About 120,000 people in the Hunter region live with "high levels of psychological distress", a new mental health report shows.
Furthermore, about 18,000 people in the region aged 25 to 64 live with a severe mental illness.
The data emerged with the release of a NSW government gap analysis that found people were "experiencing increasing levels of mental health issues".
The gap analysis found there was a "missing middle" in the state's mental health system.
Affected people had "significant difficulties accessing mental health services, driving them to use emergency and acute services due to a lack of alternatives".
"This places additional pressure on the already overburdened ED (emergency department) system," it said.
More than 10,000 people are now being turned away from emergency departments annually for mental health issues in the Hunter New England and Central Coast health network.
GPs are also experiencing a rise in mental health cases, adding to the pressure on the primary care system.
Royal Australian College of General Practitioners president Nicole Higgins said "Australia has an epidemic of chronic disease and mental illness, which means increasing demand for GP care".
Fiona Van Leeuwen, chair of the Hunter General Practitioners Association, said "there's been a rise in people presenting stating they have mental health issues".
"There's been so much in the media about mental health issues, so people feel more confident and empowered to raise these kinds of things," she said.
But she raised concerns that GPs had to refer patients to psychiatrists outside the region due to a shortfall.
"You can't get an appointment with a psychiatrist in Newcastle. That's a dreadful situation," she said.
The gap analysis found that 17 per cent of adults had high levels of psychological distress, and 41 per cent of people aged 16 to 85 had experienced a mental disorder in their lifetime.
About 2.6 per cent of people aged between 25 to 64 had "some form of severe mental illness requiring care".
The gap analysis showed 58,000 people a year in this category were missing out on care, but the "level of under-servicing of those who require mental health services may even be greater".
This was because the figure did not include "younger and older age groups, nor individuals with moderate mental illness".
The gap analysis pinpointed four areas for reform: funding for community mental health services, workforce and training, improving emergency mental health care and the expansion of "psychosocial support".
NSW Mental Health Minister Rose Jackson said the gap analysis suggested that "our mental health system is experiencing significant challenges in meeting increasing service demand".
"We know we need to do more when it comes to protecting the mental health of our people in NSW."
She said the next stage of the gap analysis report was "expected to be published by the end of this year".
"It will provide a full picture of what is required to bridge the gaps of the mental health system - including staffing, infrastructure and investment."
