Veterans’ claims add $1.8 billion, driving budget further into red

The federal budget has taken a $1.8 billion hit as a huge backlog of claims for assistance from the nation’s defence veterans is finally cleared, and money flows to tens of thousands of people with multiple physical and mental health problems.

This week’s mid-year budget update from Treasurer Jim Chalmers will show one of the biggest cost blowouts is due to faster processing of veterans claims that were left by the Morrison government in 2022.

Faster-than-expected payments to the nation’s veterans will add $3.5 billion to the budget bottom-line.Credit: AAP

The extra $1.8 billion over the next four years is on top of $6.5 billion that Chalmers revealed in the May budget as public servants dealt with a backlog of claims that at one point reached more than 66,000 people.

Despite recording a $15.8 billion surplus in 2023-24, Chalmers forecast a deficit of $28.3 billion for the current financial year. He is expected to confirm a major deterioration in the budget bottom-line due to a drop in company tax collections and a lift in government costs.

Some economists believe the deficit could be more than $42 billion, which would be the sixth-largest deficit on record.

The extra payments to veterans are due to both the faster processing of claims and an increase in the number of veterans – many from the wars in Afghanistan and Iraq – presenting with multiple health issues.

The health problems include tinnitus, hearing loss, post-traumatic stress disorder, degenerative back injuries, depression, alcohol and drug abuse and anxiety.

In 2021-22, each veteran’s assistance claim covered an average of 2.7 health issues. From July to November this year, the average was 4.6.

In 2021-22, there were 53,508 compensation claims determined by the Veterans’ Affairs Department, but the backlog of claims that had not even been examined stood at 66,000.

The lag was a major complaint from veterans, who coined the term “delay, deny, die” to describe the system, with the government accused of delaying the start of processing a claim, then denying the initial claim, with the veteran likely to have died before they are finally paid what they are owed.

Chalmers used his October 2022 budget to fund an extra 500 staff, supplementing that with money for an additional 141 public servants in this year’s budget.

The surge in staff has meant that in the last financial year, the backlog was cleared, and compensation claims reached 100,697. Between July and November this financial year, 42,272 claims were determined.

Chalmers said the government was doing the right thing by the nation’s veterans.

“Supporting those who served our country is our responsibility. We’re paying veterans what they’re entitled to,” he said.

“The Liberals think supporting our veterans is ‘wasteful spending’, but we don’t.”

Treasurer Jim Chalmers is expected to confirm a larger-than-expected budget deficit this week.Credit: Alex Ellinghausen

The Coalition has lambasted the government for a blowout in the number of public servants, signalling plans to go to next year’s election promising a deep cut in the public service.

But the final report of the Royal Commission into Defence and Veteran Suicide, published in September, found the Veterans Affairs’ Department had been “insufficiently resourced to process claims in a timely manner”.

“While the number of claims lodged has increased substantially in recent years, this was not
matched with a commensurate increase in departmental funding and claims processing staff on hand, contributing to a large backlog of unassessed claims and unacceptably long processing times,” it found.

The commission noted the recent improvement in claims assessment, which had cleared the huge backlog left by the Morrison government, was due in part to extra staff, but warned that demand from veterans would continue and require more resources.

It said changes – including faster processing, expanded support for those who are medically discharged from the defence services, and ongoing funding so that people could access provisional medical treatment – were all needed.

“These reforms would directly improve client experiences and address some risk factors for worsening mental health and suicide,” it found.

Last week, Chalmers revealed the budget update would include almost $2 billion in extra spending for natural disasters that have occurred since May.

These include substantial flood and storm damage across Tasmania and through central Queensland in August, similar incidents in northern NSW in September and substantial storms that hit much of Victoria through October.

This is on top of an extra $3.9 billion on disaster relief that was confirmed in the May budget due to higher-than-expected spending on events dating back to the devastating northern NSW and southern Queensland floods of early 2021 and Tropical Cyclone Jasper, which caused enormous flood damage across far north Queensland in late 2023.

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