Australia's National Immunisation Program (NIP) provides free influenza vaccination for children at high risk of severe influenza; a pilot-funded programme for vaccine in all children aged 6 months to <5 years in one of eight states, has seen poor vaccine impact, related to recent vaccine safety concerns. This retrospective review examined influenza hospitalizations in children aged <16 years from three seasons (2011–2013) at two paediatric hospitals on opposite sides of the country. Comparisons of this cohort were made with state-based data on influenza-coded hospitalizations and national immunization register data on population-level immunization coverage. Of 740 hospitalizations, the majority were aged <5 years (476/740, 64%), and a substantial proportion (57%) involved healthy children, not currently funded for influenza vaccine. Intensive care unit admission occurred in 8·5%, and 1·5% of all children developed encephalitis. Use of antiviral therapy was uncommon (20·5%) and decreasing. Of those hospitalized, only 5·0% of at-risk children, who are currently eligible for free vaccine, and 0·7% of healthy children were vaccinated prior to hospitalization. This was consistent with low population-wide estimates of influenza vaccine uptake. It highlights the need to examine alternative strategies, such as universally funded paediatric influenza vaccination, to address disease burden in Australian children.