Politics Sector News — 25 August 2015

Leading economists including Allan Fels and Ross Garnaut have called on the federal government to embrace mental health as its next big reform agenda, warning it is costing the economy more than $60 billion each year and 12 million lost working days in reduced productivity.

They have backed calls for a major road safety-type campaign to target six key risk factors, smoking, alcohol, exercise, obesity, diet and family violence, claiming that improvements to the system would dwarf gains from tax or microeconomic reform.

The chair of the National Mental Health Commission, Allan Fels, said that much of the federal government’s $10 billion spending on mental health and suicide prevention was being wasted on “downstream programs” that were “neither effective nor efficient”.

“It needs to be part of the economic reform agenda,” Professor Fels told the Melbourne Economic Forum on Monday, a forum jointly hosted by Victoria and Melbourne universities and sponsored by The Australian Financial Review.

 “It is a significant problem for the economy, as significant, often more significant than tax or microeconomic reform. The economic gains from better mental health would dwarf most of the gains, often modest ones being talked about in current microeconomic reform debates. The potential gains are extremely high because it has been a neglected area,” Professor Fels said.

The OECD estimates the overall cost of mental health to developed countries is about 4 per cent of GDP. In Australia that equates to more than $60 billion or about $4000 a year for each person who lodges a tax return, or more than $10,000 per family. Up to 20 per cent of the adult population is affected by mental ill-health and a 2014 PwC report found mental health issues resulted in about 12 million days of reduced productivity for Australian businesses each year.

Professor Fels said that more than 87 per cent of the federal government’s $10 billion in spending went on five “downstream programs”, including the disability support pension and pharmaceutical benefits scheme which were “neither effective nor efficient”.

“If we can improve the mental health system by 25 per cent, we can deliver a 1 per cent improvement in GDP. To put it another way for every 10 per cent gain in mental health, GDP would rise by 0.4 per cent.”

Leading economist Ross Garnaut, who is a delegate to Wednesday’s National Reform Summit, backed Professor Fels in calling for mental health reform to be referred to the Productivity Commission, whose chairman, Peter Harris, another attendee and delegate at Wednesday’s reform summit, said he was open to a review.

“In my mind, a case has been made for taking reforms in this area very seriously as a central economic policy issue, which is not how it is seen in the mainstream economic policy debate,” Professor Garnaut said.

 “When the Tariff Board was first making an issue of trade liberalisation in the early ’70s, which showed that gains of between 1 and 2 per cent of GDP were possible through radical trade liberalisation, when the detailed studies were put out, they were controversial at first, then they were much discussed, then over time time it became an issue of political feasibility more than an argument about the gains.”

Victoria University’s Professor Rosemary Calder called for a major Transport Accident Commission-type public campaign to raise awareness.

“The road-safety campaign generated some graphic photos and images,” she said. “We can’t do that as easily with chronic disease but we have to find the equivalent.”

This article first appeared on ‘The Australian Financial Review’ on 24 August 2015.

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