Victoria’s $450m bailout for worker compo

Spiralling mental health costs have forced a $450m emergency payment to Victoria’s workers compensation scheme.

Victorian Premier Daniel Andrews on Wednesday. Picture: NCA NewsWire / Andrew Henshaw

Deep structural issues with mental health claims have fuelled a $450m Andrews government bailout of its embattled workers’ compensation scheme, which also has been undermined by volatility in international markets.

The government was forced to tip the money into WorkSafe after years of poor performance and growing uncertainty over the ­impact of mental health claims.

WorkSafe also has experienced a sharp increase in public administration and safety sector claims – up 17 per cent on last year – leading the body to work closely with Victoria Police and other government entities to improve return-to-work outcomes.

Mental injury issues accounted for 38 per cent of all public administration claims, a disproportionately high impact. Mental injury claims accounted for 15.1 per cent of new claims in 2021-22, up two percentage points from the previous year.

The $450m government “grant” is significantly higher than the $300m initial payment ­expected to be paid by the ­Andrews administration in the middle of this year.

The government has not ­increased workers’ compensation premiums in the run-up to the ­November 26 election, but will be under pressure to turn around the scheme’s fortunes.

A spokeswoman for Workplace Safety Minister Ingrid State said the scheme was showing signs of underlying improvement.

“Volatility in international markets has affected WorkSafe’s financial projections compared to last year – on top of the existing pressure from complex claims, ­especially for mental injuries,” she said.

“Despite this, WorkSafe’s ­annual report shows better-than-forecast financial performance, with a net profit after tax of $43m and the best half-year results for claims costs in six years.

 “We will continue to work with WorkSafe to ensure our WorkCover scheme remains sustainable and Victorian workers can get the help they need.”

Opposition Treasury spokesman David Davis said government bailouts were adding pressure on a budget that was carrying forecast debt of $167bn by 2025. “This just points to further pressure on the budget and further pressure on gross debt,” he said. “When will it all end?”

He said the $450m emergency payment had been the result of mismanagement and a failure to heed warnings.

WorkSafe management was so concerned about the scheme’s ­future it told the board last year that premium increases of 15 per cent were needed for last financial year, followed by 5 per cent in 2022-23, which would have savaged thousands of businesses battling the pandemic fallout. But the government ignored the advice and announced it would pump in close to $1bn, rather than head to an election hitting business with large premium increases.

“The WorkSafe scheme is facing the most significant threat to its long-term sustainability in more than 20 years,” the board was warned in February last year.

The management recommendation for premium ­increases came as the board also recommended higher costs to business to protect the scheme’s integrity.