The Australian economy is losing up to $936 million each day due to poor mental health. Breaking down the scale of the problem can help strengthen buy-in for workplace interventions.

The scale of Australia’s mental health challenge is immense. 

According to the Australian Bureau of Statistics, 21.5 per cent of Australians (4.3 million people) experienced a mental disorder in the previous 12 months. Concerningly, the Australian Institute of Health and Welfare (AIHW) says the proportion of Australians reporting a diagnosed serious mental illness in the previous 12 months almost doubled between 2009 and 2021, rising from 11 to 19 per cent. 

Taking a lifetime perspective, the AIHW estimates that 43 per cent of Australians aged 16-85 have experienced a mental illness at some point in their lifetime. 

There is no universal experience of ‘mental illness’. It can vary in severity and be episodic or persistent in nature. In most cases, the impact on the individual will be mild (nine per cent) or moderate (five per cent). However, around three per cent of people have a severe mental illness, of which two-thirds have episodic mental illness and one-third have persistent mental illness.

The most comprehensive estimate of the cost of mental health was provided in the Productivity Commission’s 2020 inquiry report Mental Health. The PC estimated that in 2018-19, the total cost of mental health in Australia was, at the low end, just below a quarter of a trillion dollars ($248 billion). 

However, at the high end, it could be close to $285 billion (see graph below). This is in the range of $678 million to $780 million every day of the year.

Inflating the 2018-19 PC values to 2023-24 (and making no allowance for any post-COVID-19 increases), suggests the costs to the Australian economy to be in the range of $297 to $342 billion in 2023-24, or $826 to $936 million per day.

Even this inflation adjustment may understate the current costs, given the spike in mental health issues associated with COVID-19 and the fact that government costs are growing well in excess of inflation. Commonwealth expenditures between 1992-93 and 2021-22 grew at a compound annual growth rate (CAGR) of 5.2 per cent and state/territory expenditures at a CAGR of 6.6 per cent over the same period.

While the bulk of the costs of mental health are borne by individuals and governments, significant costs are also evident in the workplace. Specifically, mental health conditions most directly affect Australian workplaces through:

Absenteeism

The direct costs of absenteeism include lost productivity and the need to hire temporary replacements or pay overtime to other employees to cover the absent workers’ duties. 

The PC estimated that absenteeism cost employers $9.6 billion in 2018-19, equivalent to $11.5 billion in 2023-24.

Presenteeism 

Employees working while unwell are less productive and can negatively affect workplace morale and efficiency. The hidden costs of presenteeism include decreased output, errors and reduced innovation. 

The PC estimated that mental health-related presenteeism cost employers $7.0 billion in 2018-19, equivalent to $8.5 billion in 2023-24.

While employers rightly spend considerable effort seeking to reduce the incidence and cost of physical accidents, in some respects mental health issues at workplaces are more costly. 

For example:

• Mental health conditions lead to more time off work compared to physical injuries. The median time lost for mental health conditions was 30.7 working weeks per serious claim in 2019-20, compared to 6.2 working weeks for physical injuries, according to a report from Safe Work Australia. 
• The median compensation for mental health claims is significantly higher than for physical injuries, with mental health claims averaging $55,270 compared to $13,883 for physical injuries.

The ROI of wellbeing interventions

Given the range and scale of workplace costs associated with mental health conditions, employers are increasingly seeking to prevent or reduce work-related mental health conditions by investing in programs to manage psychosocial risks and create a supportive work culture.

Targeted employee wellbeing programs can yield significant financial returns – a 2014 analysis prepared for beyondblue indicated a positive ROI of at least $2.30 in benefits per dollar spent on mental health wellbeing programs. This equates to a $3 return in 2023-24. 

Investing in the mental health of employees is a ‘no-regrets’ approach that benefits both employees and the employer.  

Design an effective wellbeing strategy and implement targeted interventions with AHRI’s Implementing Wellbeing Initiatives short course.