Motorists will next year pay around a third of the ACC levy they do now, under cuts announced today by the Government.

National has moved on the issue after charges by Labour that ACC was being treated as a "cash cow", and the corporation's chair saying it was likely in the best financial shape in its history.

ACC Minister Nikki Kaye said this month's Budget would signal further levy cuts of about $375 million in 2016/17, and $120 million in 2017/18.

"These indicative levy cuts represent a total saving for New Zealanders of around $500 million, and will be spread across the motor vehicle, work and earners accounts," says Ms Kaye.


"The indicative reductions, if confirmed, will take total levy cuts since 2012 to around $2 billion, benefiting businesses, workers and motor vehicle owners alike.

"As an example, this year the average ACC motor vehicle levy, including the annual licence levy and petrol levy, will fall from around $330 to $195 a year.

"On current projections, this is likely to fall further to around $120 next year, making the average motor vehicle levy around one third of what it is right now."

Labour has gone on the attack over ACC recently, calling for an immediate cut in levies and says ACC is being treated as a "cash cow" by the Government.

It said ACC's two main accounts, workers account and earners account, are oversubscribed by more than a third.

Levies are paid by businesses, motor vehicle owners and employees for injury cover that is funded by ACC.

In 2014, the government rejected a recommendation from ACC that levies for the 2015/16 year be cut by 21 per cent for the work levy on employers, and by 5 per cent for the earners' levy on workers.

Instead the work levy was cut by 5 per cent, and the earners' levy remained the same.


In announcing today's cuts, Ms Kaye said they were based on current financial projections.

"While we're committing to at least half a billion dollars in reductions over the next two years, it's important people understand that the exact reductions in each account won't be known until after public consultation."

Ms Kaye said she was also introducing new legislation that would put in place a new framework to set ACC levies, taking effect in 2016/17.

"New binding principles will be introduced to ensure the scheme is adequately funded to withstand economic volatilities, while ensuring levies are kept as low as possible and stable over time.

"The new levy setting process will enable people to see the delicate balance between ensuring there's a sufficient buffer in each account to withstand volatilities, while
demonstrating that we're not over-collecting money that could be in people's pockets."

Ms Kaye said ACC would be required to report publicly on the long-term implications of the Government's levy setting.

"The new legislation will also enable the residual levy, which funds ongoing costs of claims lodged before 1999, to be discontinued when these costs have actually been fully funded. Existing legislation requires that the residual levy be collected until 2019."

In March, ACC chair Paula Rebstock told a select committee that the corporation was likely in the strongest financial position in its history.

Ms Rebstock outlined the corporations' excellent financial health, which saw a $2.1 billion surplus at the end of the last financial year. A key factor was that the corporation's investments, now close to $31 billion, had performed better than expected, she said.