ACC balance goes ‘up and down’, but no need to panic - law expert

By RNZ

A law expert says ACC’s $7.2 billion dollar deficit is not a crisis.

The deficit is driven by an $8.7b dollar increase to ACC’s Outstanding Claims Liability, which represents how much it expects to pay on injury claims.

ACC law researcher Warren Forster told RNZ’s Midday Report the increase sounded alarming but was perfectly normal.

He said lower interest rates affect ACC’s accounting, which takes a “long-term view”.

“When the interest rates are high they bank on a high return on investment which means they need less money in their accounts, and when interest rates start going down that means that their returns or their assumed returns go down, and that has a impact on how much money they need.

“And every year they recalculate this, they take into account a whole bunch of factors.”

He said the Outstanding Claims Liability regularly jumps up and down by billions of dollars due to multiple factors including court cases, rehabilitation rates and what is happening with interest rates, and people should not panic.

“Last year they did it and they said we’ve got a billion more than we need, this year they did it and they said we’ve got $9b less.

“We just need to be very careful that we’re not going to manufacture a crisis and say ACC can’t afford anything, or to blame people and say it’s your fault you’re not getting rehabilitated, or do anything else.

“We just need to have an even keel and say look, every time we recalculate the amount of money ACC thinks it needs, it’s going to change. And we need to take a pretty mature view to do that.”

Despite the deficit, Forster said people should still expect the same level of care and service from ACC.

“This happens all the time. And it goes up and down - one year we’ve got $6 billion more and we’re happy, the next year we’ve got $9 million less.

“We need to remember that ACC has legislation, it can’t just change its mind, it needs to follow that legislation.”

ACC also blamed court decisions for expanding its boundaries as it expects higher costs.

The huge bottom line deficit was largely driven by an $8.7b increase in ACC’s Outstanding Claims Liability (OCL) calculation to $60.2b. The OCL represented the expected future costs of injury claims on ACC’s books.

The result marked a big turnaround from the previous year’s $911 million surplus.

Meanwhile, Finance Minister Nicola Willis says the ACC needs to do better with the money that is has.

Willis says ACC just needs to do better to manage its spending and outcomes. She says levies going up at the rate that they have been is unsustainable.

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