Workers’ compensation blowout to $53bn hidden

EXCLUSIVE

By?JOHN FERGUSON , ASSOCIATE EDITOR

and?RACHEL BAXENDALE , VICTORIAN POLITICAL REPORTER

The Australian, NOVEMBER 15, 2023

Eye-watering?future liabilities? soaring above $53bn and wholesale flaws with the Victorian workers’ compensation scheme that would require further large taxpayer bailouts were concealed by the Labor government in the run-up to the last election, new documents reveal.

The Victorian government also suppressed crucial details of the financial sustainability review of its WorkSafe scheme when it released heavily redacted details of the problems on New Year’s Eve last year.

The?Finity Consulting report ?found WorkSafe’s net assets by June 30, 2030, could plunge to minus $22.7bn, with total liabilities of more than $53bn, on one published scenario. This is nearly double the posted total liabilities at June 30 this year.

The unredacted Finity investigation into?WorkSafe , seen by The Australian, shows the scheme could have collapsed without further taxpayer bailouts and policy interventions, which included huge premium increases and planned tightening of mental health provisions.

On this scenario, the scheme’s insurance funding ratio – the measure of assets against claims liabilities – would have crashed to 38 per cent compared with the December 2019 result of 147 per cent. The IFR at the end of June was 105 per cent, at the bottom end of the preferred range.

An IFR of below 100 per cent points to issues with the scheme.

Victorians already have spent $1.3bn on taxpayer bailouts in the past three years to keep the scheme afloat but there are concerns the costs could rise further, at the same time state debt has soared to historically high levels.

The documents, obtained by the opposition after an FoI court battle, show Labor knew when it went to the polls that business would have to be slugged with higher premiums.

Even when it?released the Finity report , the government culled extensive information detailing the parlous state of the scheme, leaving out a series of projections that pointed to liabilities leaping above $53bn, on one scenario.

“There is compelling evidence that without fundamental change the current premium charged to employers is inadequate and has been for some time,’’ the censored Finity report said.

“Claims and expenses are greater than revenue (premium collected plus investment revenue) and will not, without intervention, rebalance into equilibrium.”

The report, dated December 2020, proves that Labor knew it was on a troubled trajectory but held off on the toughest decisions until after last year’s election, with the government now fighting this week to get its reforms through the parliament.

These include tightening mental health provisions such as stress and burnout and making it harder for very long term claim recipients to receive money.

Liberal frontbencher David Davis fought the Victorian bureaucracy through the courts to receive the full report.

“Labor was warned again and again that its WorkSafe settings were completely and utterly unsustainable and that the scheme was careering out of control,’’ he said. “They chose incompetently not to act, ignoring the Finity Report which screamed out loud at the growing sustainability risk; instead, leaving injured employees at risk, employees to face massive hikes in worksafe rates and the state budget bleeding.’’

The government said the report redactions were made by the Department of Premier and Cabinet in line with legislation.

The redactions under freedom of information law were standard and related to Cabinet deliberations, internal working documents and personal affairs.

Victorian Chamber of Commerce and Industry chief executive Paul Guerra said business should not be forced to bear the brunt of the problems.

Premier Jacinta Allan said she expected Labor’s bill to reform the workers’ compensation bill to pass the Legislative Assembly, where it was being debated on Wednesday, and urged other parties to support its passage through the Legislative Council.

“We’ve put workers at the centre of these changes, because we know we need to make the system fit-for-purpose,” Ms Allan said.