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Wednesday, 30 October 1974
Page: 2143

Senator WHEELDON (Western AustraliaMinister for Repatriation and Compensation)

That the Bill be now read a second time.

The National Compensation Bill 1974 will provide the framework for the compensation aspects of the report of the Committee of Inquiry into Compensation and Rehabilitation in Australia. I tabled Volume 1 of that report, dealing with compensation, on 10 July 1974 and Volume 2, dealing with rehabilitation and safety, on 26 September. Volume 3, the Compendium, was tabled on 17 October. I repeat what I have said outside the Senate on previous ocasions, namely that, so far as the total report is concerned, the Government places primary emphasis on the matters contained in Volume 2, namely, safety and rehabilitation, rather than compensation, which is dealt with in Volume 1 , and is the subject of the present Bill.

I should like to pay tribute to the work of the Chairman of the Committee of Inquiry, the Right Honourable Sir Owen Woodhouse, D.S.C., of the New Zealand Court of Appeal, and to his learned colleague, the Honourable Mr Justice C. L. D. Meares, of the Supreme Court of New South Wales, who is also Chairman of the New South Wales Law Reform Commission. These gentlemen have performed a most admirable task and presented to the Government a scholarly and challenging report for which we are in their debt. The Government is grateful for the co-operation and assistance of the Governments of New Zealand and the State of New South Wales in making available their services.

The Bill now before the Senate introduces a social measure of great significance. This Bill is based upon the draft Bill contained in Volume 1 of the Committee's report, with some amendments resulting from the Government's examination of the report, and from consideration of representations already received. Further amendments were introduced by the Government in the House of Representatives to give effect to the principles outlined in the report and to meet further representations made. I emphasise that, while the Government has adopted the measure in principle, it is not irrevocably committed to every detail of it. As I have already pointed out, we have made amendments to the Bill as the result of representations received and we remain open to consider further amendments in the light of representations, both now and in the period between the enactment of the Bill and the coming into operation of the scheme. The Government sees this measure as being of such importance to the Australian community that we have welcomed any views which any person or organisation, including representatives of the insurance industry, women's organisations, trade unions, and of course the Opposition parties in this Parliament, wish to place before us.

The Bill provides for earnings-related compensation to all people incapacitated as a result of injury or sickness and to the dependants of deceased persons. The scheme envisaged in the report of the Committee embraces injury, congenital disability and sickness. The Government, at this stage, cannot see its way clear, much as it would like to see this done, to the immediate implementation of the whole scheme and has decided that it should be introduced in 4 stages. The draft Bill has been amended accordingly.

Stage one, which will extend to personal injury and congenital disability occurring on or after 1 July 1976, will come into operation on that date. The Government sees the period between now and 1 July 1976 as being necessary to phase out existing systems, allow the insurance industry to make adjustments, and enable the Government to prepare the administrative machinery to implement the scheme. Stage two, which will extend to personal injury and congenital disability occurring before 1 July 1976, will come into operation on a date to be proclaimed. Stage three, which will come into operation on a date to be proclaimed, not earlier than 1 July 1979, will extend to sickness occurring on or after that proclaimed date. Stage four, which will extend to sickness occurring before the date proclaimed for stage three, will come into operation on a date to be proclaimed.

As honourable senators will see, this is a longterm program. An initial waiting period of 18 months between the enactment of the legislation and the coming into operation of the scheme was recommended by the Committee. The operation of the first stage of the scheme will be closely watched, and decisions to implement the ensuing stages will be taken in the light of experience and the economic and other circumstances existing from time to time. It would not be possible for me, in the short time available, to explain all the implications of the scheme. I have arranged for the printing of an explanatory memorandum on the scheme and on the details of the Bill. This will be distributed to all honourable senators.

Honourable senators will note that entitlement to benefits under the scheme replaces the present remedies for personal injuries at common law and under workers' compensation legislation. These remedies have an important place in the history of social justice, but they are both inadequate and unnecessarily expensive. These issues are well explained in Volume 1 of the report of the Committee. With the discontinuance of common law and workers' compensation remedies, the need for compulsory insurance in the motor vehicle third party and workers' compensation fields disappears. As honourable senators are aware, experience in these areas over the last 10 years or more has shown the need for the type of drastic re-thinking which has led to the development of this scheme. This is a measure which is designed to replace what we have now. This is a new scheme. It brings a fresh approach to compensation. It more efficiently, cheaply, and justly provides that compensation for the injured, sick and disabled, towards which those jurists who built our present system of common law remedies, were striving. It is interesting and relevant to note that both Sir Owen Woodhouse and Mr Justice Meares, are outstanding representatives of a judiciary founded upon our English common law.

The Committee of Inquiry recommended in its report that the scheme be financed from a levy of 10c a gallon on petrol and diesel oil used on the road, replacing the third party insurance premiums; the imposition of a levy of 2 per cent on the wages bill of employers and on the net earnings of self-employed persons, replacing the present compulsory workers' compensation premiums; and the raising of any residual amounts from general revenue. The Government has considered this matter, but it has not committed itself to this or any other method of financing. The Treasurer (Mr Crean) is investigating the options available to the Government and will bring forward proposals for later consideration.

The abolition of the present remedies will, of course, affect the insurance industry. With the cessation of compulsory motor vehicle third party and workers' compensation insurance, there may be a diminution of income to the insurance industry. However, the present experience of many insurance offices shows that, in recent years, both of these fields have become increasingly unprofitable to such an extent that many companies have either withdrawn or are anxious to withdraw from these socially essential forms of insurance. For example, in an address at a symposium conducted in Sydney on 7 June 1973 during the Australian Insurance Institute Annual Conference, Mr D. G. Pettigrew, the Managing Director of Sun Alliance Insurance Ltd, said:

Workers' compensation insurance poses special problems for the insurance industry due to the natural desire of governments to increase compensation rates in response to increasing community wage levels.

While this is essentially desirable the insurance company must pay this compensation out of the premium fixed, in many cases, years previously.

Mr Pettigrewthen went on to say:

Obviously, the estimation of claims costs poses difficulty and raises the question whether private enterprise is the proper medium to provide protection when liabilities are emphasised by statute and potential liabilities are unpredictable.

The Committee of Inquiry was unable to assess the full effects which its recommendations would have upon the insurance industry, and hence was unable to make specific recommendations as to how they should be met. This matter has been placed in the hands of the Treasurer who is setting up a consultative committee comprised of representatives of the insurance industry and Government officials to look into the problems of the industry resulting from the Government's plans to introduce this national compensation scheme.

I have been in constant touch with the representatives of various organisations representing insurance companies operating in Australia, and with the Australian Insurance Staffs Federation, and have invited these organisations to make suggestions as to amendments to the Bill, including necessary transitional provisions, and have undertaken to give my careful consideration to any advice I may receive from these quarters. I recently visited New Zealand where I discussed these matters with representatives of the insurance industry in that country, and learned something of the problems which may be expected. It is to be noted in this regard that the New Zealand compensation proposals, contained in the report which was made to the New Zealand Government by Sir Owen Woodhouse in 1967, were amended later in many respects.

The Bill provides for the payment of benefits at the rate of 85 per cent of earnings, calculated on earnings of up to $500 a week, for any person unable to work because of injury or sickness. The upper earnings limit of $500 a week was reached by the Committee of Inquiry after consideration of income levels payable in Australia. Any person in receipt of an income in excess of that amount would have his benefit calculated on the basis of earnings of $500 a week. We support the principle stated by the Committee of Inquiry at page 105 of Volume 1 of its report that:

Real compensation demands the provision of incomerelated benefits for lost income through the whole period of incapacity and the opportunity for every incapacitated person to maintain the living standards he or she had earlier achieved by energy and hard work.

The Bill makes provision in respect of permanent incapacity. A person who suffers permanent total incapacity would be entitled to a continuation of his benefit at the rate of 85 per cent of average earnings. A person who suffers a permanent partial incapacity would be paid a benefit calculated on the percentage of his incapacity and based on national average weekly earnings. Special provision has been made by a Government amendment in the House of Representatives to ensure that compensation would be payable for loss of earning capacity if the benefit payable in any case for permanent partial incapacity were to be insufficient. The Bill also provides for payment of benefits to widows and other dependants of persons who die from injury or sickness. Once again, the benefit is related to the average weekly earnings of the deceased spouse. Benefits will be payable also to non-earners. These include housewives and others who are not members of the workforce. In these cases, the benefits payable will be based on a notional earnings figure of $50 a week.

One of the most significant advances in the law of accident and sickness compensation proposed in this Bill is the recognition of the right to compensation of non-earners, such as housewives and children. In particular, it should be noted that although no-one could deny the important contribution made to the economy by housewives and mothers, they have until now been excluded from any scheme of workers' compensation. The report and this Bill propose that this gross injustice should be remedied, and the community should accept the same responsibility for these citizens as it does for employees receiving a wage or salary. In the same way, this Bill proposes that compensation should be paid in the appropriate circumstances to another important group, also excluded from the present workers' compensation laws, namely selfemployed persons, of whom the farming community, for example, forms a substantial part.

Provision is made for the automatic adjustment of benefits each quarter based on movements in the consumer price index plus an element to reflect productivity growth. This will enable beneficiaries to retain relativity of income with movements in the cost of living. The minimum income figure of $50 a week and the maximum income figure of $500 a week will also be brought up to date. These will be adjusted annually on the basis of movement in seasonally adjusted average weekly earnings. As I have indicated, the Government has made some admendments to the original draft Bill. One major change which we have made is to provide that payment in respect of injuries arising from work, that is the type of industrial injury presently covered by workers' compensation, will be made for the first week of incapacity. Payments in respect of other injuries will commence, as recommended by the Committee, from the second week of incapacity in the case of injuries to earners and from the fourth week of incapacity in the case of injury to non-earners and in the case of sickness. The Government believes that it would be retrogressive to deprive workers of the rights already existing under compensation law to receive payment for the first week in respect of injuries arising at work. Equally, it would be inequitable to expect employers to be responsible for payment in the first week in these cases which at present are covered under their workers ' compensation insurance.

Another important amendment has been made to ensure that wage earners on the lower incomes are specially protected from loss of income during incapacity. Other amendments have been made to guarantee rights of appeal against all determinations under the legislation; to give right of access to documents upon which determinations are based; to provide for payment of costs of an appellant, where a tribunal awards costs; and to protect applicants against possible administrative delay. A common criticism which has been made of the national compensation scheme, is that its administration will be left to public servants. It is, of course, necessary that public servants will be involved in handling the day to day operations of any scheme such as this. We recognise that it is undesirable that public servants be allowed any large measure of discretion without appropriate methods for holding them accountable for the decisions that they make. To this end, provisions are already contained in the Bill for appeal procedures which will protect the applicant for compensation and at the same time make it difficult for public servants to use their discretionary powers arbitrarily. Many of the amendments already made and to which I have referred are designed to protect the rights of the citizen in these circumstances.

The permanent head of my Department will be studying a number of methods which might be used to train the sections of the Department of Repatriation and Compensation which will administer this scheme, to ensure that we have available in the Department officers especially sensitive to the needs of the people whom the scheme will serve. He will also be looking into the possibility of building into the administration of the scheme a means whereby the operation of the scheme will be continually watched so that its efficiency can be constantly under scrutiny and the returns for every dollar spent can also be regularly gauged. I am advised that some excellent methods have been developed which deal with such crucial matters as staff and man-power development, operational effectiveness, internal administration and mechanisms to ensure budgetary realism with economy. These are matters to which the Government gives the highest priority and on which it places the greatest importance.

As honourable senators are aware, the Committee of Inquiry did an amount of research and calculation to arrive at cost estimates for the scheme recommended in the report. Work is still proceeding on the analysis of these cost figures. The major costs will, of course, occur when stage 3, related to sickness is implemented. Revised estimates have been prepared for stage I, in respect of anticipated expenditure in its first year of operation from 1 July 1976 to 30 June 1977. It is estimated that the net cost for that first year of operation, taking account of the amendments made in the House of Representatives, will be $306m. Work on the cost estimates will continue and they will be revised and brought up to date on the basis of the Government's staging of the scheme. The estimated costs in respect of each of the ensuing stages will be one of the factors which the Government will take into consideration before proclamation of those stages.

I should like to repeat that this Bill introduces a most important social measure. We are dealing in this Bill only with the compensation aspects arising from the report, which covers also rehabilitation and safety. These are 3 arms of a total concept, namely that we must provide a safe environment at work and elsewhere, rehabilitate those unfortunate enough to suffer incapacity and ensure compensation during rehabilitation and for residual handicap.

We must seek first to prevent, so far as humanly possible, the occurrence of injury and sickness. Already in Australia in the post-war period great advances have been made in accident prevention, particularly in industry and on the roads; but much more remains to be done. Where, in spite of all endeavours, incapacity occurs, the payment of compensation in itself is not the answer. The prime and important issue is rehabilitation to the maximum degree that society can provide. The role of compensation during the early stages of disability is to remove the financial worries which could interfere with effective rehabilitation. If all rehabilitation efforts fail to restore a person's total capacity, then compensation is paid to recompense the individual for that permanent residual incapacity.

Until now, insufficient stress has been placed upon the rehabilitation role. This is particularly so in the common law area and has been the subject of comment by many learned judges, medical practitioners and others who see delays in litigation and settlement as being against the best interests of the injured person and, in fact, often worsening his condition by encouraging the mental approach, commonly referred to as litigation neurosis', which may lead the person to reject improvement until settlement of the claim. Through this comprehensive program, of which compensation is but one part, the Government intends to ensure that the people of Australia will enjoy the benefits of this scheme and so avoid the problems, delays and weaknesses inherent in the existing systems.

The accident compensation scheme now operating in New Zealand, which has many similarities to the scheme proposed in this Bill, was introduced by a National Party government, and supported in principle by the New Zealand Labour Party. I am sure that all honourable senators will consider and debate this Bill in a positive and constructive manner and I assure the Senate that the Government will welcome suggestions which will allow the resultant legislation to provide an even better framework for the proposed scheme. I undertook to make available to representatives of the Opposition Parties all of the facilities and information available to me, including discussions with the officers of my Department, and the perusal of any relevant documents and statistics. I am pleased to be able to say that this offer was accepted by members of the Opposition. On several occasions, Sir Owen Woodhouse has met groups of Opposition members, and others have had discussions with officers of the Department of Repatriation and Compensation, and members of my personal staff. I arranged for the Opposition spokesman on repatriation and compensation, Senator Drake-Brockman, to visit New Zealand, and assisted him to meet those people in that country who could speak with some authority on the New Zealand scheme.

It is naturally the Government's hope that the passage of this Bill will not be delayed for so long that the proposed date for the introduction of stage 1 would have to be postponed. At the same time, it has been the Government's wish that the exchange of ideas should in no way be stifled or that representatives of those persons in the Australian community who have an interest in this proposal should be precluded from offering suggestions to the Government. To this end, the Government has welcomed the opportunity to consider such suggestions and to support those amendments which will assist in the establishment of the national compensation scheme. I commend the Bill to the Senate.

Debate (on motion by Senator DrakeBrockman) adjourned.

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