ACC: Mirrors smashed and smoke dispersed

NZCTU economist Bill Rosenberg  has debunked the supposed “financial crisis” facing ACC that  Nick Smith is relying on to gut cover and entitlements  to  set it up for privatisation.

Here’s Rosenberg’s take on it:

ACC’s reserves are now above forecast by $739 million (5.4 percent), a further improvement over last month,” said CTU Economist and Policy Director Bill Rosenberg. “The strong performance of ACC’s investment portfolio shows that the Government’s claims of blowouts and financial mismanagement are completely inaccurate.

Yep, just what Kevin Hague and before him Sue Bradford have been saying all along as the Green ACC spokespeople.  The poor investment results last year were consequent on the global financial  crisis.  The financial markets are recovering, and so, therefore, is the value of ACC’s investments.

Rosenberg again:

ACC’s claim liabilities, above forecast largely because of changes in the assumed interest rate used to estimate it, are now just 0.6 percent ($166m), more than forecast, again an improvement over last month. These numbers are driven largely by constantly changing market valuations and by actuarial assumptions.

The main problem is the full funding of future claim payments which means ACC accounts will always be susceptible to large apparent variations which in reality may have little practical consequences for the ACC scheme.  A pay as you go scheme with a prudent level of reserves could be much more stable.

Hey, exactly what the Green Party has been saying too.  While it is tempting in a time of financial instability to move ACC completely to pay as you go and pull the entire $11 billion of ACC reserves to stimulate an economy in recession, to do so would not be a good look for the security of the ACC scheme.

But move away from the policy of fully pre-funding future entitlements on past claims, while maintaining some reserves to smooth the possibility of future levy increases to meet the cost of those entitlements, then levies can fall while entitlements to rehabilitation and compensation for injured people can be maintained.

6 Comments Posted

  1. jh, the thread is about ACC. It is a long bow to extend it to immigration, even though the policy advice for both comes from the Department of Labour.

    A couple of other regular commenters earlier today were given a polite reminder on a different thread about threadjacking. Please keep on topic. There are always General Debate threads if you want to start your own discussion on an issue.

  2. I think the report would see the infill housing situation a$ twice a$ good a$ a single dwelling with a garden. What annoys me is that it is clear that some groups benefit directly and we see their houses in Home and Garden but it means the (for example) the Property Council call for the lifting of height restrictions (as in increased shading of existing properties), so what is in it for others? We need a tunnel under Auckland Harbour but high immigration is seen as a “great opportunity” (there is no link). Immigration is like a ponzi scheme we will never see the day when someone rings a bell and says: “ah now we have just the right amount of people!”

  3. Don’t you mean IMmigration, jh? Although, emigration does indeed have its merits also, me thinks. It’s just that the report on high that you refer to would in no way support such a heresy!
    Well, the measuring criteria are very narrow aren’t they? For example, there’s little reference to the impact on the local environment. Indeed, the analysis seems to be wedged in the narrow concepts of economic growth and GDP. It appears to have scant regard for the quality of life outside of pure (monetary) wealth.
    But of most concern is that it also seems to assume that inter alia growth – population and export – can go on indefinitely. It really should be taking heed of ‘external’ factors, such as the likely huge increase in transport costs, a world shortage of water and other fundamental resources.
    Regardless of the merits (or otherwise) of increasing the population via immigration to improve our overall standard of living in the short term, more consideration has to be given to what this country sees as a population limit. To do this we need to weigh up our conservation/preservation desires against our social/consumerist wishes. Of course, within limits, a more natural environment need not be incompatible with a healthy and well educated society. That is to say that, whereas a simple consideration of pros and cons would be a good start, more thought would need to be given to how they might interact – that is, the modelling of various scenarios. But that’s another story.

  4. This should be in the papers and Nick Smith is the obvious scapegoat to have to take a fall.

    Hide and Brownlee next – ducks in a row!

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