The Treasury

Global Navigation

Personal tools

Government
Publication

Budget 2006 Home Page Half Year Economic & Fiscal Update 2006

Notes to the Forecast Financial Statements (continued)

NOTE 16: ACC Claims Liability

Calculation information PricewaterhouseCoopers Actuarial Pty Ltd have prepared the independent actuarial estimate of the ACC outstanding claims liability as at 30 June 2006. This estimate includes the expected future payments relating to accidents that occurred prior to balance date (whether or not the associated claims have been reported to, or accepted by, ACC) and also the expected administrative expenses of managing these claims.

The key economic variables that impact on changes to the valuation are the long-term Labour Cost Index (LCI), average weekly earnings and the discount rate of 5.75% (5.83% at 30 June 2006). Other key variables in each valuation is the assumed rate at which long-term claimants will leave the scheme over the period. This assessment is largely based on scheme history.

The forecasts are based on currently approved levy rates. ACC claims expenditure is forecast to increase at a greater rate than levy revenue at those levy rates. As a consequence, ACC's net reserves position is forecast to deteriorate from 2008 to 2011. Levy rates are reviewed annually to ensure that new claims are fully funded and that the required components within the claims liability relating to older claims are fully-funded by 2014.

Explanation of change

The total change in the gross ACC liability compared to the expected movement for 2006/07 from the 30 June 2006 estimate is an increase of $109 million. The main driver of the change has been the decrease in the discount rate since the 30 June 2006 valuation.

Presentation approach

The projected gross liability is included within total liabilities. The ACC has available to it a portfolio of assets that partially offset the gross liability. The assets (less cross holdings of NZ Government stock) are included in the asset portion of the Crowns' overall balance sheet.

($ million) 2006 Actual 2007 Previous Budget 2007 Forecast 2008 Forecast 2009 Forecast 2010 Forecast 2011 Forecast
ACC liability and asset information          
Gross ACC liability              
Opening gross liability 11,384 12,581 12,715 13,543 14,283 15,029 15,791
Net projected change 1,321 674 828 740 746 762 781
Transfer from other insurer 10 ..  ..  ..  ..  ..  .. 
Closing gross liability 12,715 13,255 13,543 14,283 15,029 15,791 16,572
               
Less net assets available to ACC              
Opening net asset value 7,217 8,813 8,880 9,681 10,427 11,122 11,750
Net projected change 1,663 802 801 746 695 628 553
Closing net asset values 8,880 9,615 9,681 10,427 11,122 11,750 12,303
               
Net ACC reserves (net liability)              
Opening reserves position (4,167) (3,768) (3,835) (3,862) (3,856) (3,907) (4,041)
Net projected change 332 128 (27) 6 (51) (134) (228)
Closing reserves position (net liability) (3,835) (3,640) (3,862) (3,856) (3,907) (4,041) (4,269)
               
NOTE 17:  Revaluation reserves          
Asset Revaluation Reserves              
Opening Balance 27,988 27,989 37,633 37,452 37,452 37,452 37,452
Net revaluations              
Land and buildings 2,386 ..  55 ..  ..  ..  .. 
State highways 2,559 ..  ..  ..  ..  ..  .. 
Electricity generation assets 1,419 ..  ..  ..  ..  ..  .. 
Other assets 3,505 ..  ..  ..  ..  ..  .. 
Total Net Revaluations 9,869 ..  55 ..  ..  ..  .. 
Transfer to taxpayer funds (224) ..  (236) ..  ..  ..  .. 
Closing Balance 37,633 27,989 37,452 37,452 37,452 37,452 37,452

Notes to the Forecast Financial Statements

($ million) 2006 Actual 2007 Previous Budget 2007 Forecast 2008 Forecast 2009 Forecast 2010 Forecast 2011 Forecast
NOTE 18: Core Crown
Reconciliation of Core Crown Forecast Net Cash Flows from Operations with Forecast Net Cash Proceeds from Domestic Bonds (flows of the NZS Fund and GSF are excluded)
Core Crown Cash Flows from Operations
Total tax receipts 50,507 51,499 52,412 54,187 55,923 59,622 62,497
Total other sovereign receipts 539 503 468 515 528 529 530
Forecast revenue allocation .. .. .. .. (1,000) (1,000) (1,000)
Interest, profits and dividends 1,893 1,035 1,916 1,710 1,832 1,749 1,817
Sale of goods & services and other receipts 1,449 1,387 1,465 1,372 1,382 1,389 1,361
Subsidies and transfer payments (15,357) (16,820) (16,676) (17,616) (18,193) (18,833) (19,513)
Personnel and operating expenses (28,167) (30,815) (30,616) (31,849) (32,128) (32,195) (32,252)
Finance costs (2,005) (1,781) (2,146) (2,120) (2,161) (2,111) (2,174)
Forecast new operating spending .. (320) (216) (1,386) (3,319) (5,101) (7,021)
Net Cash Flows from Core Crown Operations 8,859 4,688 6,607 4,813 2,864 4,049 4,245
Net purchase of physical assets (1,826) (1,953) (2,237) (1,233) (966) (1,025) (690)
Net increase in advances (822) (957) (1,142) (1,051) (720) (674) (683)
Net purchase of investments (389) (441) (490) (333) (209) (155) (20)
Contribution to the NZS Fund (2,337) (2,049) (2,049) (2,133) (2,326) (2,459) (2,576)
Purchase of Reserve Bank reserves (500) (500) (500) (200) .. .. ..
Forecast new capital spending .. (256) (82) (554) (464) (714) (570)
Available to Repay Debt/(Required to be Financed) 2,985 (1,468) 107 (691) (1,821) (978) (294)
Financed by:
Other net sale/(purchase) of marketable securities and deposits (2,039) 2,493 (2,842) (1,678) 2,581 1,667 (2,146)
Total Operating and Investing Activities 946 1,025 (2,735) (2,369) 760 689 (2,440)
Used in:
Net (repayment)/issue of other
New Zealand-dollar borrowing 419 (1,132) 1,994 (345) (134) 25 15
Decrease/(increase) in cash 105 (23) (115) 72 (13) (104) (12)
Issue of circulating currency 165 .. 69 34 35 35 35
Net issue/(repayment) of foreign-currency borrowing (1,801) 502 1,088 91 (174) (15) (63)
(1,112) (653) 3,036 (148) (286) (59) (25)
Net Cash Inflow/(Outflow) to be Offset by Domestic Bonds (166) 372 301 (2,517) 474 630 (2,465)
Gross Cash Proceeds from Domestic Bonds
Domestic bonds (market) 2,375 2,438 2,456 2,517 2,476 2,472 2,465
Domestic bonds (non-market) 740 406 441 .. 343 464 ..
Total Gross Cash Proceeds from Domestic Bonds 3,115 2,844 2,897 2,517 2,819 2,936 2,465
Repayment of domestic bonds (market) (2,574) (2,777) (2,777) .. (2,950) (3,102) ..
Repayment of domestic bonds (non-market) (375) (439) (421) .. (343) (464) ..
Net Cash (Repayments of)/Proceeds from Domestic Bonds 166 (372) (301) 2,517 (474) (630) 2,465
Page top