This is a study on the operating efficiency of the public library system in Australia. Cost functions have been fitted to library data and the results are interpreted with a view to generating insights into the functioning of the existing library system. An exploratory cost benefit analysis has also been attempted. Activities of libraries have been sample surveyed with the objective of providing information for rationalization and regionalization of Australian public libraries. Policy implications and avenues for further research based on the study are presented. Appendices include an explanation of some limitations of the collected data, means and standard deviations of cost and output data for each library surveyed, copy of the survey form, and cost data for various library operations. (Author/JPF)