sign up log in
Want to go ad-free? Find out how, here.

ACC investment managers eye global market turmoil after investment fund jumps 12.6% in 2010/11 yr; Govt confirms levy cut

ACC investment managers eye global market turmoil after investment fund jumps 12.6% in 2010/11 yr; Govt confirms levy cut

By Alex Tarrant

ACC's investment fund managers are wary of a worsening global economic situation after total reserves in its portfolio rose 12.6% to NZ$16.6 billion in the 2010/11 year on the back of a global equities recovery.

The fund's result for the year was in ACC's annual report released by ACC Minister Nick Smith on Wednesday. Smith confimed levy cuts would be made for wage and salary earners, and employers from April 1 next year, as foreshadowed in July.

ACC's net deficit - effectively a hole in the government's books - stood at NZ$6.8 billion at June 30, down from NZ$10.3 billion the year before after recording a NZ$3.5 billion surplus over the year. ACC chairman John Judge said the improvement was mainly due to improved rehabilitation rates for injured people and the increased returns from ACC's investment portfolio.

However, the significant gains in the fund had been tempered in recent months by a worsening global economic situation, ACC Chairman John Judge said when releasing ACC's annual report.

"ACC's investments make a significant contribution towards keeping levies affordable and towards managing our outstanding long-term claims liability. With the economic outlook now a little clouded, there will be continued pressure to run the organisation efficiently," Judge said.

"That said, the funding policy we have adopted for each of our accounts means we do now have the ability to ride out any short term financial problems, and we may even be able to reach full funding earlier than our 2019 target," he said.

Levy cuts

ACC Minister Nick Smith today confirmed the government would make half a billion dollars worth of levy cuts a year for workers and employers, despite ACC's underlying net deficit of NZ$6.8 billion. Asked whether he thought the cuts were responsible given the deficit, and possiblity of lower fund returns, Smith said he was confident ACC would be able to stick to its goal of eliminating the deficit by 2019.

“These levy reductions will save households NZ$340 million a year and businesses NZ$247 million a year.  This is money that will go back into the pockets of hard working New Zealanders and will assist with our economic recovery,” Smith said.

“The levy on wage and salary earners is reduced by 17% – or NZ$170 a year for someone on the average wage.  The levy on employers and the self-employed is reduced by 22% – a saving of NZ$1,120 a year for the average small business with seven employees," he said.

“These levy reductions are possible because of the huge improvements in ACC finances from the [annual] deficits of NZ$2.4 billion in 2007/08 and NZ$4.8 billion in 2008/09, to surpluses in 2009/10 of NZ$2.5 billion and today’s announcement of a NZ$3.5 billion surplus in 2010/11.

“This financial turnaround and levy reductions has been achieved by major improvements in rehabilitation rates and better management of costs.  Rehabilitation rates steadily declined from 2005 to 2008, but have consistently improved since with 20% fewer people on long-term compensation.  ACC’s claim costs rose 58% from NZ$1.93 billion in 2005 to NZ$3.06 billion in 2008, but have since been trimmed back by 15% to NZ$2.58 billion in 2010/11,” Smith said.

The Earners’ Account Levy (paid by wage and salary earners) will decrease from NZ$2.04 to NZ$1.70 (including GST) and the average Work Account Levy (paid by employers and the self employed) will decrease from NZ$1.47 to NZ$1.15 (excluding GST) per NZ$100 of liable earnings from 1 April 2012.  Work levies for individual companies depend on their industry classification and experience rating, Smith said..

“The motor vehicle levies on vehicles and petrol are to remain the same.  The solvency in the Motor Vehicle Account is significantly behind the Work and Earners’ accounts.  Levy reductions will be possible in the next term of Government for motorists if the ongoing performance improvements in ACC are maintained,” Smith said.

“ACC’s Board and staff need to be commended for their hard work in turning around ACC’s finances.  These significant levy reductions are good news for New Zealand workers as it increases their take home pay by keeping money in their pockets.  It is equally good news for businesses by improving their cash flow,” he said.

(Updates with video of Smith)

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

3 Comments

 I say that again : I have a “gut feeling” gold rises to US$ 1’800.- again in the next 10 days - with a massive collapse of the markets by Friday the 28th of October 2011.

...but then it is already 1:43am and I may not be a 100% - but moon rumbling along  -as usual.

Did you feel that ?

Up
0

Updated with video of Nick Smith on the levy cut yesterday

Up
0

He's an economic cretin IMHO....keeping that levy as is would have built a large rainy day fund to protect the next Govn(s) from having to pump $ into ACC in hard times and balanced the books far sooner.....what a short term focused waster.

regards

Up
0