Cost estimates of the impact of chronic pain on work have largely focussed on absenteeism, excluding the hidden contribution of reduced work effectiveness to lost productivity. This paper aims to estimate the cost of lost productivity due to chronic pain in Australia, not only in terms of absenteeism but also reduced work effectiveness. Data on chronic pain in Australia and its impact on work were obtained from the 1997 New South Wales Health Survey (n=17,543) and the Northern Sydney Area Pain Study (n=2,092), both of which were population-based and used random-digit dialing sampling methods. This was combined with relevant Australian population and labour force data obtained from the Australian Bureau of Statistics. From this we estimated annual lost productivity costs arising from both chronic pain-related days absent and 'reduced-effectiveness workdays'. There were estimated to be 9.9 million workdays absent due to chronic pain annually in Australia, equating to a cost of AUD 1.4 billion per annum. Under the assumption that reduced-effectiveness workdays affect productivity costs in the same way as lost work days, the total number of lost workday equivalents was 36.5 million, with the total annual cost of lost productivity due to chronic pain estimated as AUD 5.1 billion per annum. In conclusion, while the impact of reduced work effectiveness on days worked with pain on productivity is uncertain, it has the potential to account for the majority of lost productivity costs associated with chronic pain. Interventions which target working despite pain have the potential to significantly reduce lost productivity costs due to chronic pain.