VOSL Challenges in Australia and New Zealand

Value of a Statistical Life (VOSL) is a way to express the social cost of a fatality so safety decisions can be supported by cost–benefit analysis (CBA). In risk management practices in industrial or Major Hazard Facilities, VOSL helps us compare the cost of proposed controls (new or improved) with the value of the risk reduction they deliver, enabling supporting a case whether or not to make those improvements. A higher VOSL will support case for implementation of more expensive controls.

Why Australia and New Zealand diverge today 

Historically, New Zealand and Australian Government VOSL figures have been broadly aligned. In Dec of 2024, the Australian Government updated their VOSL to $5.7M whereas a couple years earlier, the NZ Transport Authority (NZTA) updated theirs to $12.5 M from a much lower value which was less than $5M. NZ has now become an outlier compared to most other industrialised nations. At that point in time, the methodologies diverged. NZTA adopted an updated willingness to pay (WTP) methodology, reflecting research that people’s WTP (to reduce fatality risk) rises with income growth and inflation.  Australia did not adopt the WTP approach citing evidence that surveys overestimate the willingness to pay in a budget constrained world. 

Because the NZ Treasury has now made reference to the NZTA figure, NZ industrial uses, now have a conundrum. Do we adopt this VOSL or choose an alternate? It should be recognised that NZTA is a roading authority which is a different context to industrial facilities. Their intent around use of VOSL was for justification and ranking of roading projects and used NOT within the context of a SFAIRP demonstration (for new or updated controls).  

 How to apply VOSL in Cost Benefit Analysis (SFAIRP context) 

When assessing a new or improved control (engineering or procedural), the following 4 steps are typically used. 

1. Cost the control (Capex + Opex).  
2. Value the risk reduction in dollars: risk improvement × chosen VOSL × expected asset life.  
3. Compute the cost–benefit ratio (CBR): Step 1 ÷ Step 2.  
4. Compare the CBR to the gross disproportion threshold (GDT). For health & safety improvements, a typical GDT is 5–10, and is influenced by scale of the event and the operators context. If the ratio is below the GDT, the control (or improvement) can be deemed justifiable and be implemented; if above, it may be unjustified on cost grounds (noting other requirements of SFAIRP).  

Choosing an appropriate VOSL for your decisions - Some Recommendations

1. Because policy goals can influence WTP based VOSL figures, treat outliers cautiously and understand their derivation before adopting them for SFAIRP decisions in process industries. NZTA’s $12.5 m is valid for transport project prioritisation but may over justify controls if ported directly into industrial safety. 

2. CBA without context; conversely, using too low a figure could underinvest in controls. Select a defensible VOSL (e.g., sector appropriate Treasury or peer reviewed guidance), document your rationale, and apply GDT to maintain the principle of “so far as is reasonably practicable.”  

Bottom line: In NZ and AU, VOSL is a powerful lever for evidence-based safety investment. Use it within a clear SFAIRP/GDT framework, choose the figure that matches your context, and be explicit about the assumptions behind the number. You do not have to follow the crowd, and use VOSLs from other contexts simply because they were used several years ago. 

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