What Australia Forgot — and What the Psychological Injury Crisis Proves
Fifty years on, Australia nearly built a national workers’ recovery system. Not a patchwork of competing insurers. Not a bureaucratic maze of adversarial assessments. But a unified, compassionate, rehabilitation-first scheme designed to protect every worker, every hour of the day.
We walked away.
The Forgotten Blueprint
In 1974, the Whitlam Government’s National Compensation Bill proposed something radical:a no-fault, levy-funded system that treated injury — whether physical, mental, or social — as a shared national responsibility.It would have removed the profit motive, replaced state rivalry with fairness, and focused on recovery over liability.
Whitlam’s design was dismantled before it began. The Dismissal froze the Bill. The States refused to hand over control. And private insurers lobbied ferociously to stay in the game.
Australia kept the insurers. It lost the humanity.
The System We Inherited
Today, the country still lives inside the failure of that compromise.
Eleven fragmented schemes define who gets help, how fast, and how much.
Psychological injury claims are managed as costs, not crises — filtered through algorithms and case-manager discretion.
Premiums, not people, drive policy. The result is predictable: delay, deterioration, despair.
Every reform since, from the 1987 NSW overhaul to the modern “icare era” has promised efficiency, but never healed the structural wound:the commercialisation of care.
Whitlam’s Model vs. 2025 Reality
Principle (1974 Vision) | 2025 Reality |
National, no-fault social insurance | Fragmented state schemes with varying thresholds |
Funded by levies, community responsibility | Funded by employer premiums and insurer profit |
Focus on rehabilitation and dignity | Focus on liability containment and actuarial performance |
Public administration | Private scheme agents, outsourced data platforms |
Equality across states | Geographic and legal inequity |
The Psychological Injury Reckoning
The NSW Government’s proposed 2025 reform to raise the impairment threshold for psychological injury claims from 15% to 31% exposes how far we’ve drifted.* Half a century after Whitlam’s call for compassion, governments are still raising barriers instead of removing them.
The Robertson Inquiry (2024) documented what Whitlam foresaw:systems that make the injured sicker, not better; administrators who fear cost blowouts more than human collapse.
Had the national compensation scheme been realised, psychological injury would have been treated as a health event, not a legal inconvenience.
Footnote: The proposed 31% Whole Person Impairment (WPI) threshold is derived from the “severe impairment” category under AMA-based psychiatric assessment guidelines. It would make access to permanent impairment benefits for psychological injury almost impossible for most injured workers — particularly first responders and healthcare professionals.
The Real Lesson
When profit drives protection, protection disappears.
Whitlam’s national plan was not socialism; it was sanity, a pragmatic recognition that collective funding saves both lives and money. Instead, we built a market out of trauma.
Fifty years later, the numbers are still kept. The people still fall through them.
Where to From Here?
If Australia is serious about “modernising” workers’ compensation, the blueprint already exists buried in the Woodhouse Report (1974) and the National Compensation Bill. The challenge is not to invent a new system but to recover our moral memory.
“The community as a whole has accepted the need to support those of its members who are burdened by injury and sickness.” — Woodhouse Report, 1974
Recommended Reading
National Compensation Bill 1974 (Explanatory Memorandum)
Report on the Clauses of the National Compensation Bill 1974 (1975) – Senate Standing Committee on Constitutional & Legal Affairs
Compensation and Rehabilitation in Australia (Woodhouse Report, 1974)
Robertson Inquiry Report (2024) – NSW Special Commission into SIRA
ABC News (2025) – “NSW Government to Raise Threshold for Psychological Injury Claims”
