself by the second half of the 20th century into a specialty operating from many more places and equally concerned with temporarily disturbed 'normal' people as with individuals with intractable conditions or intellectual disability.
Detached from medicine's main currents and remote from the community gaze, asylum physicians mainly supervised large custodial government-owned and operated institutions, including Yarra Bend Asylum, the Kew Asylum and the Kew Cottages. Before World War I recovery rates of patients in the asylums hovered around 20-30%, a low figure compared with other states, which Dr W. Ernest Jones, head of Victoria's mental health services from 1905 to 1937, blamed largely on the failure to obtain early treatment for 'delusions and bad habits' and the dumping of aged relatives by work-focused younger generations.
Efforts to reduce stigma and segregation in mental health included the renaming of asylums as hospitals for the insane (in 1905), the establishment of receiving houses, providing early treatment without prior certification (from 1907 at Royal Park and from 1911 at Ballarat), the development of psychiatric outpatient clinics in public hospitals (from 1911) and legislation enabling mentally ill patients to enter hospitals for the insane at their own request (in 1914).
The return of emotionally disturbed World War I casualties stimulated a broad rethink of the distinction between the mentally normal and abnormal. Further reassessment occurred with population-wide intelligence testing, enthusiastically embraced by influential professionals as a way of increasing Australia's social and economic efficiency.
Optimism about psychiatry's power to ameliorate serious mental illness was generated by psychodynamic therapies relying on communication to promote self-understanding and expressions of pent-up emotions, together with a wave of treatments such as electroconvulsive therapy (ECT), psychosurgery and insulin coma therapy. Lithium, about which Melbourne psychiatrist Dr John Cade published pioneering insights in 1949, helped to kick-start the modern era of psychopharmacology and remains a mainstay of treatment today. Cade later commented that psychiatric thought was permeating the whole study of medicine.
Community involvement in Victoria's mental health service reached unprecedented levels with encouragement from Dr Eric Cunningham Dax, Chairman of the Mental Hygiene Authority from 1952 to 1967. The development of the Mental Hospitals Auxiliary (originally established 1933) exemplified the growing importance of the non-government sector in mental health care, and additional medical and social therapies helped to improve symptoms: for example, the use of tranquillisers produced behavioural and mood changes in patients, such that staff relied less on seclusion and restraint and more on activities such as occupational therapy. Increased opportunities to consult psychiatrists in community settings, the emergence of prevention-oriented community mental health services, and disenchantment with institutional care reduced the number of large government institutions, many of which closed after the mid-1960s. Meanwhile, psychiatrists had organised themselves into a professional organisation at a meeting in Melbourne in 1946, forming the Australian and New Zealand College of Psychiatrists in 1964, acquiring the prefix 'Royal' in 1978. In the late 1960s the college began to take a more active role in public affairs, during the next three decades examining controversial social and ethical issues such as abortion, homosexuality, firearms usage, Aboriginal deaths in custody, in-vitro fertilisation, the relationship of the pharmaceutical industry to psychiatric practice, harm-minimisation strategies for drug abusers and the situation of single-parent families.