Bennett David: Questions for Oral Answer — Questions to Ministers 
Bennett David: Questions for Oral Answer — Questions to Ministers 
[Volume:658;Page:6923] 
6.  
DAVID BENNETT (National—Hamilton East) 
 to the  
Minister for ACC 
: What has contributed to ACC’s reported financial result of a $4.8 billion loss for the 2008-09 year on top of the $2.4 billion loss for the 2007-08 year? 
Hon Dr NICK SMITH (Minister for ACC) 
: 
 Total claims costs over the last 5 years have increased 57 percent—five times the inflation rate—growing from $2.2 billion to $3.6 billion while investment returns were unsurprisingly down. Given the global recession investment returns actually make up less than 20 percent of the losses. Although we are quite confident investment returns will recover to more normal rates they make up only a fraction of the loss. The fundamental problem of the accident compensation scheme has been the huge increase in claims costs. 
David Bennett 
: Can the Minister confirm that the biggest single increase in claim costs was income compensation which is up from $655 million in 2005 to $966 million in the 2008-09 year; if so what changes contributed to this large increase? 
Hon Dr NICK SMITH 
: Yes the member is correct. The increase in income compensation can be attributed to deteriorations in rehabilitation rates and also to legislative changes. The previous Government changed the criteria for returning to work by requiring that a person’s previous income had to be considered and it increased the threshold for work from 30 hours to 35 hours per week. It also changed the rules around income compensation for casual workers part-time workers and non-earners. All of this has added to the cost of income compensation. None of these changes were funded and that contributed to last year’s $4.8 billion loss. 
David Bennett 
: Which Government decision during the last financial year has had an impact on the accident compensation scheme’s loss of $4.8 billion in the 2008-09 year? 
Hon Dr NICK SMITH 
: In December the new Government provided a $300 million cash injection to address blowouts in the non-earners account. Without that cash injection the scheme’s losses would have been $5.1 billion. In August and October last year the previous Government introduced over a dozen additional entitlements. Extending the scheme at that time when the accounts for the previous year to June had shown a loss of $2.4 billion was unwise and has compounded this year’s deficit. 
Hon David Parker 
: Is the Minister aware that accident and rehabilitation insurance costs in Australia are higher than in New Zealand even after adjusting for the different way motor vehicle accidents are funded; if so why does he keep saying that New Zealand’s lower-cost accident compensation system is fundamentally broken? 
Hon Dr NICK SMITH 
: When the scheme lost $4.8 billion in the last year and $2.4 billion in the previous year it is a bit rich for the member to say that our levies are less because quite simply our levies are not meeting the cost of claims. Over the last 4 years claim costs have gone up at five times the rate of inflation. If any members of this House believe that that is sustainable without levy increases then they really are financially illiterate.