Struggling families and natural disaster victims are being told to brace for reduced services from charities due to skyrocketing insurance premiums to protect millions of workers.
Reforms to rein in spiralling costs in the nation's largest workers compensation scheme were voted down in parliament on Friday, five months after NSW government's first effort to pass the controversial overhaul.
The changes would have made it harder to claim for psychological injuries such as post-traumatic stress disorder, anxiety and depression in the scheme, which covers more than 3.6 million workers.
Psychological claims comprise 12 per cent of workers' compensation claims but 38 per cent of the scheme's total cost, the state government says.
Following the defeat, Premier Chris Minns declared efforts to carry the laws were finished, but on Monday said he would "never close the door to a discussion" on the reforms.
"We've tried everything we possibly can to knit together a coalition to get a bill through," he told reporters.
"Workers' comp premiums are going to skyrocket as a result of them blocking the reform."
"Them" - an unusual coalition of Liberals, Nationals, Greens, minor parties and independents - took particular note of expert warnings the reforms would make it near impossible for seriously injured people to access proper support.
"How is it that you attack people who have suicidal ideation and self-harm ideation and think that that's a good idea (to make) savings to a workers' compensation scheme?" shadow treasurer Damien Tudehope asked on Friday.
The government would shift focus to "getting our charitable sector, our small business sector and many others braced for some pretty steep increases in premiums," Treasurer Daniel Mookhey said.
Without the reforms, insurance premiums would likely rise in NSW by "double digits over the next two years at least," he told ABC Radio.
The peak body for the state's social services sector said struggling families and those impacted by natural disasters would be hurt by the impasse.
Many charities would have to scale back services and teams during the peak holiday season due to higher premiums, NSW Council of Social Service chief executive Cara Varian said.
"As we head into Christmas, and we're expecting there to be a big disaster season as well, the charities are gearing up ready to prepare, but in reality they will be limited because of the cost," Ms Varian said.
Businesses will face added premium pressure, making it harder to invest, employ and grow, the Business Council of Australia has warned.
Unions NSW said the government needed to heed parliament's message to "rediscover compassion and dignity for traumatised and vulnerable workers".
