Govt looks to 'moderate' workers' compensation cost blowout

The mid-year budget update, released on Wednesday, shows workers' compensation premiums and claims will cost the government $7.9 billion this financial year, revised up from the $5.5 billion that was forecast in the March budget.

In 2028-29, the government expects to spend $9.6 billion on workers' compensation among its workforce, a 70 per cent increase on what was forecast in the budget.

Finance and Public Service Minister Katy Gallagher said she had spent some time looking at the figures and would continue to investigate them in the lead-up to next year's budget.

"This is another one of those programs where you see it start to increase faster than you'd like," she said.

"We need to go back and have a look at what's happening and look at how we moderate some of that, including what's happening to staff to see these claims increase."

The claims were largely linked to increased claims of "psychological disease", Senator Gallagher said.

"So we need to do more work on this," she said.

A disease claim is different to an injury claim and is defined by Comcare as an ailment that was contributed to, to a significant degree, by the person's employment.

The mid-year economic and fiscal outlook (MYEFO) also included revisions to the cost of wages and salaries, leave and superannuation.

The government expects to spend $31.1 billion on wages and salaries this financial year, revised up from $30.5 billion forecast in the March budget. Wage costs are expected to dip just under $30 billion next financial year, and stay relatively flat into 2028-29.

Superannuation costs are expected to hit $24.2 billion this financial year, above what was forecast in March, but have been revised down marginally over the forward years.

Asked whether the public service workforce would need to shrink in order to keep costs like compensation payouts under control, Senator Gallagher said the costs were part of meeting employee expenses.

"This is one of those pressures that the budget has to deal with; it's not linked to [average staffing levels]," she said.

Comcare noted in its annual report that continued increases in psychological disease claim frequency and associated administration expenses were putting upward pressure on the average premium rate that Commonwealth agencies were required to pay.

In December, the Albanese government released a long-awaited review of the Safety Rehabilitation and Compensation Scheme Act, which underpins the Comcare scheme.

The review included 141 recommendations and called for a sweeping overhaul of the scheme that has long been criticised for being overly complex and psychologically harmful to litigants.