Lee Melissa: Questions for Oral Answer — Questions to Ministers 
Lee Melissa: Questions for Oral Answer — Questions to Ministers 
[Volume:652;Page:1922] 
8.  
MELISSA LEE (National) 
 to the  
Minister for ACC 
: What has been the rate of cost increases at ACC and how does this compare with the rate of inflation? 
Hon Dr NICK SMITH (Minister for ACC) 
: 
 Claim and administration costs are this year projected to increase by $451 million on last year—an increase of 15.6 percent. The increase for the 3 preceding years was 12.3 percent 13.6 percent and 10.4 percent. The average rate of inflation over that period has been 2.5 percent. 
Melissa Lee 
: Has the cost in administration of accident compensation exceeded the cost paid out in claims? 
Hon Dr NICK SMITH 
: Yes administration costs have increased by 148 percent as compared with claim cost increases of 32 percent and inflation of 33 percent over the same period. This Government wants the focus to be on services to the public at the front line and addressing the issue of the very large increase in administrative costs will be one of the priorities for the new board. 
Hon David Parker 
: Does the Minister accept that labour cost increases in recent years caused by better pay for doctors nurses and care workers were a significant part of the accident compensation scheme’s overall cost increases and that the low inflation environment that we are now in will see those pressures ease? 
Hon Dr NICK SMITH 
: The advice I have received about the projections of future cost increases is that they will be still very high and considerably above the rate of inflation. I say to this House quite honestly that anybody who thinks that ongoing cost increases in accident compensation of 15 percent per year in a recession are appropriate are I really think on the wrong side of the debate. 
Melissa Lee 
: What advice has the Minister received on the impact of reduced rehabilitation rates and an increasing pool of long-term claims on accident compensation costs? 
Hon Dr NICK SMITH 
: Rehabilitation rates have as measured at the 3-month 6-month and 12-month rate all declined over the last 3 years and this is adding significantly to accident compensation costs. The latest 3-month rate of rehabilitation is the lowest that has ever been recorded. The long-term weekly compensation claims have also been increasing since 2005 and these too are having an adverse impact on the scheme’s finances. 
Hon David Parker 
: How can the Minister complain that the accident compensation scheme is unaffordable when it is so much cheaper than the Australian equivalent and to quote Brian Fallow of the  
New Zealand Herald  
again it is a “civilised and cost-effective approach to dealing with the injured. Why undermine confidence in the scheme unless you plan to undermine the scheme itself?”. 
Hon Dr NICK SMITH 
: I have made it absolutely plain that I am committed to the Woodhouse principles of accident compensation. When the member makes comparisons with Australia for instance in relation to the work account he needs to note that motor vehicle costs are not included in New Zealand’s work account but are in Australia’s. Those significant differences need to be noted when making comparisons but the member can be reassured that this Government is about securing the future of the accident compensation scheme and managing costs better.