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House of Assembly - Fifty-First Parliament, Third Session (51-3)
2009-09-10 Daily Xml
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MOTOR ACCIDENT COMMISSION

Mr GRIFFITHS (Goyder—Deputy Leader of the Opposition) (14:40): My question is for the Treasurer. Has the solvency level of the Motor Accident Commission improved since 30 June 2009, given that the Australian equities market, where a significant amount of the commission's investments lie, has risen by 15 per cent since then?

Members interjecting:

The SPEAKER: Order! Members will come to order so that all members have an opportunity to hear the question from the Deputy Leader of the Opposition.

Mr GRIFFITHS: I was speaking as loudly as I could, sir.

The SPEAKER: I know you were. The deputy leader.

Mr GRIFFITHS: My question is to the Treasurer. Has the solvency level of the Motor Accident Commission improved since 30 June 2009, given that the Australian equities market, where a significant amount of the commission's investments lie, has risen by 15 per cent since then? On 4 March 2009, the Treasurer told the house, regarding the solvency of the Motor Accident Commission, 'Our Motor Accident Commission, at about 100 per cent, is doing pretty well.' In his statement to the house yesterday, the Treasurer said that the Motor Accident Commission was 91.3 per cent solvent as at 30 June 2009. However, from 4 March to 9 September 2009, the Australian equities market has increased by 45 per cent.

The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (14:42): I am not quite sure what the point of that question is.

Members interjecting:

The SPEAKER: Order!

The Hon. K.O. FOLEY: I will come back to the house with that information. However, one would assume that, if the equities market has improved, the solvency would have improved. However, the asset allocation of the Motor Accident Commission is a conservative asset allocation. It is much more heavily into cash, bonds and other forms of assets and has a lower allocation of equities than does Funds SA, for example. But I am happy to come back and advise the house what the current solvency is at 1 September or 8 September. If we even get that information before question time ends, I am happy to share it with the member.

However, let's just remember where we have taken the Motor Accident Commission since coming into office in that we adopted a risk-free discount rate, and we also ensured that we put a proper prudential margin into the fund; that is, to align it more to the funding ratios that would be required of private sector insurance companies, a move that the former Liberal government never made. By doing that, we had actually raised, prior to the global financial crisis, the solvency of the Motor Accident Commission (CTP) Fund upwards of around 160 per cent. So, for the Motor Accident Commission to have, when the crash occurred—when the markets had been shattered by the GFC—a solvency of around the 90 to 100 per cent mark is quite an extraordinary effort.

Had the solvency been what it was when I came to office, under the former Liberal government, we would have a very, very sick Motor Accident Commission today. I do not recall the exact solvency when I came to office, but assuming it was around 100—it may have been a little less; it may have been a little higher—whatever the number was, it would be a very sick entity today if we had not put that very large prudential margin in place. So, the action of this government coming into office, ensuring that we lifted the solvency ratio of that entity, has ensured that it has been in a very strong position to weather this incredibly damaging global financial crisis.

I am confident that, particularly under the chairmanship of Roger Cook, who is highly respected on both sides of the house, and also under the leadership of Andrew Daniels, who is doing an outstanding job, we will see that entity recover and remain a very, very viable and good government business and one that the government of the day can be very confident of in terms of its solvency ratios.

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