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House of Assembly - Fifty-First Parliament, Third Session (51-3)
2009-06-18 Daily Xml
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MOTOR ACCIDENT COMMISSION

Mr GRIFFITHS (Goyder) (15:01): My question is again to the Treasurer. Why has the solvency level of the Motor Accident Commission reduced in the last three months during a period that has seen the stock market rise by 25 per cent? On 4 March 2009, the Treasurer told the house regarding the solvency of the Motor Accident Commission: 'Our Motor Accident Commission is at about 100 per cent and it is doing pretty well.' However, yesterday, he said that the Motor Accident Commission was 93 to 94 per cent solvent. Since 4 March 2009, the Australian equities market has increased by 25 per cent, but, in the same time, the reduced solvency level has resulted in compulsory third party insurance premiums being increased by 8.5 per cent.

The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (15:02): It really does pain me and disturb me, the fundamental lack of understanding of a shadow finance minister about financial markets.

An honourable member interjecting:

The Hon. K.O. FOLEY: Way ahead of me, jeepers.

An honourable member interjecting:

The Hon. K.O. FOLEY: 'Jeepers', I said.

Members interjecting:

The Hon. K.O. FOLEY: I said 'Jeepers'. What were you suggesting I said?

Mr Goldsworthy: I thought you blasphemed.

The Hon. K.O. FOLEY: Blasphemed; no. I don't do that; I'm a Catholic. I often say 'jeepers willikers'. Where did that come from, Michael, by the way? Am I the only person who uses that expression? The stock market, the member says, has recovered 25 per cent in the last three months—that sounds about right—but what you would have to appreciate is that, thankfully, the Motor Accident Commission does not put all of its $1 billion plus (or whatever the number) of investments into the stock market, because if they were all in the stock market, we would have a hell of a lot worse problem than we have currently.

What we do with the Motor Accident Commission—as you do with WorkCover and Funds SA—is we have asset allocators. Now I am not sure, I think it is Frank Russell for the Motor Accident Commission, certainly Frank Russell for Funds SA. Of course, we are now transferring those funds into Funds SA. An asset allocator for an insurance company would have a more conservative asset allocation program than what you may have for Funds SA, where you tend to be more in equities than you are in other asset classes. For example, the Motor Accident Commission invests in direct property. They invest in cash and bonds and would have far more of their investments, I would assume, in bonds and cash than Funds SA would.

Those various markets have performed differently in respect of the stock market. so I will again get the member a more detailed answer. Indeed, Roger Cook, the Chairman of the Motor Accident Commission, will be in my office later today. However, I can say this: the Motor Accident Commission has been outstandingly managed, at both the corporate and board level.

One of the things we have done in this government, which the last government was not courageous enough, strong enough or disciplined enough to do, was lift premiums in our first term in government, and since coming to office, much more in line with what the Third Party Premiums Committee had recommended, so much so that, prior to the financial crisis engulfing the world, we had solvency levels at the Motor Accident Commission upwards of 160 per cent solvency.

Had we not taken that very difficult decision and introduced legislation to mandate certain targets, imagine if we had been 100 per cent solvent when the crisis hit. We would be in a very sick and sorry state at the Motor Accident Commission. The fact that it has been able to keep solvency at or near 100 per cent in the midst of the worst financial crisis it has had to manage through is an outstanding achievement.

If the member opposite looks at the premium increase for compulsory third party, it is less than the premiums committee had recommended. Also understand this: the premium increase that is recommended to us is not just a factor of financial performance in terms of the investments of the Motor Accident Commission, it is also a factor of accident numbers and serious injury. It is based on actuarial and other assumptions that are not just financially based. It is the way trends are heading in terms of accident rates, etc.

So, it is disappointing that the shadow finance minister was under the impression that all the investments of Funds SA and the Motor Accident Commission were in stocks or securities, as such, and not diversified across other asset classes. That is an alarming admission from somebody who wants to be the finance minister.

Members interjecting:

The Hon. K.O. FOLEY: Well, it is. This is a finance shadow minister who asked me why we have not had an improvement because the stock market had gone up 25 per cent, by that assuming that he thinks that everything they invest in is in the stock market. That is the ridiculous proposition put forward by the shadow finance minister, and I appeal to him to get briefed on how these funds are established, how these funds are managed and how these funds allocate their assets so that next time he will ask a more intelligent question.

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