Budget 2013: ACC levy cuts to cancel out fiscal drag

Reserve Bank Governor Graeme Wheeler. Photo / Mark Mitchell

ACC levies will be significantly reduced for households and businesses with cuts of $300 million next year and $1 billion in the following year.

The cuts announced in the Budget today amounted to a 40 per cent cut in levies between 2011/12 and 2015/16.

ACC Minister Judith Collins said Government was confident that further decreases in levies was sustainable and would allow a $300 million reduction in 2014/15, growing to a $1 billion reduction in 2015/16. Further cuts were likely in following years.

These reductions followed a $630 million cut in ACC levies in the previous Budget.

Collins said the reductions were made possible by ACC's improved performance, with returns $1.1 billion ahead of budget in February.

This improved financial performance meant substantial levy reductions were "appropriate and sustainable".

Finance Minister Bill English said that Government had waited until ACC's financial stability had been "locked in" before committing to reductions.

"We don't want volatility in the levies where you're putting them up and then down all the time. We believe now that the performance is sufficiently embedded that we can look at a track over the next four or five years of steadily reducing ACC.

"That should deliver some quite significant bonuses back to households and businesses and wage-earners."

Collins said ACC had focused on regaining the trust and confidence of New Zealanders and on improving its service to claimants.

"I am very pleased to see ACC continuing to work on these priority areas and investing in better quality outcomes, improving privacy, culture change, customer service, and importantly, injury prevention," she said.

English said Government was still committed to making ACC self-funding, and believed it would meet this goal before the deadline of 2019.

But he did not plan to open it up to competition because he felt that insurance companies were still tied up with the Christchurch rebuild.

The ACC levies would be decided later this year after public consultation.