MAC sell-off: New car rego rise despite claims costs should be cut

MOTORISTS face a new $7 hit on car registration bills from July 1, as compulsory third-party insurance premiums rise despite the MAC’s moves to cut them. YOUR QUESTIONS ANSWERED

New car rego rise despite plan to cut it

• MAC sale ‘planned before election’
• Secret report urges against MAC sell-off
• Complete lack of detail in move to sell MAC

MOTORISTS face a new $7 hit on car registration bills from July 1, as compulsory third-party insurance premiums rise ahead of State Government plans to privatise the market next year.

The Advertiser can reveal that the increase will be imposed despite the state-owned Motor Accident Commission’s plan to reduce premiums if the sell-off had not been forced on it.

The MAC is the state’s sole supplier of CTP insurance and traditionally uses earnings from its $3.5 billion investment portfolio — which includes a mix of cash, property and shares — to cut charges paid by drivers as part of vehicle registration bills.

Record profits last year allowed the MAC to deliver a $38 CTP cut.

The Government insists this year’s increase, set to be announced in Thursday’s Budget, is in line with a formal recommendation made to it by the MAC board this year.

However, MAC sources say CTP premiums could have been reduced had the Government not decided to sell the insurer’s $600 million property portfolio.

The average CTP annual premium is currently $370. It is built into car registration bills along with other charges, including the $106 Lifetime Support Scheme Levy introduced last year to help support people with catastrophic injuries.

The MAC earned $41.9 million from its property investments last year, equivalent to about $30 per registered vehicle in SA. The Government intends to sell those properties in the coming 12 months, a move that MAC sources say will force higher costs on motorists to make up the shortfall.

Treasurer Tom Koutsantonis intends to allow private insurers to enter the CTP market next year in a plan that will deliver his Budget a $1.2 billion cash boost when MAC investments are sold.

He yesterday rejected suggestions the MAC board, which secretly advised the Government to keep the MAC in public hands, also recommended a drop in CTP charges from July 1.

The Government insists it received no advice from the MAC board indicating property sales should be abandoned and denies the move will have an impact on this year’s CTP premiums.

Mr Koutsantonis said CTP changes would be announced on Thursday and “the average CTP premium that will be announced by the Government will be the same as that recommended by the MAC board and by the Third Party Premiums Committee”.

Family First MP Rob Brokenshire said the Government was clearly raiding the MAC’s investments to create a return to surplus, and hitting motorists with unfairly high charges.

“This will be just another unfair cost of living hit that has been forced on motorists because of the Government’s arrogant decision to privatise MAC,” he said.

“This increase is an early example of what motorists will need to get used to if full privatisation is allowed to occur.”

Mr Koutsantonis has pledged a three-year fixed-price period beginning next year that will keep rises to about CPI.

He says it is impossible to guarantee prices will fall in a fully open market.

The fixed-price period means the impact of privatisation will only be felt after the next election.

Opposition Leader Steven Marshall said he was “very concerned” by the Government’s response to suggestions CTP bills would rise after the MAC aimed for a reduction.

“If it turns out that this Treasurer has rejected that advice and artificially inflated CTP insurance prices, then he’s got to go,” Mr Marshall said. “We know water bills are already too high.

“He’s completely out of touch with families who are doing it really tough in SA.”

Premier Jay Weatherill said the MAC asset sale plans would provide hundreds of millions of dollars which would be applied to the “good purpose” of building roads.

The MAC paid $853 million into the Government’s highways fund in December and a further $300 million is forecast to be added in 2016-17 when the CTP market is privatised.

Mr Weatherill said competition between insurers would put downward pressure on premiums.

“We’re putting in place measures to limit the increases in third party premiums,” he said.

“We have an independent assessment which says this is the best approach to take.

“It’s not unnatural for a MAC board, that has enjoyed its role in administering the scheme and investing in property assets around the nation and around the world, wanting to continue that much bigger role when we are now going to give them a much smaller role.”

Mr Weatherill said he believed the MAC privatisation could occur without legislation, meaning opponents to the sale may have no power to block it in State Parliament.

The MAC property portfolio features 12 high-quality buildings in five states, including two in SA — the Ernst & Young building on King William St and 99 Gawler Place.

On Saturday, it was revealed the MAC board advised the Government against privatisation plans and warned prices could spike if the industry were removed from public hands. The board instead proposed the Government accept a new annual dividend of up to $150 million as well as an upfront cash injection totalling several hundred million dollars.

It was yesterday revealed the Government considered a “full or partial divestment” of the MAC before last year’s election, where it promised no privatisation of essential government services.

What is the Motor Accident Commission?

The MAC is SA’s compulsory third party (CTP) insurer and provides about $360 million each year in compensation to road crash victims.

When motorists register a vehicle they pay a CTP insurance premium that is designed to provide cover for people injured in road crashes.

The MAC also manages the State Government’s road safety communications program and funds projects to bring down the road toll.

It is owned by the State Government but managed by an independent board. However, the Board is subject to direction by the Treasurer.

The MAC board includes noted financial and medical experts.

How much is the MAC worth? Where does it source its income?

The MAC uses earnings from its $3.5 billion investment fund of assets including cash, shares and property to lower CTP charges. It reported a $483 million surplus last year.

In addition, last year it gave the Government $100 million for road improvement projects.

Why is the State Government selling the MAC?

The MAC has built up investments worth $3.5 billion and uses the earnings to lower CTP.

It has assets including shares and property that are well above the amount needed to cover compensation costs to injured motorists.

The Government intends to sell these surplus assets and inject $1.2 billion into the State Budget.

From next year, the MAC will cease offering CTP and private insurers will be brought into the market. The Government says market insurers can “deliver better outcomes” than a government-run insurance agency and competition should put downward pressure on prices.

A PricewaterhouseCoopers study released in December predicted a private CTP market would boost the state economy by $308 million over the next decade as the financial sector expands.

The proposed privatisation is the state’s biggest asset sell-off since the controversial sale of ETSA Utilities for $3.5 billion in 1999.

How is the sale process progressing?

The Government is waiting on Crown law advice to determine whether legislation, and the agreement of both houses of Parliament, is required to deliver the planned MAC changes.

Premier Jay Weatherill has indicated it may not be required. The Government will undertake market sounding exercises to inform interested insurers, followed by Expression of Interest and Request for Tender processes.

The Government transferred $853 million from the MAC into own highways fund in December last year and expects to pocket another $300 million in 2016-17.

The new model will take effect from July 1, 2016.

Premium prices will remain fixed for the first three years, with CPI-like increases, and be

governed by an industry-specific CTP Regulator.

What did the MAC board propose?

The plan remains secret but is understood to advocate that the MAC remain publicly owned.

The board warned of possible rego price rises in a fully privatised market.

It offered the State Government a large upfront cash payment and proposed delivering a new annual dividend of $100 million to $150 million to the Budget.

Why has the sale become a political hot potato?

Correspondence obtained under Freedom of Information laws shows Premier Jay Weatherill, while also Treasurer in 2013, considered a full sale of MAC a year before the March 2014 election.

It is expected the once-off cash injection from MAC asset sales will assist Mr Koutsantonis’s ambition to report a return to surplus in his second Budget, to be delivered Thursday.

Family First MLC Robert Brokenshire has foreshadowed he will use State Parliament this week to call for an urgent inquiry into the MAC sale and why the alternative proposal was rejected.

Opposition Leader Steven Marshall has said the Liberals would back such an inquiry and threatened to block any legislation which may be needed to enact the MAC privatisation plan.

Mr Koutsantonis’ political rivals say the MAC sale is being used to create a “dodgy surplus” by “selling off the last piece of family crystal” after other privatisations in the past five years.