8. MELISSA LEE (National) Link to this
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) Link to this
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.
Hon Dr NICK SMITH Link to this
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 ParkerDoes 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 Link to this
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.
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 Link to this
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.
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 Link to this
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.