Smith still lying with numbers

Written By: - Date published: 12:03 pm, October 19th, 2009 - 7 comments
Categories: ACC, national/act government - Tags:

Last week, David Parker asked Nick Smith what the “whole-of-life cost to ACC of all new claims” for the last year were.

Smith’s answer surprised everyone because it made no sense. He told us that claims made last year alone would cost $7 billion over their lifes. If that were really so, ACC’s liablities would be increasing by $6 billion a year ($7b – $1b spent on new claims in the last year) due just to new claims, and that’s just not the case.

I took a look at the table Nick Smith is getting his $7 billion from (ACC annual report, p123) and discovered the trick he had used.

The $23.8 billion in future liabilities we’ve heard so much about is the present value of the future cost of all current and past ACC claims. Because money now is worth more than money in the future or, to put that another way, money you have now can be turned into more money in the future by saving it and earning interest on it, to work out the present value of a future cost you have to apply a ‘discount rate’, which is basically the interest rate.

The $23.8 billion number is present value but Smith’s $7 billion number isn’t. Apply the discount rate (5.86% – see p124) over the weighted average life of claims, and it turns out that Smith’s answer to Parker’s question should really be $3.5 billion (see p122), not $7 billion – that’s less than the government took in levies last year.

Has Smith ‘misled’ the House? No. He set out to trick us but Parker basically handed him the opportunity on a plate by not specifically asking for the present value of the whole of life cost of new claims. But this is just one more example of how we can’t trust a word that comes out of this minister’s mouth.

It can be assumed that everything Smith says is a distortion and a lie, and it all needs to be checked.

7 comments on “Smith still lying with numbers ”

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  1. randal 1
    19 October 2009 at 12:06 pm

    according to “red” hooton this morning on rnz this morning smith is on the way out anyway. looks like he has had his TURN.

  2. roger nome 2
    19 October 2009 at 12:27 pm

    Ouch randal – attacking the dude for his lies and policies are one thing, but his mental illness? Not very helpful for the public perception of people suffering from mental illnesses.

    I mean Farrar can change his girth problem, but Smith is stuck with his mental illness for life.

  3. ghostwhowalksnz 3
    19 October 2009 at 12:40 pm

    What is the amount of weekly payments that are paid that were once covered by ‘lump sums’
    That was why pay as you go covered most of the cost of injuries, with only the cost of severely injured as weekly payments.

    Guess who removed ‘lump sums’ to add to the future costs to make pay as you go unsustainable.

  4. tc 4
    19 October 2009 at 12:45 pm

    So which deckchair will the Titanic-NACT brainstrust swap around to front this sham manufactured crisis so their insurance backers can cash in on decades of public funding.
    It’s worked out well for them with Smith’s bumbling of the numbers…..now ACT can cop the blame for privatisation when the Nat’s wanted that outcome from the start.
    Scary prospect for NZ that Wodney and Wodger get to call the shots on anything really.

  5. randal 5
    19 October 2009 at 1:01 pm

    ya had to be there rogernome. hooton said it. I didnt.

  6. toad 6
    19 October 2009 at 2:16 pm

    Marty, the other possibility is that Nick Smith is too thick to understand the figures.

    Maybe he needs to ask officials to explain things to him with charts and graphs like Paula Bennett has.

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