Crown accounts reflect recession, ACC liability-Mr English said

The recession and a further deterioration in ACC’s outstanding claims liability showed through in the Crown’s accounts for the seven months to January 31, Finance Minister Bill English said today.

“It is encouraging to see tax revenue and receipts tracking more in line with the December update than they were the previous month,” Mr English said. “But they are still about $500 million below the Pre-Election Update as effects of the global recession flow into the New Zealand economy.

“We expect the deteriorating global economic and fiscal situation to be reflected in the Crown’s finances through 2009. The Budget in May will take a responsible approach to managing the position we have inherited and set out a credible plan for the medium to long-term.”

The Crown accounts issued today also show that, since December, the loss on ACC’s outstanding claims liability had increased by $700 million to $3.1 billion, after an updated actuarial valuation.

“While this is largely the result of another fall in the discount rate used to calculate the cost of meeting future claims, it does feed into our operating deficit and will eventually have to be funded,” Mr English said. “It is the latest in a run of concerning information to come out of ACC and reinforces the need for government action to sort it out.”

The January accounts do not include the $385 million of additional funding required by the end of June to keep ACC’s non-earner’s account solvent.

The ACC liability contributed to an overall $5.5 billion operating deficit for the seven months to January 31. The deficit compared to a $2.6 billion surplus forecast in the Pre-Election Update and a $3.6 billion deficit forecast in the December Update.

“We have known for some time that we face the most difficult economic conditions in two generations – the new government is focused on both getting through this recession and preparing New Zealand for recovery,” Mr English said.