“Blow out” more like Blowup

Written By: - Date published: 1:29 pm, October 10th, 2009 - 11 comments
Categories: ACC - Tags:

Readers of a certain age will remember an Antonioni film called Blowup. The title conceit involves a photographer who finds what appears to be a dead body in one of his photographs but when he blows the photo up to find out more all that happens is the resolution degrades. The more closely he looks the less clear things become. In the end he himself just disappears from the frame. All very existential (it was the 60’s after all)

It would be close to 20 years since I last watched Blowup but over the last few months I’ve had cause to remember it every time Nick Smith opens his mouth about the latest ACC “blow out”. Just yesterday he rode off the back of more dodgy numbers to claim that ACC is in crisis. But here’s the thing, the numbers are based on a reassessment of future costs which are then lumped together with this year’s costs to produce a shock-horror “deficit” of $12.8bn! As you can imagine Smith is already talking about cutting back coverage and the usual suspects in the media are already falling over themselves to breathlessly report this “blow out” despite having fallen for the same trick just a few months ago (I’m reminded of that old saying “Fool me once…”)

But if you were to apply the same logic to other portfolios what would it look like? Say we do the same thing with superannuation and lump all of the future costs into the one year. Why look at that, there’s no way we can fund decades worth of super out of this year’s revenues. It’s a super “blow out”! We better cut pensions to $5 a week right away!

The difference of course is that ACC could be made self-funding over time by chipping away at the backlog of historical long-term accident costs but that will take more time than the last government set aside and isn’t suitable for attacking the the system right now. After all “ACC shift to fully funded model will take a few years more than predicted” isn’t going to stir many voters into support for cutting their coverage and private sector involvement. Bollocks like “Big lift in ACC levies needed” well, that’s another story altogether.

Like Blowup the so-called crisis might be clear at first but the closer you look the less clear things become. Apart from one very clear thing, Smith’s agenda to discredit ACC and the help he is getting from Judge. Unfortunately, like Blowup, nobody seems interested in digging into the truth and, unlike Blowup, Smith won’t just disappear in a final shot as the whole farce is unveiled. In fact it looks like he’ll be given the chance to repeat this number-twisting farce again and again and again.

11 comments on ““Blow out” more like Blowup ”

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  1. IrishBill 1
    10 October 2009 at 1:36 pm

    For a more thorough analysis of the political accounting gaming than I could ever manage I recommend Rod Oram’s March piece:

    http://www.stuff.co.nz/sunday-star-times/business/2262350/Rod-Oram-ACC-the-political-claims-and-the-reality

    The current claims are only blow out redux.

    • sk 1.1
      10 October 2009 at 3:42 pm

      Thanks for the link. It is clear by now that Nick Smith does not the math ability to follow the issues. Ideology trumps all . . .

  2. Marty G 2
    10 October 2009 at 2:09 pm

    Man, Colin Espiner falls for a cheap trick every time. He even describes the supposed increase in long-term costs as a ‘loss’ this year, as if ACC spent billions more than it took in income.

    I can just imagine his eyes glazing over as someone tries to explain a change in asset and liability values vs an operating loss.

  3. Draco T Bastard 3
    10 October 2009 at 3:38 pm

    Ah, NACT lying with numbers again to push their sell out of NZ to the highest bidder.

  4. BLiP 4
    10 October 2009 at 4:12 pm

    International insurance companies must be rubbing their grubby little hands together in glee as National Ltd® sets up the privatisation of our ACC. The companies already have a battalion of their own troops stationed in the heart of the enterprise while the financially illiterate and spoon-fed media help shape the conditions for a TINA sell off.

    KiwiBank is also going through the same preparatory steps. Loans from KiwiBank are now being provided by GE Finance, one of the worst corporate citizens of the banking world. GE Finance is known internationally as usurious and New Zealand consumers are themselves already victims of its predatory tactics.

    Less than a month after tying itself up with GE Finance, KiwiBank has begun the process of easing back on its competitiveness with foreign banks by raising fixed rate mortgage interest. Frighteningly, KiwiBank tries to do it in secret.

    Bend over and lube up New Zealand – National Ltd ® hasn’t get into its stride yet.

    • BLiP 4.1
      10 October 2009 at 4:27 pm

      More on the privatisation by stealth of KiwiBank.

    • Mark M 4.2
      11 October 2009 at 7:10 am

      I think the bend over and lube up comment is more appropriate for a labour caucus meeting.

      The problem with ACC is the wide coverage.
      Every little niggle , ache or pain has the Doctor volunteering an ACC claim ,which then entitles you to further treatment you dont want or need.
      You get pills which end up unused in the cupboard.

      When a doctor claims for your treatment how do we know how much they claimed .

      As a self employed person I resent the massive premiums I pay each year .
      I have never had an accident at work nor have any of my staff

      • BLiP 4.2.1
        11 October 2009 at 2:56 pm

        I shall put aside your conempt for the medical profession as part of the irrational fear of the “thousands of public servants and others working against small business” stirred up by Crosby/Textor at the last election. Unless, of course, you have any evidence that doctors are all currupt . . .

  5. Rich 5
    10 October 2009 at 4:33 pm

    The idea that ACC has “liabilities” is really just an accounting artifact.

    ACC has predictable expenses for both existing claims and new claims. Because it covers the entire population, this isn’t going to change much (unless some disaster were to create a huge number of accident claims, like NZ buying a nuclear power station which explodes, injuring millions).

    So ACC can be fairly confident of what its costs are going to be, and can set the levies accordingly. If costs increase, then the levies can go up and if they decrease, levies can fall. There is no need whatever to “make provision” for future liabilities. It isn’t like earthquake insurance, where payments need to be salted away for a future disaster – ACCs cashflows aren’t unpredictable like that.

    The *only* reason I can see to account for ACC “liabilities” like this is in order that it can be privatised at some stage.

  6. Westminster 6
    10 October 2009 at 7:21 pm

    “Blow job” more like: A Tory blow job of the Australian insurance industry. You remember, the same industry that Key privately briefed on his real plans before he mentioned anything to the NZ public on the campaign trail. THAT Australian insurance industry. Turns out, they have the National Party on their collective knees. And just like a blow job, I guess the Tories are getting something for their efforts but nothing like the recipient’s immense pleasure.

  7. Samuel Konkin 7
    11 October 2009 at 1:19 pm

    Um… but that’s how normal insurance works – one year’s revenue needs to cover the life cost of injuries sustained in that year.

    Given that the Governments over the years have tried to change it from a PAYGO scheme to a fully-funded scheme, that is the correct estimate of the shortfall.

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