Australia’s mental health could be the key to our productivity push
8 min read
As the dust settles on the federal government’s Economic Reform Roundtable, productivity has been the buzzword of the week. But why has the mental health of our workforce not been given more focus in our push for better productivity?
The roundtable discussions earlier this week brought together economists, business leaders and policymakers, to tackle Australia’s falling productivity levels which are lagging behind comparable countries.
The agenda ranged from digital transformation using AI, to reducing regulations, and tax reform. But despite mounting evidence that poor mental health is costing Australian businesses billions in lost productivity, mental wellbeing barely got a mention.
The $11.5 billion blind spot for businesses
A recent study of small and medium-sized businesses by Peninsula Australia, found that mental health challenges among staff are costing employers $11.5 billion annually in lost productivity.
This is due to the costs related to staff turnover, absenteeism and presenteeism (when staff turn up to work but are unable to perform their jobs effectively, due to burn-out or mental ill-health).
The report found that 51% of Australian employers have noticed more staff struggling with their mental health in the last 12 months, yet formal support systems for staff are still provided inconsistently.
Meanwhile, for other Australians with mental health challenges, the severity and ongoing nature of their mental ill-health, as well as the lack of adequate and accessible support, is leading them to leave the workforce altogether.
Mental health claims crippling the insurance industry
According to data from the Council of Australian Life Insurers (CALI), mental ill-health is now the leading cause of temporary and permanent disability among workers aged under 30.
Since 2013, the industry has seen a 732 per cent increase in these types of temporary and permanent disability (TPD) claims due to mental ill-health.
So, what does this mean for the individuals involved in these claims? That their mental health challenge has become so severe that employment is no longer tenable, leading them to file a claim for a one-off life insurance payout, citing total and permanent disability.
In terms of productivity, the loss of potential hours over the lifetime of the claimants is significant, especially when the majority are young Australians with decades of working life ahead of them.
But while the enormous increase in mental health claims is crippling the insurance industry (to the tune of 2.2 billion in 2024 alone), one cannot dismiss the level of distress that the claimants themselves must be experiencing, to lead them to permanently leave the workforce.
Overall, the recent increase in TPD claims paints a worrying picture of the lack of mental health support available, to prevent people’s mental ill-health from worsening to the point that entire aspects of their lives become unmanageable.
Most concerningly, however, this trend also speaks to the claimants’ expectations for long-term recovery.
Never say never: Supported employment as a possible solution
Considering that employment is a crucial part of mental wellbeing (what’s known as a social determinant for health), there’s a chance that permanently leaving the workforce can in itself, contribute to the claimants’ mental ill-health worsening over time.
Adding to this, is the fact that claims generally take more than 12 months to be granted, and the one-off payouts are often not significant enough to provide long-term financial security, so future financial challenges and stress can also become a problem.
But there are ways to support people that can potentially prevent them from reaching the point of making a claim.
The internationally recognised Individual Placement and Support (IPS) program, which sees employment embedded in an individual’s mental health recovery plan, is one possible solution.
In practice, the program connects individuals who are receiving support for a mental health challenge with an IPS Employment Specialist, who supports them to retain their job or find a new position, given their unique challenges and situation.
This program - which WAAMH supports in more than 60 sites across Australia - is based on the idea that with the right supports, anyone can gain or retain meaningful paid employment.
IPS is backed by evidence from more than 28 randomised controlled trials and is twice as effective as other supported employment models.
It’s been shown to provide participants not just with a source of income, but increased access to social networks and community participation, a sense of purpose and improved self-esteem, and opportunities to acquire new skills.
The human cost of productivity
Five years ago, a Productivity Commission inquiry estimated that mental ill-health was costing Australia’s economy a staggering $220 billion a year. With the recent data from the insurance sector, it seems the problem may be worsening.
So, perhaps in this week’s discussions of productivity, more focus should have been placed on the mental health and wellbeing of Australia’s workforce, and the potential preventative measures that could be found to make it adaptable and sustainable for the future.
This was the call from both the insurance industry, led by CALI, and national mental health bodies. But once again, the government seemed to view the issue of mental health more as a cost, rather than an opportunity to find savings through increased productivity.
Afterall, productivity isn’t just about output, it’s about people, and focusing solely on short-term solutions – like reducing approvals for regulations – doesn’t cut to the heart of the issue.
Building and maintaining a mentally healthy, supported workforce has benefits for the economy, businesses and individual Australians alike.
Mental health could just be the missing link in our push for better productivity.
Find out more about the Individual Placement and Support program in Australia, which WAAMH’s IPS Works team supports through accredited training and fidelity reviews.