Safety costs of harmonised laws revealed

The Regulatory Impact Statement (RIS) on Australia’s Work Health and Safety laws has been released and will be available through the Safe Work Australia website shortly (probably today given the media attention).  Much attention will be given to the cost estimates of the laws’ introduction but the 336-page RIS seen by SafetyAtWorkBlog  emphasises in the Executive Summary that

“While monetary values of impacts are estimated and an appropriate sensitivity analysis is undertaken, these results should be treated with some caution given the uncertainties associated with estimating changes in work health and safety benefits. Greater weight should be given to the general direction that the estimates suggest is the likely outcome from these reforms.”

This important point is likely to be lost in some of the expected argy-bargy over economic impacts and cost v benefit.

The core figures provided in the RIS are:

“While there will be one‐off implementation costs, the quantitative analysis undertaken at the national level for adopting the model WHS Regulations indicates net benefits (i.e. after implementation costs) of around $250 million per annum to the Australian economy over each of the next 10 years. This estimate does not include expected productivity benefits. While noting the difficulties in estimating the productivity benefit, a reasonable conclusion would be that the reforms will provide a positive and meaningful productivity benefit. Specific figures were excluded from the quantitative analysis largely due to the difficulties in providing a sufficiently robust estimate. Based on a review of the analysis in this RIS, productivity improvements in the order of $1.5 billion to $2 billion per annum over the next 10 years are considered likely.

Multi‐state businesses are expected to benefit from harmonisation by approximately $80 million per annum. They will gain both compliance costs savings and expected work health and safety outcomes over the next decade. While these businesses face initial adjustment costs, the compliance and safety benefits are expected to be considerably greater and this is before productivity benefits are even considered.

It is expected that single‐state firms and small businesses will face a net cost of $3.27 per worker per annum (or about $27 million per annum). This is clearly outweighed by the net benefit to society of $21.48 per worker per annum (or about $250 million per annum), before any productivity gains are taken into account.

Workers are not expected to face any initial adjustment costs as a result of the adoption of the model WHS Regulations and, like businesses, are expected to benefit from improved work health and safety outcomes.”

The RIS is about much more than cost and the whole document is worth careful reading.  For instance, the RIS includes

  • the results of a Deloitte Access Economics survey undertaken during the public comment phase.  The statistics and the comments are worth examining.
  • analysis by categories, such as falls, major hazards, electrical safety, risk management, construction induction training and first aid.

More comments on the RIS will be provided when SafetyAtWorkBlog has read more and when the document is officially released to the public

Kevin Jones

reservoir, victoria, australia

5 thoughts on “Safety costs of harmonised laws revealed”

  1. I\’ve spent a coupla hours dipping into what looked to me like the important bits of the WHS reg RIS, and I gotta say it don\’t add up. I\’d also say that the RIS does, in general terms, do what it should do, in terms of making the reasoning processes it uses relatively clear. The merit of the conclusions is up for debate of course, but at least the RIS seems to have made a fair fist of explaining how the conclusions were reached.

    For mine there are 2 key flaws.

    1. The options to the proposed reg (chapter 4 pg. 19) are just not sufficient. I don\’t think it\’s at all reasonable to provide 2 \”options\” which are: do nothing or make the regs. Roger, it might be reasonable to conclude that a big public consultation exercise has happened with the WHS Act, so why revisit a lot of other options? But the fact is the COAG RIS guidelines say a \”range of options\” should be included, and it\’s common practice in RISs to at least have a few genuine alternatives to consider………

    [The full comment is now an article by itself HERE]

  2. It\’s good to see real numbers associated with the \”cost of safety.\” Businesses may grumble about the cost of adopting more stringent safety measures, but isn\’t it worth it in the long run? What\’s a few extra dollars per employee if you can avoid major medical coverage bills and labor loss down the road.

  3. \”Revealed\”? The costs or savings should have been reasonably well understood when the first draft RIS came out. This is old new, served up as cover. Or did the draft RIS mislead the public and parliaments?

    1. Martin, I agree that the costs should come as no surprise but, as we have seen from recent media reports, there have been some who have suggested that the costs outweigh the benefits. Now the RIS is out (or soon out) it will be of interest to see if, and how, the doubters respond.

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