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High workers compensation premiums are holding back the NSW economy

High workers compensation premiums are holding back the NSW economy

Extract from speech NSW Premier Barry O’Farrell delivered to a NSW Business Chamber, Sydney Business Chamber and Business Council of Australia luncheon marking his first anniversary in office.

To get our economy growing, we must make NSW competitive within Australia, and in a global context. 

If you were to receive a report that said that a government entity had a deficit of more than $4 billion, that this deterioration had started four years ago, and that it had increased by $1.7 billion in six months, you would take immediate action to get it under control.

The Government has received an actuarial report by Pricewaterhouse Coopers, into the outstanding claims liability under the WorkCover scheme.

The $4 billion deficit equates to more than $15,100 per employer, and more than $1,300 for every worker.

Growth in the scheme deficit from June to December 2011 cost NSW more than $9 million per day.

Premiums paid by NSW employers are already estimated to be between 20 and 60 per cent higher than equivalent employers in our competitor states.

Under present projections, the scheme would not return to surplus within 10 years, and to return it to full funding within five years would require premiums to rise by around 28%.

To help you put this into perspective let me use a few examples: 

A NSW residential construction company paying around $250,000 in annual wages has a base premium of $12,600.

If we do nothing;

this employer’s premium will go up by $3,500 to more than $16,000 – a premium around 6 times higher than that of a similar company in Victoria (who pays around $2,600), and a similar Brisbane firm (who pays $7,000). 

A NSW café with 11 staff pays a base premium of over $8,600. 

If we do nothing;

this café’s premium will increase by more than $ 2400 to over $11,000 - more than double its Queensland counterpart (who pays around $4,000), and five times more than a similar Victorian company (who would pay around $2,000).

And if that isn’t enough to concern any employer, another example: 

A cleaning company paying around $150,000 in annual wages has a NSW base premium of $10,700. 

If we do nothing;

this employer’s premium will increase by around $3000 to $13,700 - more than double its Queensland counterpart (who pays around $4,900), and three times what a similar Victorian company would currently pay (which is around $3,700).

There was no leadership by the former government to rein in spiralling scheme costs, produce better outcomes for injured workers, and a competitive deal for employers. 

Labor saw NSW employers as a bottomless pit of cash, and operated WorkCover on a ‘cost-plus’ basis – ignoring the professional skills of good people who tried to fix a broken system.

The PWC report makes clear that if no action is taken, the scheme will rapidly and dramatically worsen.

It also warns that even while reforms are implemented, the scheme performance will likely get worse before it gets better.

Getting WorkCover right - and competitive - represents one of the most significant drivers of economic improvement within our control in NSW.

And we are committed to starting this second year of change in NSW with a process to repair this broken system, to:

  • ensure that injured workers get the best possible and most timely result in returning them to a productive and appropriate working life, and
  • to make sure that individuals with catastrophic injury are looked after in the way that any of us would want to see our loved ones cared for. 

The Government is now considering these issues – including the projected $4 billion deficit, and its consequences for management and policy.

We are aware that schemes in other states strike a better balance between looking after injured people, promoting incentives for safe workplaces, and setting competitive premium rates, and we will be working closely with employers, peak groups, individuals and employee representatives in long overdue reforms to the WorkCover scheme.

Posted: 26/03/2012 3:08:27 PM by | with 0 comments
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