Hon Dr Nick Smith ACC Minister

04 December 2008

Big blow-out in another ACC account

Officials are recommending an increase in earners levies of $1.337 billion over the next three years to cover significant increased costs of the ACC Earners' Account that funds non-work accidents involving employees.

"Department of Labour officials have advised the Government to increase the current ACC Earners Levy of $1.40 per $100 of earnings to $2.00 in 2009/10, $2.10 in 2010/11 and $2.20 in 2011/12 to cover the increased costs of the Earners' Account.

"The cost increases identified by officials is being blamed on increases in the number of claims, lesser rates of rehabilitation resulting in increased duration of costs, increased medical and treatment costs, expansion of the schemes entitlements, and increases in treatment injury cover.

"This $1.337 billion is additional to the $1.253 billion required for the Non-Earners Account. The key differences are that the Earners' Account is paid for by employee levies rather than the Government from general taxation, and the account does not require a cash injection in the current financial year.

"These are very significant cost increases for workers. A person on the average wage of $47,000 per year would pay an additional $282 in the next tax year or $5.40 per week, $329 in 10/11 or $6.33 per week, and $376 in 11/12 or $7.23 per week.

"The new Government is very concerned about the scale of these recommended increases.

"I certainly do not wish to impose these sorts of increased costs on households, but also must take a prudent approach to ensuring ACC's ongoing viability.

"The immediate decision the Government needs to take by Christmas is the levy rate for 2009/10 and I am continuing to work with officials on how these cost increases might be constrained.

"I am also seeking further information on the motor vehicle account which is also facing significant cost increases. The decision on motor vehicle levies does not need to be made until March and there are legislative options of extending the full funding date beyond 2014 to alleviate these increases.

"The new Government is committed to a full stock-take of all the components of the ACC scheme."

Dr Smith has also released ACC's Briefing to the Incoming Minister. It can be viewed at:

"I am concerned that ACC's briefing does not adequately address the major issues of the very significant cost increases. A change in culture is required at ACC so it is better placed to appreciate the impacts of cost shocks on families and businesses."

ENDS

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