Health services are not equipped to treat the "toxic blend" of mental illness and substance abuse, experts say, with a new report finding one in four users of illicit drugs have a mental illness.

Key points: 27pc of illicit drug users have a mental illness

27pc of illicit drug users have a mental illness That climbs to 42pc cent among methamphetamine users

That climbs to 42pc cent among methamphetamine users Overall, one in six people said they had a mental illness

Overall, one in six people said they had a mental illness Mental illness and psychological distress has also gone up in people drinking alcohol at risky levels

That figure is up nearly 30 per cent in three years, and compares to about one in six in the broader population who have a mental illness, according to the Australian Institute of Health and Welfare's 2016 national survey.

Sixteen per cent of total survey respondents said they had been diagnosed or treated for depression, anxiety, schizophrenia, bipolar disorder, eating disorder or psychosis, up from 14 per cent in 2013.

Huge rise in mental illness for meth users

Mental illness occurred in one in four ecstasy and cocaine users but is far higher still among methamphetamine users — above 40 per cent.

Around one in five people who drank alcohol at risky levels had been diagnosed or treated for a mental illness, a 25 per cent increase in three years.

A vicious cycle of self-medication

Patrick McGorry, professor of psychiatry at the University of Melbourne and former Australian of the year, said the overlap between mental ill health and substance abuse was enormous and yet treatment for drug and alcohol problems had been "progressively defunded, demedicalised and split off" from mental health care.

"Mental ill health drives self-medication with drugs and alcohol and yet virtually no services are equipped to respond to this toxic blend," he said.

Respondents to the AIHW survey said money should be taken from law enforcement and allocated to drug education and treatment programs.

Frances Kay-Lambkin, director of the mental health and substance abuse centre at The University of Newcastle, said the results were a genuine concern.

"Distress, mental health symptoms and mental illness are often linked in a vicious cycle with alcohol and other drug use," she said.

"We do not always know what has come first. As these new data show, often it can be a bit of chicken-and-egg."

Professor Kay-Lambkin said people with mental illness who used drugs and alcohol were often too ashamed to get help, sometimes waiting up to 18 years after the disorder developed.

Psychological distress also on the rise

The report showed 12 per cent of survey respondents experienced high or very high levels of psychological distress, up from 10 per cent in 2013.

One in five illicit drug users said they had high or very high levels of psychological distress.

Psychological distress was measured with a series of questions commonly used by doctors to diagnose depression and anxiety.

Not a new problem

As far back as 2002, the first National Mental Health Plan identified that dual diagnosis treatment of mental illness and substance abuse was the exception rather than the rule.

Melbourne has four dual diagnosis centres to concurrently treat substance abuse and mental illness and there is one centre in Sydney.

"They provide an invaluable service caring for people who are tackling complex issues of mental illness and addiction and provide the best possible chance at recovery by treating mental health and substance issues side by side," a spokesperson for Jill Hennessy, the Acting Victorian Minister for Health, told ABC News.