I. INTRODUCTION

17.1 This Chapter deals with the cost of the Scheme and the means of funding it. The recommendations have not been formulated by reference to a pre-determined cost. However, as noted in Chapter 5, the cost of benefits is necessarily a consideration in determining the nature of the Scheme (paragraphs 5.16-5.17). The objective has been to create an equitable compensation scheme for victims of transport accidents, within the range of costs the community can reasonably be expected to bear.

17.2 The recommendations in this Report vary in important respects from the tentative proposals put in the Working Paper. In some cases, such as compensation for non-earners’ loss of earning capacity, the changes have added materially to the cost of the Scheme. In the result, however, the estimated cost of the Scheme, according to the consulting actuary. appears to be substantially less than the cost of the existing compulsory third party insurance system assessed on the same basis. This is so despite the fact that the proposed Scheme offers a wider range of benefits, maintains periodic compensation over the whole period of incapacity and provides compensation for all victims of transport accidents subject only to very limited exclusions.

17.3 The abolition of the common law negligence action has made substantial savings possible. The main reasons for this are the exclusion of damages for non-economic loss such as pain and suffering in cases of short-term disability and the elimination of the high incidental costs of a fault-based system. The high cost of the fault-based system is increased if combined with a limited no-fault scheme such as that operating in Victoria. The cost of such a scheme, if adopted in New South Wales, would exceed that of the existing system based exclusively on fault (paragraph 17.19).

17.4 In presenting cost estimates it is appropriate to sound a note of caution. Estimates of the cost of any scheme, particularly one not yet in place, cannot be precise. Actual costs will vary according to such factors as accident and incapacity rates, general economic conditions affecting employment opportunities and the interpretation of eligibility criteria. The major assumptions on which the estimates have been prepared are summarised in this Chapter and dealt with more fully in the consulting actuary’s report, which has been published separately. ¹ The estimates should not be taken for more than they are: predictions, based on careful evaluation of relevant data from New South Wales and other jurisdictions, of the likely cost of the proposed Scheme. If the assumptions on which the estimates are based turn out to be inaccurate, the estimates themselves will be inaccurate. But the qualification also applies to estimates of the cost of existing compensation schemes since these, too, will be affected by many of the factors likely to influence the cost of the proposed Scheme. Making the appropriate allowances for the difficulties of predicting future costs, there is little doubt that the proposed Scheme is affordable by the New South Wales community and cannot simply be rejected on grounds of cost. It may have the additional advantage, when compared with the existing scheme, of producing significant savings but this is not the major reason for proposing a new compensation system.

17.5 Part IV of this Chapter examines possible sources of funds. It is suggested that the Scheme should be funded primarily out of contributions paid by owners of motor vehicles in much the same way as compulsory third party motor vehicle insurance premiums finance common law claims. Contributions on a comparable basis should be made by the Urban Transit Authority and State Rail Authority to cover the cost of public transport accidents involving their vehicles. Another source of funds that should be tapped is a levy on drivers’ licences. The objectives of safety and accident prevention should be furthered by loadings on contributions and licence fees reflecting risks created by classes of vehicles and the safety records of individual drivers. The concluding section of the Chapter considers ways in which the Commonwealth can reasonably be expected to assist in sharing the cost of the Scheme.

II. COST ESTIMATES

A. Data and Assumptions

17.6 The consulting actuary has costed the Scheme as it relates to motor vehicle accidents. Because of the relative paucity of information, it has not been possible to estimate the cost of extending the Scheme to all forms of public transport, nor is it necessary to do so. If, as we recommend, public transport authorities contribute to the Scheme the proportion of costs attributable to their activities, there will be no additional burden on privately owned motor vehicles or on drivers. Moreover, this form of contribution will not materially alter the present practice under which the public transport authorities act as self-insurers in respect of their common law liability.

17.7 In preparing the estimates, extensive use was made of experience under the New Zealand and Victorian no-fault schemes. ² One reason for this is that the nature of the compensation system affects the behaviour both of the injured and of the providers of services to the injured. Data from existing no-fault schemes outside New South Wales consequently may be a more reliable guide to the future costs of a similar New South Wales scheme than the cost of the existing third party insurance system. ³ In addition, Australian third party systems have normally recorded only the bare minimum of data needed for claims processing, premium setting and audit. The GIO has thus been unable to provide all information needed to estimate the costs of the proposed Scheme, ⁴ although use was made of GIO estimates of claims by out-of-state residents and long-term hospital and medical costs. ⁵ The Australian Bureau of Statistics was a source of information on the needs of the handicapped ⁶ and statistics published by the Traffic Accident Research Unit of the Traffic Authority of New South Wales together with the 1981 Australian Census were used to estimate the cost of death benefits. ⁷

17.8 A number of assumptions were made for the purpose of estimating costs. Among the most important were the following.

• A long-term annual rate of 400 fatalities per million vehicles has been assumed. This is an 11 per cent reduction on the 1982 rate, but an 18 per cent increase on the 1983 rate of 340 fatalities per million vehicles. In 1983 the introduction of random breath-testing had an unusual impact, unlikely to be equalled in later years. ⁸ The number of fatalities were used as a means of comparing data from different years from New Zealand, New South Wales and Victoria. This procedure was employed because admissions to hospital per fatality, and the average stay in hospital have remained fairly stable in different places and at different times despite large variations in the number of fatalities per million vehicles. ⁹
• Incapacity rates for earners were assumed to be 50 per cent higher than rates estimated from the New Zealand motor vehicle fund. ¹⁰ The principal reason for the additional allowance is to take account of a different test of incapacity under the proposed Scheme. ¹¹ It also allows for higher unemployment levels in New South Wales compared with New Zealand, although the gap has narrowed considerably since cost estimates were prepared for the Working Paper. The allowance was made after taking account of information from the Victorian no-fault scheme concerning rates of incapacity in that State.
• It was assumed that no accident victim would recover from incapacity more than five years after the accident. It was also assumed that an increase of 15 per cent would occur in the number of incapacitated people at ages 50, 55 and 60 ¹² because of the gradual deterioration in work capacity that sometimes affect older people.
• For the purpose of financing a fully-funded scheme (paragraph 17.15), it was assumed that all compensation and the costs of the Scheme would increase at 10 per cent per annum and that investment earnings of the fund would be at 11 per cent per annum. ¹³
• The administrative expenses of collecting revenue and processing claims were estimated at 9 per cent of total compensation paid. This accords with the experience in New Zealand and Victoria. ¹⁴

17.9 The Government Actuary, Mr. J H Taylor, kindly agreed to examine the costings prepared by the consulting actuary. The Government Actuary states his conclusions as follows.

We have examined the methodology and considered the applicability of the data from which the results have been derived. No independent checks on the arithmetic have been made ...

To derive his estimates, Mr. Cumpston has drawn on the experience of the New Zealand accident compensation scheme and the Victorian motor accident scheme. He has also compared these schemes in order to assess the probable variability of costs. He has had to allow for significant differences between these schemes, and between these schemes and the proposed NSW [S]cheme, and has had to take into account that the nature of a scheme affects the behaviour both of the injured and of the providers of services to the injured. Many assumptions have had to be made and these are clearly set out in the report and in the appendices to the report. These assumptions are well adduced, but there is a substantial element of conjecture. Different opinions may be held on some of the assumptions, but it is my opinion that, overall, they are not unreasonable. Their accuracy will only be determined when the data from several years of operation of the proposed [S]cheme has been accumulated. Also, I consider that the methodology is appropriate for the practical problem of deriving estimates from the available data and from the assumptions that have been made, and the estimates so obtained should be as reliable as can reasonably be expected. ¹⁵

17.10 The consulting actuary has estimated an average cost per vehicle to cover the compensation proposed in this Report, based on motor vehicle accidents, including those involving public bus transport but excluding rail, ferry and water taxi accidents. ¹⁶ Although the Scheme covers all public transport accidents, it has been assumed, in accordance with our recommendations, ¹⁷ that the costs of rail, ferry and water taxi accidents will be met from sources other than contributions paid by motor vehicle owners. For costing purposes, “motor vehicle” has been taken to mean motor vehicle or motor cycle, excluding tractors, equipment, caravans and trailers. ¹⁸ This is the definition of vehicle used by Australian and New Zealand authorities in comparing traffic accident casualty rates. Allowance has been made in the cost estimates for the costs arising from all types of motor vehicles currently subject to compulsory third party insurance, ¹⁹ and all such vehicles will continue to pay premiums under the proposed Scheme.

17.11 Some of the costs estimated by the consulting actuary are described as “not likely to be less than $X or more than $Y”. This has been done on the basis that there is only about a 16 per cent chance that the cost is less than the lower figure and only about a 16 per cent chance that the cost is more than the higher figure. The 16 per cent chance level was used by the consulting actuary because the “normal” probability distribution is such that there is about a 16 per cent chance that random fluctuations will result in the outcome being more than one standard deviation above the mean, and an equal chance that the outcome will be more than one standard deviation below the mean. ²⁰ The Government Actuary has commented on this approach to the “high” and “low” estimates as follows.

In addition to his ‘best’ estimate, Mr Cumpston has estimated a range within which he would expect the actual cost to lie. This range is calculated assuming an underlying statistical distribution of the derived estimates. This assumption may not be completely borne out in practice. It represents an attempt to quantify the variability likely to appear from the many factors which will affect the outworking of the scheme. ²¹

B. Costing Alternatives

1. Pay-As-You-Go Scheme

17.12 A “pay-as-you-go” scheme is one in which the costs of today’s accidents are met from future contributions, as benefits become payable or are provided. The costing of the proposed scheme on a pay-as-you-go basis uses the long-term or “plateau” cost, allowing for administration costs of 9 per cent, but ignoring inflation and changes in the number of vehicles. ²² The following table indicates the estimated cost per vehicle of the proposed Scheme, broken down by type of benefit (including an allowance for safety and prevention).

Table 17.1: Estimated Costs of Transport Accidents Scheme: Pay-As-You-Go Plateau Costs

New South Wales June 1984

	Cost Per Vehicle ($)
Type of Expenditure	“Low” Estimate	“Best” Estimate	“High” Estimate
Compensation for loss of earning capacity	53	66	79(b)
Rehabilitation services	4	6	8
Support services	17	24	31
Compensation for permanent disability	12	15	18
Compensation in respect of death	19	22	25
Hospital, medical and ancillary services	34	42	50
Safety	2	2	2
Total	150(a)	177	204(b)

(a) The “low” and “high’ estimates (paragraph 17.11) for total expenditure are not the totals of these estimates for each expenditure, as estimation errors were assumed to be only partially correlated. For example, if compensation for loss of earning capacity is higher than the “best” estimate, this will not necessarily be also true for compensation in respect of death. See Actuary’s Report, para. 10.4.

Source: Actuary’s Report, para.10.2.

17.13 The estimated cost per vehicle on hospital, medical and ancillary services is based on the assumption that all such expenses will be met by the Scheme, although it is recommended in Chapter 13, that medical and hospital services should be provided through the Medicare system. If the Commonwealth meets the costs of medical services provided through Medicare, and pays contributions to public hospitals at the levels it normally pays for non-compensable patients as recommended, ²³ the cost per vehicle would be reduced by about $24 per annum. ²⁴ The “best” estimate contribution would then be $153 per vehicle per annum. If the Commonwealth’s subsidy to the Scheme were less, the reduction in the contribution would be less.

17.14 One of the features of a pay-as-you-go scheme providing periodic compensation is that it takes a considerable time before the plateau is reached. In its early years the proposed Scheme will be very inexpensive and even after 10 years will reach only 64 per cent of the plateau cost. The build-up of payments per vehicle on a plateau cost of $177, assuming no inflation or changes in vehicle numbers from 30 June 1984, is as follows.

Table 17.2: Transport Accidents Scheme: Build-up of Pay-As-You-Go-Costs to Plateau

New South Wales 1985-2024

Year	Pay-as-you-go cost ($)	Proportion of Plateau cost
1984-85	38	21
1985-86	65	37
1986-87	83	47
1987-88	94	53
1988-89	99	56
1993-94	114	64
2003-04	134	76
2013-14	150	85
2023-24	163	92

Source: Actuary’s Report, para.10.6

2. Fully Funded Scheme

17.15 In a fully funded scheme, each year’s contributors meet the cost of all compensation to be paid or provided as a result of that year’s accidents, after allowing for investment earnings likely to accrue before payments have to be made. Assuming 10 per cent per annum inflation and 11 per cent per annum investment earnings, the estimated average annual contribution per vehicle for the scheme on a fully funded basis, as at 30 June 1984, is $160. The “low” estimate is $135, the “high” estimate $185. ²⁵ The fully funded estimate is lower than the equivalent pay-as-you-go plateau figure, because returns on investments can reasonably be expected to exceed the rate of inflation of compensation costs. ²⁶

3. The Existing System

17.16 The present third party system is using investment income from the existing fund to reduce premiums below a pay-as-you-go level. While this practice has enabled the Government to reduce motor vehicle third party insurance premiums ²⁷ and will help to keep them low in the short-term, there will inevitably be a need for substantial increases in the (not too distant) future. In short, current compulsory third party premiums are unrealistically and misleadingly low. The consulting actuary has calculated the average premium per vehicle now being charged at $141. ²⁸ This is only possible because of the use of investment income permitting an artificial reduction in premium of approximately $63 per vehicle. ²⁹

17.17 If the existing system was operated on a proper pay-as-you-go basis the estimated cost per vehicle is $225 per annum. ³⁰ This compares with $177 per vehicle per annum for the proposed Scheme on the same basis (paragraph 17.14). The cost of the existing system on a fully funded basis is estimated at $235 per vehicle per annum. ³¹ The higher cost of the current scheme on a fully funded rather than pay-as-you-go basis reflects the assumption that the rate of inflation of common law claims will continue to exceed investment earnings as has occurred in recent years. ³² This is in contrast to the proposed Scheme, where claims inflation is assumed to be slightly lower than investment earnings, making it less expensive fully funded than on a pay-as-you-go basis (paragraph 17.8). The reason for this assumption is that the experience in New Zealand suggests that benefits under the Scheme, which are linked to AWE, will increase broadly in line with wage movements. ³³

17.18 If the present method of funding was applied to the proposed Scheme, the cost per vehicle per annum would be $114. This figure is reached by deducting from the pay-as-you-go “best” estimate of $177 the current deduction derived from investment income of $63. ³⁴ It compares with the current average premium of $141 per vehicle per annum. We mention this merely for the purpose of comparison. We do not recommend the current method for the reasons given in paragraph 17.16 and regard the only feasible alternatives as pay-as-you-go or fully funded.

4. Dual Scheme-Limited No-Fault/Common Law

17.19 One further comparison should be made. Chapter 6 has explained the advantages of a pure no-fault scheme over a dual scheme, such as the Victorian scheme which combines a limited no-fault scheme with the common law negligence action. The reason for making a careful comparison of the two approaches was the support given to the dual scheme, particularly by professional bodies in New South Wales and Victoria. To complete the comparison an estimate was made of the cost of establishing a scheme in New South Wales which provides benefits equivalent to those available in Victoria. The consulting actuary estimates the pay-as-you-go plateau cost of such a scheme in New South Wales at $255 per vehicle per annum, while the fully funded cost would be about $285 per vehicle per annum. ³⁵ These estimates were made on the assumption that the 5 per cent discount rate and other statutory restrictions introduced in New South Wales in 1984 ³⁶ would not apply, since the restrictions have not been adopted in Victoria. The estimates suggest that the cost of a dual scheme would exceed that of the existing common law system and would be substantially greater than the proposed Scheme.

5. Interstate Aspects of the Scheme

17.20 The costings prepared by the consulting actuary are based on estimated annual motor vehicle accident fatalities and injuries in New South Wales. The proposed Scheme extends to death or injury outside New South Wales, where the person killed or injured is a resident of New South Wales and the death or injury is caused by or arises out of the use of a New South Wales vehicle. ³⁷ However, some people killed or injured in motor vehicle accidents in New South Wales will not come within the Scheme, although we propose elsewhere that there should be discussions with interstate authorities to prevent anomalies arising. For example, the Scheme does not apply where the person killed or injured is not a New South Wales resident and no New South Wales vehicle is involved. Thus the cost of implementing the additional class of claimants will be offset, to a substantial extent, by savings in not compensating certain victims of accidents occurring in New South Wales. In addition, the set-off provisions of the Scheme, which will apply to interstate sources of compensation, will provide some savings for the Scheme. A further factor is that cooperative arrangements, especially with neighbouring States and the Australian Capital Territory, are likely to minimise the costs associated with accidents occurring outside the States. In the circumstances, no additional allowance has been made for the extension of the Scheme to some New South Wales residents killed or injured outside the State.

17.21 There is one cost to the Scheme, associated with interstate accidents, which is not offset by any equivalent savings. We have recommended that the owner and/or driver of a New South Wales registered vehicle, who is held liable in a common law action in another State or Territory, should be indemnified by the Corporation against the damages claim. Since this is not a cost of compensation under the Scheme it does not form part of the costing. However, it will add to the overall cost of the Scheme. The cost of indemnifying New South Wales owner/drivers against out-of-State claims is estimated by the consulting actuary at 2 per cent of the total cost of the Scheme ³⁸ and thus might add approximately $3-$4 per vehicle per annum to the cost of the Scheme.

6. A Comparison

17.22 Table 17.3 sets out the estimates of average annual contributions or premiums required for the proposed, existing and dual schemes in New South Wales.

Table 17.3: All Schemes Cost Estimates: Cost per Vehicle per Annum

New South Wales June 1984

Type of Scheme	“Low” Estimate	“Best” Estimate	“High” Estimate
Proposed Transport Accidents Scheme(a)
Pay-as-you-go	150	177	204
Funded	135	160	185
Existing Compulsory Third Party Insurance Scheme
Pay-as-you-go	210	225	240
Funded	190	235	280
Dual Scheme-Limited No-fault/Common Law(b)
Pay-as-you-go	235	255	275
Funded	230	285	340

(a) Account will need to be taken of the cost of providing third party coverage in respect of interstate accidents (para. 17.20). However, to the extent that the Commonwealth is prepared to meet expenses incurred through Medicare (para. 17.13), costs will be reduced.

(b) Based on benefits available in Victoria.

Source: Actuary’s Report, para.1.39.

III. FULLY FUNDED OR PAY-AS-YOU-GO?

17.23 The Working Paper expressed a preference for a fully funded scheme. ³⁹ While the choice should make little difference to the long-term cost of a compensation scheme, ⁴⁰ it was suggested that payment by this year’s motorists (or other contributors) of the cost of this years accidents would be more equitable than placing the costs on future generations. Regard was also had to submissions from private insurers and others contending that the Scheme should be fully funded. ⁴¹

17.24 After further consideration, we have concluded that the Scheme should be conducted on a pay-as-you-go basis, with a reasonable reserve of, say, one year’s contributions being maintained to guard against disasters or unexpected contingencies. A fully funded scheme is clearly Justified where private insurers provide cover without government support since the fund guarantees (or should guarantee) against insolvency. However, if the Scheme is publicly funded and administered, there is no compelling reason to create a fund to meet future claims. It can be assumed that future governments will provide the resources necessary for this purpose. Nor is a fully funded scheme immune from the impact of unexpected additional costs that can affect a pay-as-you-go scheme. Unexpected cost increases will require premium contribution adjustments whatever the method of funding.

17.25 The Australian Woodhouse Committee accepted that the proposed national compensation scheme should be operated on a pay-as-you-go basis. ⁴² More recently one commentator has noted a general trend in several countries towards pay-as-you-go funding, particularly for publicly financed schemes. ⁴³ The recent changes in New South Wales to the formula for setting compulsory third party insurance premiums reflect this trend. ⁴⁴ These changes also presumably reflect a judgment that it is not essential for the State to have a continually growing third party fund for investment purposes. A further important consideration is that a new Transport Accidents Scheme will need to provide for the residue of claims under the compulsory third party insurance system. Since the third party fund maintained by the could be insufficient for this purpose, transitional arrangements will be very much easier to implement if the Scheme is conducted on a pay-as-you-go basis under which the costs in the early years will be relatively low (paragraph 17.14). Accordingly, we recommend that the Scheme should be funded on a pay-as-you-go basis, with reasonable reserves set aside to guard against disaster or unexpected contingencies.

IV. MAJOR REVENUE SOURCES

17.26 While the proposed Scheme has been costed simply on the basis of contributions from motor vehicle owners, this is not the only source of funds. This section considers the major source of reverie that should finance the Scheme and thus provide compensation for Transport Accident victims.

A. Contributions from Motor Vehicle Owners

17.27 In New South Wales, as has been seen, payments made in common law claims arising from personal injuries in motor vehicle accidents are generally funded from compulsory third party insurance premiums. Premiums collected from motorists in the State for 1983 were estimated to be $427 million. ⁴⁵ The payment of premiums, which vary according to the vehicles classification and the district in which it is usually garaged, is a condition for registration. ⁴⁶ It is an offence to drive a vehicle on a public street without such insurance. ⁴⁷ There are few exceptions to this requirement. Even State-owned vehicles are required to comply, unless exempted by the regulations. ⁴⁸ The regulations exempt only State-owned buses, ⁴⁹ motorised pedal cycles ⁵⁰ and visiting vehicles so long as they carry equivalent insurance in another Australian State or Territory. ⁵¹ Commonwealth-owned motor vehicles are also outside the Act.

17.28 The primary source of funds for the Scheme should be contributions of a kind similar to existing compulsory third party insurance premiums, although of course the purpose of the contributions would not be to provide coverage against possible common law claims. The collection machinery already operates effectively; the community is familiar with, and appears to accept, a levy on vehicle ownership as a means of funding the costs of motor vehicle accident compensation and the transition to a new scheme could be implemented without disruption to the present system of collecting premiums. In Chapter 14 it was suggested that “motor vehicle” should be defined, for the purposes of the Scheme, in the terms of the Motor Vehicles (Third Party Insurance) Act, 1942 (paragraph 14.4). ⁵² Consequently, contributions under the Scheme will be paid by the same motor vehicle owners who now pay compulsory third party insurance. If the Scheme were extended to other forms of transport, it would be necessary to develop additional procedures for assessment and collection of premiums. This would be required if, for example, the Scheme were extended to privately owned ferries and water taxis, as suggested in Chapter 14, or to other forms of transport such as bicycles. We recommend that the primary source of funding for the Scheme should be contributions payable on registration of motor vehicles and of other forms of privately owned transport, using where appropriate the same procedures as now apply to the payment of compulsory third party motor vehicle insurance premiums.

17.29 At present compulsory third party premiums vary according to such factors as the nature of the vehicle, whether the vehicle is used for commercial purposes and the district where the vehicle is normally garaged. Table 17.4 sets out the premium levels for selected classes of vehicles on both the current costing basis and on a pay-as-you-go basis (see paragraph 17.30). The Table also sets out estimated contributions for the proposed Scheme calculated, in each case, on a comparable basis.

Table 17.4: Motor Vehicle Accident Compensation: Premium Comparison^(a)

New South Wales 1984

			Annual Premium on current Costing Basis		Annual Premium on Plateau Pay-as-you-go Basis
Class	Type of Vehicle	Premium District Where Normally Garaged	Existing System (Actual)	Proposed System (Estimate)	Existing System (Estimate)	Proposed System (Estimate)
1	Motor Vehicle	Sydney Metropolitan and Wollongong	158	128 (b)	253 (b)	199 (b)
1	Motor Vehicle	Newcastle and Elsewhere	138	111	220	173
3	Goods Vehicle with and unladen weight of over 2 tonnes	Sydney Metropolitan and Wollongong	320	259	512	403
6	Regular omnibus seating and over 16 adults	Sydney Metropolitan and Wollongong	498	403	797	627
6	Regular omnibus seating over 16 adults	Newcastle	411	333	658	517
7	Taxi-cab	Sydney Metropolitan and Wollongong	1086	880	1739	1368
10	Motor cycle with and engine over 300 ml.	Sydney Metropolitan and Wollongong	158	128	253	199

(a) This Table compares existing and estimated premiums under the compulsory third party insurance system with equivalent estimated premiums for the motor vehicle component of the proposed Transport Accidents Scheme.

(b) According to the Actuary’s Report (para.11.2), the average premium is about 89 per cent of the premium for class 1 metropolitan motor cars. The relevant estimate for a class 1 metropolitan motor car was therefore obtained by dividing the average estimate by 0.89. Other estimates were obtained by using the table in Schedule 1 of the Motor Vehicles (Third Party) Insurance Act, 1942.

Source: Columns 1-4: Motor Vehicles (Third Party Insurance) Act, 1974 - Table of Premiums, 1 July 1984. Columns 5-7: Actuary’s Report, paras.10-2, 10.9 and 11.1-11.3.

17.30 Several points should be noted about Table 17.4.

• Current premiums are not the result of any recognised costing approach and have been made possible by substantial drawings on investment income (paragraph 17.16). Current premiums therefore give a misleading picture of the true cost of the existing system. The estimated cost of the proposed Scheme on the current costing is equally misleading, but the figures are included for comparative purposes.
• The pay-as-you-go estimates give a more realistic assessment of the cost of the respective schemes. To the extent that the proposed Scheme relies on sources of funds other than contributions from motor vehicle owners, it will be possible to reduce those contributions, although not the total revenue required.
• We propose later that contributions should closely reflect the risks to safety created by classes of vehicles. It is likely that the current premium classifications will be discarded if such an approach is adopted.

B. Contributions from Public Transport Authorities

17.31 Public transport in New South Wales is administered by the State Rail Authority and Urban Transit Authority. ⁵³ These services are not covered by compulsory third party insurance and both authorities act as self-insurers. ⁵⁴ It is reasonable to expect that the authorities which have provided funds to meet common law claims arising out of public transport accidents, should meet the cost of compensating the public transport accident victims under the Scheme. For this purpose, the authorities could continue to act as self-insurers. However, it would assist the orderly administration of the Scheme if the authorities were required to make a contribution to the Scheme calculated by reference to the number of public transport accidents in which the relevant authority’s involved and the cost of meeting claims arising out of those accidents. Accordingly, we recommend that the State Rail Authority and Urban Transit Authority should be required to make an annual contribution to the Scheme assessed by reference to the cost of meeting claims arising out of accidents in which each Authority is involved. The exact level of contribution will need to be the subject of negotiations between the Government, the Corporation and the relevant Authority. The negotiations should take into account the extent to which other vehicles are involved in public transport accidents, but not so that a disproportionate burden is placed on private vehicle owners or drivers.

C. Levy on Drivers’ Licences

17.32 There were 3,274,999 drivers’ licences current in New South Wales on 30 June 1983. Table 17.5 shows the numbers holding each category of licence as at that date.

Table 17.5: Drivers’ Licences: Number Issued

New South Wales 30 June 1983

Category of Licence	Number of Licences in Issues
Class 1: Motor car	2,478,189
Class 2: Motor car and public vehicle not registered under the Transport Act, 1930	6,493
Class 3: Includes class 1, and motor lorry in excess of 2 tonnes unladen	323,557
Class 4: Includes class 3, and public transport buses not registered under the Transport Act, 1930	43,122
Class 5: Any vehicles except those registered under the Transport Act, 1930	121,084
Motor cycle rider	282,388
Taxi-cab driver	20,166
TOTAL NUMBER OF LICENCES	3,274,999

Source: Commissioner for Motor Transport, Annual Report 1982-83, p.17

An exact figure for the amount of revenue received from licences is not readily available, because the records of the Department of Motor Transport combine licence fees, registration fees and certain other fees. We estimate the total licence revenue for 1982-83, using the figures in Table 17.5, at approximately $48.3 million.

17.33 Licence fees are not currently used as a source of finance for the compulsory third party insurance system. However, there are good reasons why such fees should be used for this purpose. A levy added to the fee payable on issue or renewal of drivers’ licences would mean that the total motoring population, rather than motor vehicle owners and public transport authorities, would contribute to the Scheme. ⁵⁵ At present a substantial number of drivers make no direct financial contribution to the compensation system. Moreover it would provide a basis for imposing loadings on drivers whose record is such that they pose a threat to safety. We recommend that the Scheme should be financed, in part, by levies on the issue or renewal of drivers’ licences. We do not think it appropriate to suggest the size of the levy. Obviously, the greater the levy the less the contribution required from motor vehicle owners.

D. Fines from Motoring Offences

17.34 Substantial amounts are collected each year from fines imposed for offences involving motor vehicles. The total receipts from fines and forfeitures under the Transport and Motor Traffic Acts during 1982-83 were $65 million. ⁵⁶ This may not include all revenue from fines for motor vehicle offences, since some offences are created and dealt with under other legislation One view is that the link between the compensation system and offences committed by drivers and other road users is insufficiently direct to justify a levy. An alternative view was expressed in a submission:

... revenue gained from traffic fines should be used to offset some of the costs of accident compensation. The reason for this proposal is that traffic fines are regarded as being an expression of the community’s sanctions against driving behaviour which is perceived as posing an unacceptable risk of injury to others in the community. ⁵⁷

17.35 The financial viability of the Scheme does not depend on the imposition of a levy on fines for offences involving motor vehicles. Nonetheless such a levy would emphasise that reckless, dangerous or careless driving creates a risk of death and injury and that people guilty of such behaviour should meet a higher proportion of the cost of compensating transport accident victims. A levy on fines thus has some attractions. However, a more convenient approach would be to adjust the levy on the issue or renewal of licences to take account of the driver s record. At this stage we do not propose a levy on fines, but regard it as an option to be kept under review.

E. Motor Fuel Tax

17.36 The Working Paper raised the possibility of relying on a motor fuel tax as a source of revenue for the Scheme. During 1982-83 tax on motor fuel collected in New South Wales amounted to $166.6 million. ⁵⁸ Funding from a fuel tax has the theoretical advantage that the greater the distance a person travels the larger his or her contribution to the compensation fund. Since the risk of being injured in an accident tends to increase with the distance travelled on the road, a higher contribution from such a person may be warranted. However, the use of a fuel tax for compensation purposes raises a wide range of issues, including questions of Commonwealth-State financial relationships. As there are adequate sources of revenue available, we do not think that it is necessary to propose that the fuel tax be used to finance the proposed Scheme.

F. Review of Revenue Sources

17.37 We have proposed that the sources of revenue for the Scheme should be:

• contributions from motor vehicle owners;
• contributions from public transport authorities; and
• a levy on the issue and renewal of drivers’ licences.

The mix of revenue sources may well vary over time, depending on government priorities and the financial requirements of the Scheme. We recommend that the Corporation should keep the question of revenue for the Scheme under close review and make any proposals it considers appropriate in annual reports or reports to the Minister. Contributions to the Scheme should be set by the Government, after receiving advice from the Corporation.

V. RISK FACTORS, SAFETY AND FUNDING

A. Introduction

17.38 Earlier Chapters have emphasised the paramount importance of accident prevention. ⁵⁹ While other agencies will be responsible for specific safety programs, this emphasis is reflected in the corporation’s role in collecting and analysing transport accident statistics for safety and prevention purposes and in supplementing the work of existing road safety authorities. The Scheme’s commitment to safety and prevention is further demonstrated by an allowance for this purpose of $2 per vehicle per annum in the costing. On current registration figures such an allowance would yield over $5.5 million to permit the Corporation to promote safety and prevention in relation to private and public transport.

17.39 It has been argued that a justification for the common law negligence action is that it promotes safety, by imposing liability for negligent conduct causing injury. But as explained in Chapter 3, the Compulsory third party insurance system has effectively removed the deterrent effect of the threat of common law liability. In practice a driver who is “at fault” is not personally able to pay damages to the accident victim. Indeed the only financial incentive to safety in the present system, apart from the threat of criminal sanctions for careless or reckless behaviour, is the risk incurred by a careless driver that he or she will be held responsible for an accident and thus denied compensate in whole or part for any injuries he or she sustains. There is no evidence of which we are aware that this risk is more likely to motivate people to avoid accidents than the desire to avoid personal injury and the imposition of criminal sanctions.

17.40 Furthermore, under the current system compulsory third party insurance premiums are levied on a flat-rate basis, according to broad vehicle classification and place of garaging. Premiums are unrelated to the accident or safety records of individual drivers or owners and are not related systematically to the safety records of classes of vehicles. This means that a safe driver obtains no direct financial advantage in relation to third party insurance premiums, while an unsafe driver incurs no penalty or loading. An owner of a vehicle of a kind which creates a high risk of accidental death or injury generally pays no more in premiums than the owner of a low risk vehicle. Thus the assessment of premiums contains no direct financial incentive to safety and makes no systematic attempt to sheet home the cost of accidents to those drivers or motor vehicle owners who create or are exposed to disproportionate risks. If the proposed Scheme were to adopt the same approach to the assessment of contributions, it would suffer from the same defects. In our view the funding mechanisms for the Scheme should attempt to promote safety and to reflect more accurately the risks created or borne by individuals and classes of drivers or motor vehicle owners.

B. Vehicle Risk Classifications

17.41 Accurate statistics relating to transport accidents and their consequences will show that certain types of vehicle are more likely to be involved in accidents causing death or injury than others. For example, the Tasmanian Motor Accidents Insurance Board has recorded a disproportionately high incidence of injury among motor cycle drivers and passengers. ⁶⁰ It is likely that different makes of vehicle, or vehicles with different engine capacities, have varying rates of involvement in serious accidents. Sometimes this will be because the vehicle has been manufactured without sufficient regard to occupant safety or the safety of other parties involved in a potential collision. This does not necessarily mean that the drivers of these vehicles are especially unsafe drivers-the incidence of injury may reflect the particular vulnerability of one party to an accident For example, a motor cyclist is more vulnerable to injury from environmental factors, such as bad roads or oil spills on the road. Similarly, where a large truck is involved in an accident with a car, its size is likely to result in more serious injury to the car occupants than if the accident occurred between two cars. Even if a driver is very careful, the incidence of injury arising from the use of a particular type of vehicle may be higher because of factors unrelated to driver skills. A particular colour car, for example, may be more difficult to see and therefore be involved in more accidents, or a design feature may make it more likely that occupant injury will occur.

17.42 While some submissions supported reliance on the use of risk-related premiums from motor vehicle owners, ⁶¹ others criticised such an approach. ⁶² For example, the Motor Cycle Council of Australia stated that

[t]he scheme pays compensation to all its participants without regard to fault Therefore, premiums should be levied in a way which does not imply that any user group is relatively more or less “responsible” for accidents than any other user group. The assessment of premiums on a risk basis implies exactly such “responsibility” and serves to divert attention from genuine road safety needs. 63

However, there is nothing inconsistent with the principle of no-fault compensation in assessing contributions by reference to risk factors. Many forms of insurance, where fault is irrelevant, take precisely this approach in setting premiums. Household property insurers, for example, take into account the location of the house, since the risk of theft is greater in some areas than others. Workers’ compensation premiums, which mainly relate to no-fault benefits, are determined by reference to industry risks. Premiums in respect of comprehensive insurance coverage for motor vehicle owners vary according to a variety of factors including the make of vehicle and the age of the driver.

17.43 A compensation system, within the limits of practicability, should provide the maximum incentives to safety. A separate, although related principle, is that those undertaking high risk activities should bear a greater share of the compensation burden. These principles lead us to conclude that contributions from motor vehicle owners should reflect fairly the risk of accidental death or injury created by the use of particular classes of vehicles. Contributions should vary. for example, among different makes and kinds of vehicles according to the frequency of their involvement in accidents resulting in death or injury and the relative severity of those accidents. Adjustments of this kind are likely to have a positive, although not dramatic impact, on safety. A manufacturer whose vehicles attract heavier contributions because they are relatively unsafe may suffer a market loss to a competitor whose vehicles are safer and thus cheaper to operate. A purchaser of a motor vehicle may prefer a small car rather than a motor cycle because the former is safer to operate and attracts a lower contribution to the Scheme.

17.44 We do not suggest that the level of contributions will always be an important influence in determining insurers’ behaviour. There are clearly many factors other than contributions that are taken into account in deciding which means of transport to use. Nor will it be a simple process to set contributions, since detailed statistics must be collected to assess the risks and identify the relevant variables that should be taken into account. Moreover not all variables can be reflected in the contributions required from motor vehicle owners. Nonetheless, the effort should be made to ensure that contributions correspond to the risk, if only to emphasise the overriding importance of safety. Accordingly, we recommend that contributions to the Scheme from motor vehicle owners should be assessed taking into account the risk of accidental death and injury associated with the use of particular classes of vehicles.

C. Driver Risk Ratings

17.45 We recommended earlier that a source of funds for the Scheme should be a levy on the issue or renewal of drivers’ licences (paragraph 17.33). Because licences are issued to individuals, such a levy could take into account the individual driver’s record. This method of funding ⁶⁴ and the use of penalty ratings ⁶⁵ were favoured in submissions. Such a rating need not depend solely on accident or injury experience, but could also take account of convictions for driving offences. In this way, penalty ratings could be seen as a deterrent to unsafe driving and thus as a preventive measure.

17.46 In New South Wales a person’s driving record is related to his or her licence, for certain purposes, through the “points” system. ⁶⁶ Points are deducted from a licence holder who is found guilty of various offences. ⁶⁷ If a licence holder loses 12 points in a two year period, the Commissioner for Motor Transport cancels or suspends the licence. ⁶⁸ In the case of a provisional licence holder, conviction of any offence usually leads to cancellation of this licence for a period. ⁶⁹ In its recent second report, the STAYSAFE Committee of the New South Wales Parliament recommended a review of this system to ensure that

[t]he present points system [includes] maximum demerit points for obviously safety related offences. ⁷⁰

This system may well provide a basis for penalty loadings on licences. However, it would also be necessary to take account of offences for which no points are deducted, but which involve fines or licence disqualifications. It would also be desirable to take account of a drivers accident record, although this may create greater administrative difficulties than a system concentrating on convictions for driving offences. We recommend that levies on the issue or renewal of licences include penalty loadings to take account of driving offences committed by the licence holders or poor accident records. Since such a system would be novel, it may not be feasible to introduce it until after the Scheme has commenced.

D. Public Transport Authorities

17.47 Public transport agencies have a substantial financial incentive to maximise safety and prevent accidental injuries and death, even under the existing system, since they operate as self-insurers. This means that they bear the costs of compensating accident victims out of their own resources. As we propose that this arrangement should continue under the Scheme the public transport authorities will retain an incentive to promote safety and minimise compensation costs.

VI. OTHER FUNDING SOURCES

A. Course of Employment and Journey Accidents

17.48 In Chapter 14 we recommended that the proposed Scheme should not affect rights under the New South Wales workers’ compensation system (paragraph 14.79). We also recommended that a worker sustaining a transport accident in the course of his or her employment, or on the way to or from work (a “journey" accident), should have a right to elect whether to retain workers’ compensation benefits or apply for benefits under the Scheme (paragraph 14.89). We proposed that the cost of course of employment and journey transport accidents should be shared between employers and their insurers and the proposed Scheme in roughly the proportion such claims are currently divided between the workers’ compensation and compulsory third party insurance systems (paragraph 14.80).

17.49 On this approach, the cost to the Transport Accidents Scheme of course of employment and journey accidents will not depend simply on the extent to which workers elect to come under the Scheme. Rather it will depend on the terms of the cost-sharing agreement negotiated between the Corporation and workers’ compensation employers and insurers. The consulting actuary has estimated the costs of the Scheme taking into account the recommended approach for meeting the cost of compensating workers injured in course of employment or journey transport accidents. ⁷¹

B. Interstate Accidents

17.50 A person may be injured or killed in a transport accident outside New South Wales and have rights to compensation under both the Scheme and under the law of another State or Territory. In these circumstances, as in the case of work-related injuries, we have recommended that the victim should have a right to elect between claiming compensation under the Scheme or from the alternative source. If the person claims under the Scheme, but has already recovered compensation from another source, that compensation is to be set off against benefits available under the Scheme (paragraph 14.92). We have also recommended that the Corporation should have power to enter into arrangements with authorities in other jurisdictions for the purpose of recoupment or exchange of benefits (paragraph 14.97). The set-off provisions, together with any cost-sharing arrangements entered into by the Corporation, will produce some financial benefits to the Scheme.

C. The Commonwealth

17.51 The Commonwealth has a vital role to play in the introduction and operation of the proposed Scheme. The Commonwealths involvement will be critical at two levels.

• First, the Scheme should apply to Commonwealth vehicles and Commonwealth employees involved in transport accidents.
• Secondly, the Commonwealth could provide financial and other support for the Scheme.

Reference has been made elsewhere to the express commitment of the Commonwealth Government to a national compensation scheme to be introduced by stages (paragraph 4.58). Clearly the active cooperation of the Commonwealth in the proposed Scheme would give effect to that commitment.

1. Commonwealth Vehicles and Employees

17.52 We have recommended that Commonwealth vehicles should be included in the Scheme. This recommendation has been made on the assumption that the Commonwealth will pay a contribution on each of its vehicles or other forms of transport (paragraph 14.15). An alternative is for the Commonwealth to meet the actual cost of paying compensation or providing benefits to persons injured or killed as the result of accidents involving Commonwealth vehicles. This alternative would put the Commonwealth in the same position as the State Rail Authority and Urban Transit Authority. It would be necessary to negotiate an agreement for the payment by the Commonwealth of a contribution reflecting the level of involvement of its vehicles in transport accidents giving rise to compensation claims under the Scheme.

17.53 Commonwealth employees are entitled to the equivalent of workers’ compensation under the Compensation (Commonwealth Government Employees) Act 1971 (Cth). Under the recommendations in Chapter 14, Commonwealth employees are in the same position as other employees injured in transport accidents, in that they have the right to choose between workers’ compensation benefits and benefits under the Scheme. It is therefore necessary for a cost-sharing arrangement to be made with the Commonwealth with regard to transport accidents in which Commonwealth employees are injured. The arrangement would determine the respective proportions of compensation costs to be borne by the Commonwealth under its workers’ compensation legislation and by the Corporation under the Scheme.

2. Commonwealth Financial Assistance

17.54 Under the current system of compensation, which relies on the common law negligence action, a large number of transport accident victims must rely on Commonwealth social security pensions or benefits for their support. In many cases the need for social security arises because the victim is unable to establish fault or because the lump sum award is (or proves to be) inadequate. In others it is created by the absence of compensation or other support during the prolonged period between the accident and final settlement or verdict. Because the Scheme provides prompt compensation on a no-fault basis, and continues periodic earnings-related compensation during the period of incapacity, transport accident victims should no longer need to rely on social security. The introduction of the Scheme should therefore produce substantial savings to the Commonwealth, although these will be difficult to quantify precisely.

17.55 In a common law damages award, compensation for loss or impairment of earning capacity is assessed on an after-tax basis. The lump sum award paid to the plaintiff is not taxable under the Income Tax Assessment Act 1936 (Cth), although assessable income derived from investment of the lump sum (should it be used for this purpose) is taxable. Subject to one exception in relation to death benefits, the Scheme compensates for loss of earning capacity on a periodic basis by reference to pre-tax earnings (paragraph 8.17). This form of compensation is likely to be taxable in the hands of the injured transport accident victims. The introduction of the scheme will therefore lead to a significant, although again not easily quantifiable, increase in income tax revenue for the Commonwealth.

17.56 The decrease in social security payments and increase in taxation revenue combine to confer on the Commonwealth substantial financial benefits from the introduction of the Scheme. A further advantage would follow if the Scheme met the cost of providing hospital, medical and related services to all transport accident victims, since some of these costs are now met by the Commonwealth, as is the case where the injured person has no right to compensation. The Working Paper proposed that the State should negotiate with the Commonwealth to allocate funds to the Scheme to take account of the benefits that would accrue to the Commonwealth. ⁷² We reaffirm this proposal, but in the context of the recommendations in Chapter 13 concerning the relationship between the general health care system (including Medicare) and the Scheme. In Chapter 13 it was suggested that the needs of transport accident victims for hospital and medical services should be met through the general health care system, rather than through a separate system as is presently the case for “compensable” motor vehicle accident victims (paragraph 13.58). This recommendation would require the Commonwealth to accept the administrative responsibility for providing hospital and medical services to transport accident victims and for ensuring that service providers are paid in accordance with the usual procedures under Medicare.

17.57 We have also suggested in Chapter 13 (paragraph 13.60) that the State and Commonwealth should enter into negotiations with a view to the Commonwealth meeting the whole or part of the cost of providing hospital and medical services to transport accident victims on the same basis as it meets the costs in relation to other sick and disabled members of the community. The justification for the Commonwealth entering into such an agreement is that the introduction of the Scheme will produce substantial savings for it and will advance the objective of moving towards a national compensation scheme. As indicated earlier, if the Commonwealth meets transport accident medical costs through Medicare and contributes to hospital costs on the basis now applied to non-compensable patients, the average annual contribution on registration of a motor vehicle would be reduced by an estimated $24, reducing it from $177 to $153. Thus, we recommend that the State enter into negotiations with the Commonwealth with a view to securing the Commonwealth’s agreement to meet an appropriate proportion of the cost of providing medical and hospital services to transport accident victims through the Medicare system.

VII. TRANSITIONAL ARRANGEMENTS

17.58 There are a number of reasons why the Scheme should apply only to accidents occurring after the date on which the governing legislation comes into force. For example, it would be impossible to meet the alms of prompt compensation and early rehabilitation in cases where injury or death had occurred prior to the introduction of the Scheme. In addition a retrospective effect would create anomalies and injustice. If the Scheme applied retrospectively only to those whose claim at common law was still outstanding (and to those who had no common law claim), this could work unfairly on those who had settled or already obtained an award of damages. If the Scheme was extended to those whose common law claims had already been paid, there would be insuperable problems in determining the amount of additional compensation if any, available under the Scheme. In any case, there must be an ultimate cut-off point which will operate to the same effect as the date of commencement, still leaving some transport accident victims outside the Scheme. Furthermore costing would be much more difficult if account had to be taken of people killed or injured before the Scheme came into operation. For these reasons the Scheme should not operative retrospectively. Therefore, we recommend that the Scheme should apply only to death or bodily injury caused by or arising out of a transport accident which occurs on or after the date on which the governing legislation comes into force.

17.59 Common law claims arising out of transport accidents in New South Wales will be abolished in respect of accidents occurring after the date the Scheme comes into effect (paragraph 14.67). However, common law claims pending at that date, or which may arise out of transport accidents occurring before that date, will have to be resolved. Thus there will be a period of some years during which the Scheme will operate alongside the residue of common law negligence actions. If, as we have recommended, the Scheme is funded on a pay-as-you-go basis, the relatively low cost in the early years would permit a large proportion of contributions to be allocated to the cost of phasing out the existing common law system. The consulting actuary estimates that if contributions are maintained at current third party premium levels and indexed in line with wage inflation, sufficient income would be generated over a period of five years, when compared with the existing third party fund, to:

• meet outstanding common law claims;
• finance the pay-as-you-go component of the Scheme during that period; and
• establish a contingency fund for the Scheme equivalent to one year’s plateau benefits. ⁷³

We do not think it appropriate to recommend the precise insurance contribution that should be levied on motor vehicle owners. It is enough to note the consulting actuary’s suggestion that the transition from the current system to the proposed Scheme could be accomplished over a period of approximately five years by maintaining contributions at their current levels, subject to indexation in line with wages movements. Should it be considered provident to provide for a contingency fund greater than one years plateau benefits or to have relatively stable contributions during the long phasing-in period, initial contributions could be set at higher levels, although these would still be substantially below the true pay-as-you-go cost of the existing system.

17.60 If the Scheme were established on a fully funded basis, an additional levy of about $30 per vehicle would be needed to meet the estimated cost of outstanding common law claims of $330 million over five years. ⁷⁴ This levy would be added to the estimated funded cost of the Scheme of $160 per vehicle per annum during the initial years of the Scheme. As explained already, the cost of outstanding common law claims could be dealt with in another way if a pay-as-you-go system of funding is adopted.

VIII. SUMMARY

Estimated Cost

17.61 The proposed Transport Accidents Scheme, like other publicly funded compensation schemes, should be financed on a pay-as-you-go basis. A pay-as-you-go system is one in which the costs of today’s accidents are met from future contributions as benefits become payable or are provided under the Scheme, subject to the retention of a fund to guard against contingencies. This contrasts with a fully funded scheme under which each year’s contributors meet the cost of all compensation to be paid or provided in the future as a result of that year s accidents, after allowing for investment earnings from the fund maintained by the Scheme.

17.62 The estimated “plateau” pay-as-you-go cost of the proposed Scheme, in so far as motor vehicle accidents are concerned, is $177 per vehicle per annum. The plateau cost is the long-term cost of the Scheme, after the phasing-in period has been completed and compensation pay outs have reached stable levels. The plateau pay-as-you-go cost of the current third party insurance system is estimated at $225 per vehicle per annum. The cost of a dual scheme, providing limited no-fault and common law benefits as in Victoria, is estimated u the same basis to be $255 per vehicle per annum. The cost of the proposed Scheme during the phasing in period when compensation payments are building up is lower than the plateau cost. The phasing-in period is very long; it will be about 40 years before the plateau cost is reached.

Sources of Revenue

17.63 The major sources of revenue for the Scheme should be:

• contributions from owners of motor vehicles collected in much the same way as compulsory third party insurance premiums are now collected;
• contributions from public transport authorities assessed by reference to the cost of meeting claims arising out of accidents in which their vehicles or forms of transport are involved; and
• levies on the issue or renewal of drivers’ licences.

17.64 Contributions from motor vehicle owners should be assessed taking into account the risk of accidental death and injury associated with the use of particular classes of vehicles. Levies on the issue or renewal of driver’s licences should include penalty loadings to take account of driving offences committed by licence holders or their accident records.

Commonwealth Assistance

17.65 The introduction of the Scheme will produce financial benefits for the Commonwealth in the form of reduced social security payments and increased income tax collections. In view of the Commonwealth Governments commitment to a national compensation scheme, the State should negotiate with the Commonwealth to secure financial and other assistance for the Scheme. The most appropriate assistance would be for transport accident victims to receive hospital and medical services through Medicare and for the Commonwealth to bear the whole or part of the cost of providing those services.

1. Actuary’s Report.

2. Id., paras.4.5-4.6, 4.9-4.10, and 4.14.

3. Id., para.4.4.

4. Id., para.4.3.

5. Id., paras.4.8, 4.11.

6. Id., para.4.13.

7. Id., para.4.7.

8. Id., para.9.2.

9. Id., para.9.1.

10. Id., paras.9.3-9.6.

11. See Chapter 7.

12. See note I above, para. 9.7.

13. Id., para.9.9.

14. Id., para.9.10.

15. Letter from Government Actuary, 13 September 1984.

16. See note 1 above, para.2.2.

17. See paras. 14.6-14.7, 17.31.

18. See note 1 above, para.2.4.

19. See paras.14.4-14.5.

20. See note 1 above, para.2.5.

21. Letter from Government Actuary, 13 September 1984.

22. See note 1 above, para.10.3 and appendix XI.

23. See Chapter 13.

24. See note 1 above, para.10.5 and appendix X2.

25. Id., para.10.7 and appendix X3.

26. Id., para.11.18.

27. As from 1 April 1984, the premium charged for a class 1 metropolitan vehicle was reduced by 6 per cent to $158.

28. See note 1 above, para. 11.2.

29. Id., para.10.8.

30. Id., para.11.9.

31. Id., para.11.17.

32. Id., paras.9.11, 11.18.

33. Id., para.9.12.

34. Id., para.10.9.

35. Id., paras.12.6-12.7.

36. See Motor Vehicles (Third Party Insurance) Act. 1942. part IIIA inserted by Motor Vehicles (Third Party Insurance) Amendment Act, 1984.

37. See para.14.49

38. See note 1 above, para.10.12.

39. Working Paper, paras.13.10-13.11.

40. The differences between the plateau pay-as-you-go cost and the funded cost will reflect variations in the rate of return on investments. If the rate is greater than growth in claims. a funded scheme (which derives substantial investment income) will prove a little cheaper. See para.17.15.

41. See eg. Submissions S37, p.2: S40, p.7: and S57, pp.34-37.

42. Australian Woodhouse Report, vol.1, para.13.

43. T.G. Ison, Accident Compensation (1980), p.115.

44. See note 1 above, para.11.1 ff.

45. Calculation derived from Actuary’s Report, para.11.2, using the GIO’s figure plus 2 per cent.

46. Motor Vehicles (Third Party Insurance) Act, 1942, s.8.

47. Id., s.7.

48. Id., s. II.

49. Motor Vehicles (Third Party Insurance) Regulations, reg.16.

50. Id., reg.16 A.

51. Id.. reg.17.

52. Motor Vehicles (Third Party Insurance) Act 1942, s.5(1); the definition of “motor vehicle” excludes “any motor vehicle which is owned by the Commonwealth of Australia or by any person or body of persons representing the Commonwealth of Australia”.

53. See Transport Authorities Act, 1980, part II. division 2: part III. division 2.

54. The Motor Vehicles (Third Party Insurance) Act 1942, s.5(1) excludes vehicles used “on railway or tramway” from the definition of motor vehicle. Public buses are excluded under the Motor Vehicles (Third Party Insurance) Regulations, reg.16.

55. As at 30 June 1983, there were 376,000 more licence holders than vehicle registrations (excluding tractors and trailers). See Commissioner for Motor Transport, Annual Report 1982-83 (New South Wales). p 21.

56. 1982-83 Report of the Auditor-General (New South Wales), part 1. p.36.

57. Submission S30, para.1 3-, see also Submission W34, p.1.

58. This is a fee charged fora petroleum wholesaler’s licence under the Business Franchise Licenses (Petroleum Products) Act 1982, s.18. The fee is assessed by references to the value of motor spirit or diesel fuel sold. See note 56 above, part 1, p.31.

59. Paragraphs 5.4-5.6, 15.24-15.25.

60. Motor Accidents Insurance Board, Annual Report for the Year ended 30 June 1982.

61. See eg. Submission W8, p.3.

62. Submissions W3; W35; and W59, p.14.

63. Submission W59, para.7.2.1.

64. See eg. Submissions W3; W23. pp.28-29; W35; W53, para. 11.5: and W89.

65. See eg. Submission W23, p.29.

66. The “points system” is an administrative tool used by the Commissioner for Motor Transport under regulation 10(1) (a) of the Motor Traffic Regulations, 1935. This section requires the Commissioner to cancel a person’s licence if the Commissioner

“is of the opinion that-

(a) having regard to such person’s record as a driver of motor vehicles or his conduct or habits, it would not be in the interests of public safety for him to hold a licence.”

The “points system” is used by the Commissioner to form his or her opinion.

67. For current list of offences and relevant points, see Leslie & Britts, Motor Vehicle Law (NSW) (4th ed), vol.2, para.8328.

68. A person whose licence is cancelled is notified of this and he or she is presented with three options’. application and granting immediately of a provisional licence for a 12 month period, cancellation of full licence for three months and reinstatement of full licence at the end of this period or appeal to a Court of Petty Sessions against the cancellation under s.22 of the Motor Traffic Act, 1909.

69. See especially, Motor Traffic Regulations, 1935, reg. 10(3 B).

70. Joint Standing Committee on Road Safety, Second Report, Car Driver Licensing and Road Safety (1984), para.6.3.4.

71. See note 1 above, appendix W.

72. Working Paper, para.14.14.

73. See note I above, para.13.7.

74. Id., paras 13.1-13.6. The actuary comments that there is “very great uncertainty” about the shortfall in the third party fund. The actual shortfall could be considerably more or less than the estimate of $330 million.