Businesses spared rising costs as peace deal struck

The months-long impasse came to an end on Thursday as newly minted NSW Opposition Leader Kellie Sloane revealed she had secured a deal with the state Labor government.

The changes will require legislation to pass parliament in February.

But the assumption of a deal means insurance premiums served on businesses in coming weeks won't include sharp rises.

Propping up the beleaguered scheme protecting millions of workers would have taken NSW premiums 74 per cent higher than Queensland and 40 per cent higher than Victoria by 2028, Treasurer Daniel Mookhey had argued.

"This compromise position allows us to stabilise the workers compensation system and return it to a secure footing," he said on Thursday.

More than 3.6 million workers in NSW are covered by the state-owned insurer, which services both the public and private sectors and has long been plagued by financial difficulties.

Psychological claims - such as for post-traumatic stress disorder, anxiety and depression - comprise 12 per cent of workers' compensation claims but make up 38 per cent of the scheme's total cost, the state government says.

In a quest for sustainability, Labor first attempted to pass the reforms in early 2025. But the coalition, Greens and other crossbenchers raised concerns that the proposed overhaul removed support for injured workers by making it harder to claim for psychological harms.

Once the new deal struck this week passes parliament, icare premiums will be frozen for 18 months and funding for return-to-work programs increased.

An impairment threshold for long-term weekly payments will sit at 25 per cent, instead of 31 first proposed by Labor and slammed by mental health experts.

"Small businesses and charities should not be heading into Christmas facing unknown premium shocks, and injured workers must have certainty of support and recovery pathways," Ms Sloane said.

"This agreement resolves immediate instability, but it does not fix the underlying structural weaknesses in the scheme."

The political compromise was welcomed by National Disability Services NSW and business groups.

"These reforms are an early Christmas present for the hardworking business owners who are already enduring significant cost pressures," Business NSW chief executive Daniel Hunter said.

But Greens MP Abigail Boyd labelled it a "stunning capitulation" and warned it would take away rights from the state's most seriously psychologically injured workers.

Australian Associated Press