In early 2001, Australia experienced a sudden and dramatic reduction in the availability of heroin. Research examining the impact of the reduction on drug-related harms has yielded a conflicting picture. The current study uses data from a prospective cohort study of anti-HCV negative injecting drug users (IDU) (n=368) to examine patterns of injecting drug use, risk behaviours and HCV incidence before and after the reduction. The proportion of participants mainly injecting heroin declined sharply from 74% to 47% after the onset of the reduction and continued throughout 2001. There was marked shift to other drugs, mainly cocaine and amphetamine. Cocaine injectors had the highest risk profile and the highest incidence of HCV (82.6 per 100 person years, 95% CI 52.0-131.0). While HCV seroconversions increased by year, this increase was not statistically significant. We observed a reduction in heroin injection and a concomitant increase in cocaine injection and a significant association between cocaine injection and incident HCV infection during a period of reduced heroin availability. Results suggest that attempts to suppress drug markets by manipulating availability may result in collateral damage in the form of drug-related harms, indicating a need for more sophisticated understandings of the potential trade-offs involved in attempting to suppress the supply of illicit drugs.