The painful bills about to wallop your wallet

BY GRAHAME ARMSTRONG
Last updated 05:00 11/10/2009
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Triple whammy for motorists: Petrol and car registrations will be more expensive, and there will be less support for accident victims.

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Steep hikes in the price of petrol and car registrations are about to hit taxpayers hard in the pocket, as the government moves to bail out the financially troubled Accident Compensation Corporation.

Wage earners will also lose hundreds of dollars a year from their pay packets, as the ACC levy rises. The government is expected to announce the "substantial increases" on Wednesday.

On Friday, ACC revealed it had posted a $4.8 billion loss for the last financial year, in what is being described as the biggest corporate loss in New Zealand's history.

Cabinet will tomorrow approve a bailout plan that also aims to safeguard ACC's financial future. The proposed changes will be open to public discussion for four to five weeks before ACC makes recommendations to the government.

While motorists and wage earners will shoulder the burden, the rescue package also involves paring back entitlements and getting injured workers off the compensation scheme faster. Already, ACC has cut funding for some services, such as physiotherapy.

Wage earners currently pay an ACC levy of 1.7% of what they earn, up to $110,000 (any income above that does not attract a levy). That is set to rise to 2.5%.

The Sunday Star-Times understands the ACC levy for a family earning $38,000 is likely to rise by $304 a year, plus an extra $52 to register the family car and 4c a litre more at the fuel pump.

If the government chooses not to increase the ACC petrol excise, which is now 9c a litre, the ACC component of registering a car, now $168, will go up even more – possibly by as much as $107.

Someone on the average wage of $45,000 will pay $360 more a year to ACC, plus the extra fuel and vehicle registration costs. The ACC levy for those on $65,000 will go up about $520 a year while those earning $85,000 will pay $680 more.

To soften the blow for taxpayers, the government is expected to introduce the changes gradually, with higher car registration and levies likely to be implemented next June.

ACC chairman John Judge told the Star-Times ACC's debt was worth about $3000 for every New Zealander, and it was going to take a "hard-nosed" approach – and possibly up to 10 years – to get it into a sustainable position. This would require "substantial" levy increases and legislative change to get people off the scheme and back to work quicker.

"In the last five years we've lost $9b. We need to act today because this liability is like a mortgage – if we don't start paying it off tomorrow it gets bigger by $700 million-$800 million a year."

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Judge said ACC would not slash entitlements "but we are going to make sure that you only get the entitlements that you are due and that you need".

ACC Minister Nick Smith said the choices for the government were "pretty ugly".

"It is inevitable there will be levy increases," he said. "The government's preferred approach is to get savings out of ACC operationally and out of pulling back on some of the welfare-type entitlements ... Without change, ACC is on course to go broke.

"This $4.8b loss will go down in New Zealand history as the biggest corporate loss of any entity, public or private, and is actually bigger than any deficit that the government has run collectively across all portfolios."

ACC's total liabilities over the past four years has blown out from $9.4b to $23.8b, mostly due to an increasing number of claims, a widening of entitlements that could be claimed, such as self-harm, and the actual cost of meeting the claims.

Labour's ACC spokesman David Parker said the situation was not as gloomy as the government was projecting. The ACC's liabilities and costs were increasing but it was also the country's biggest insurer, and the cost blow-out could not simply be blamed on poor management.

The government could soften the blow for taxpayers by extending the date for the full funding of historic claims, which were due to come into effect in 2014.

- Sunday Star Times

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