This study investigates the impact on human resource management (HRM) practices in the public health sector in Victoria, Australia of two different government policy environments. First, it explores the Liberal Coalition Government's decentralisation of public health sector management, from 1992-1999 and second, the Labor Government's recentralisation of employment relations in the sector. This paper focuses on three dimensions. First, it outlines the main policy directions impacting on people management in the health care sector under the different governments. Second, it explores the impact of these policy directions on HRM. Third, it discusses the implications for future directions of the practice of HRM in the public hospital sector.