Victoria’s government-owned compulsory third party insurer, The Transport Accident Commission, has plunged to a shock $192 million loss which has caused lots of ripples.

What Jacko has been a lot more reticent about is her $300 million hedging blunder at the Transport Accident Commission which has put a big hole in the Victorian budget not much smaller than the cost of the HIH bailout for NSW and Queensland.

Crikey picked up the 2000-01 TAC annual report last week and can report back these interesting statistics from Victoria’s compulsory third party insurance monopoly.

Gross investment income on the $5.5 billion portfolio plunged from $528 million to $104 million as percentage returns dived from 11 per cent to 2 per cent, well below the target of 7.5 per cent.

Why did this happen? “Due to the poor return recorded from international equities markets during the year. All major international equities markets recorded negative double-digit percentage returns during the year.

BUT, BUT, BUT, the Australian dollar plunged to record lows during the year and with the TAC having $717 million of their $1.2 billion foreign equity portfolio in US dollars, the plunging local unit should have been a good thing.

Unfortunately for taxpayers and motorists, there is this line in the annual report: “The TAC has adopted a policy of fully hedging against movements in the Australian dollar.”

Given that the dollar has plunged about 40 per cent over the past three years, this hedging plunder would appear to have cost us taxpayers about $300 million.

Jacko is also said to be furious with her successor as TAC chairman James MacKenzie because he has also suddenly found an extra $500 million in liabilities which, when combined with the disastrous hedging strategy, have sent the TAC tumbling to an unprecedented $192 million loss for 2000-01.

MacKenzie offers no explanation of this in his chairman’s address but the clear suggestion from the figures is that Jacko was understating future liabilities and over-stating profit.

Jacko has certainly been well and truly stitched up by MacKenzie and you can now see why she fought long and hard to get her girl, AMP director Patricia Cross, up as her replacement.

In the end Premier Steve Bracks went for the controversial MacKenzie to take over the monopoly third party insurer on top of his duties as chairman of Victoria’s WorkCover Authority and we reckon it’s a good idea.

It would be interesting to find out when the hedging strategy goes back to because MacKenzie had a three year stint as CEO of TAC in the mid-90s and could have initiated the policy himself. But as chairman the buck ultimately rests with Jackson and the dollar didn’t go into freefall until after MacKenzie had moved on.

Ironically, WorkCover invested offshore completely unhedged and the difference runs into the hundreds of millions with the dollar now at US48c and foreign holdings rocketing

Jacko is now looking a little damaged as a professional director. She was chairman of the BHP audit committee during the disastrous period from 1995 till 2000 and was on the Pacific Dunlop board from 1992 till 2000.

And it was Jackson who stood back and let the Kennett government steal $3 billion of money that actually belonged to the motorists of Victoria.

This is what Peter Coster wrote in the Insider column for the Herald Sun on my third last day as Business Editor in June 1997:

Hypocrite Stockdale raids the TAC surpluses

Having noticed that Alan Stockdale has overseen the removal of nearly $2.7 billion from the TAC since becoming Treasurer, Insider was amused to across a 1990 utterance of our chief bean counter:

“Bushy Brows” was always a righteous performer, reminiscent of bible-belt preachers as he transfixed his audience with a zealot’s eye.

In November 1990, he lectured Parliament on the moral horrors of taking money from the TAC when the Kirner Labor government proposed changing legislation.

“The money in the Transport Accident Commission is not the government’s money,” thundered Stockers.

It was “money for the protection of the future interests of people injured or maimed on our roads,” he said.

Two years later, the Kennett Government changed the law and began the stripping of the TAC surplus Stockdale warned should never be touched.

What does he say now? Nothing. The Treasurer’s press secretary was left to offer the excuse of paying out the Pyramid Building Society shareholders, a $521 million item.

The other $2.2 billion appears to have disappeared into the morass of Budget surpluses through dividends, tax equivalent payments, stamp duties and capital returns, none of which existed under Labor.

Without this $2.7 billion raid, motorists would be paying about $180 a year for their accident cover, not $265.

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Bracks even more addicted to TAC-raiding

After stealing $370 from the TAC for the budget last year – and this money actually belongs to the motorists who fund the scheme, not the government – the Bracks government will get diddly squat this year after the shock $192 million loss.

The Bracks government budget is already getting into trouble thanks to all their spending initiatives and they were quick to take a special $200 million “Accident Black Spots” dividend last year which won’t be repeated this year. And premiums are now up pushing $300 a year, although part of the rise is due to the GST.

But don’t worry if you’re injured on the Victorian roads because the TAC still has net assets of $940 million AND has the lowest premiums in Australia.

Despite the TAC’s loss, we reckon they should run a national compulsory government-owned CTP monopoly and hope this recommendation comes out of the HIH Royal Commission.

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TAC slush fund

A subscriber also emailed in this piece explaining how the Kennett government used the TAC to help reduce the size of apparent taxpayer losses and subsidies at the Grand Prix which has so far cost taxpayers almost $150 million if you include everything:

Stephen,

Further to your TAC story, an interesting sidelight is that during the years Margaret Jackson was chairman of this publicly owned traffic accident insurer it has apparently sponsored the Albert Park Grand Prix to the tune of $6.3m over six years. Not a big sum but the annual payment is around 5% of the annual TAC accident prevention program budget ($21m in 2000).

What did they get for their money? No “speed kills” signs to be seen, and in fact the TV coverage gave no TAC exposure at all yet some of the other low rent sponsors got their names in lights next to the major tobacco and booze sponsors.

Given that various financial analyses of this Grand Prix and the former Adelaide event have consistently stated that public subsidies were hidden in a myriad of accounts in various government departments, I smelled a rat. So in the time of Jeff “you don’t need laws, you have my word” Kennett I paid my money to the TAC and requested an FOI to view the study which decided that spending money on motor racing in a public park is a good way to promote road safety.

Apart from a copy of the Grand Prix program with a drink driving warning I did not get what I requested as all contact between the two publicly owned entities was “commercial in confidence”. I did speak to various employees of the TAC and the general opinion was that they were ashamed of this particular sponsorship as it was contrary to the other excellent advertising they were putting across to young drivers.

My conclusion? I feel that this was more of subsidy for the Grand Prix than a part of the TAC accident prevention program and I received no evidence from the TAC to the contrary. The other disturbing feature is that Margaret Jackson is now in partnership with the chairman of the Australian Grand Prix Corporation, Ron Walker and the head of Formula1, Bernie Ecclestone in a telco and bank venture.

Unfortunately, the TAC board does not have to face its shareholders at an AGM so they have shown that they are ready to act as a defacto government revenue agency in passing on surpluses to the government and sponsoring the Grand Prix. Two improvements that they could implement immediately is to openly declare what percentage of the compulsory third party premium is a “tax” and stop sponsoring an event that is giving the wrong road safety message to the most vulnerable.

Yours sincerely, Peter Logan

* Sources: TAC Annual Report 2000 Page 41 gives Accident prevention program expenditure $21.459m. There has only been one mention of the Grand Prix, in the 1996 report. Australian Grand Prix Corporation Annual Reports 1996 to 2000 give a summary of “Transactions with State Government Controlled Entities” section in the notes, and the TAC payment is carefully buried in there. Using their figures the estimate of the TAC payment is: 1996 $1.2m, 1997 $1.102m, 1998 $1.092m, 1999 $0.998m, 2000 $0.915m and 2001 $1m (the 2001 report will be released on last day of Parliament, as usual).

And another reader has emailed in this piece about further links between the TAC and motor racing:

TAC Promoted Speed Thrills at Calder and won the heart of Bob Jane

Bob Jane, former motor racing champ and used car salesman was known as one of the toughest men in either game. As owner of Calder Motor Raceway he negotiated for the “big” event, the Formula 1 Grand Prix, with another tough character, Bernie Ecclestone, in the early 1980’s.

Bob lost that one to Adelaide because the SA government threw more money at it than Bob. Surprisingly when the event came to Albert Park Bob supported this temporary circuit, and even put his hand in his pocket to build a new soccer stadium at Albert Park to house the South Melbourne soccer club. An exceedingly magnanimous gesture to the Greek community from a fellow who was regarded as a tough negotiator in business (but a generous benefactor in private) who never lets anyone get on top of him in a deal.

But what has the TAC got to do with all this? Well at the same time as Bob was relinquishing any claim to host a Grand Prix the TAC was a major sponsor at Calder. They were not just paying for a sign to tell the impressionable young patrons to “take a cold shower and swap the V8 for a sensible four cylinder car” they were sponsoring whole weekends of motor racing!

Obviously it could not be said that the TAC sponsorship was in any way linked to Bob Jane’s enthusiastic support for losing the Grand Prix to another venue but it appears that his income stream from the TAC went some way towards helping him pay for the “Bob Jane Stadium” at that other venue. The public is entitled to ask the TAC why it sunk millions into motor racing at a time when the Victorian government committed itself as a motor racing entrepreneur.

Crikey is to be commended for putting the TAC under scrutiny, as both Liberal and Labor governments in Victoria appear to prefer no public scrutiny of its activities or the subsequent conflict of Margaret Jackson in being offered an entre51e to the Ron Walker banking and telco businesses.

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