We employ the Phillips and Sul (Econometrica 75(6):1771–1855, 2007) methodology to test for the convergence of healthcare expenditure across Australian states and territories. We utilise a nonlinear model that allows for heterogeneity and transitional dynamics and consider the convergence patterns of total, government and non-government healthcare expenditures. The results display varying degrees of convergence, specifically in government and non-government expenditures. The formation of convergence and non-convergence clusters suggests that health policies need not be uniform across all Australian states and territories but within convergent clubs. As a result, healthcare policies need to be implemented at the state level rather than at the national level.