Published in The Australian (Sydney), 23 October 2025
Every country has sacred cows: government programs beyond criticism even when failing. Britain has the NHS, Australia has Medicare. These schemes become so wrapped in national identity that criticism almost feels treasonous.
New Zealand’s sacred cow is ACC, the Accident Compensation Corporation. For half a century, New Zealanders have boasted about their no-fault injury scheme, regularly contrasting it with systems where injured people must sue for compensation.
In exchange for giving up the right to sue, every New Zealander and visitor receives injury cover funded by levies on wages, businesses and vehicles. ACC pays for treatment and income support after accidents.
But under Jacinda Ardern’s Labour government, the wheels came off the operating model. ACC recorded a net deficit of NZ$7.2bn in 2023-24.
The crisis became so severe that in December 2023, the government chose to create a new fiscal deficit accounting measure, essentially stripping ACC out of the headline budget deficit figures to stop its massive deficits from distorting the government’s accounts. By last year, the total estimated cost of all existing claims reached more than NZ$60bn.
But the fiscal blowout is only part of ACC’s problem. The human cost has been enormous. Slower rehabilitation and heavier caseloads are pushing thousands into long-term dependency.
Since 2018, ACC’s rehabilitation performance has deteriorated markedly. BusinessNZ, the country’s largest business advocacy group, estimates the average duration on weekly compensation has risen from 10 weeks to 22 weeks. Long-term claimants (those on support for over a year) rose from about 13,300 in 2018 to about 22,600 in 2024.
What makes this particularly damning is that worsening rehabilitation performance has been a key driver of the explosion in long-term dependency among people with recoverable conditions.
How did a scheme that New Zealanders consider part of their national identity fall apart so badly?
A series of policy missteps drove the decline. The centrepiece was “Next Generation Case
Management” – conceived and piloted before the 2017 change of government but rolled out during the Ardern years. This abandoned the traditional approach of assigning dedicated case managers to injured people. Instead, claimants were thrown into a teams-based model with reduced continuity of care.
ACC’s own internal reviews found this new model created a massive “build-up of overdue tasks”.
Caseloads ballooned to nearly double what was planned. By September 2024, ACC was forced to reinstate one-to-one case management for thousands of clients after the backlogs became unmanageable.
There were also funding reforms that were penny-wise but pound-foolish. The rehabilitation funding cap was cut from approximately NZ$7000 to about NZ$3500 in 2021. Providers had to seek bureaucratic approval for additional treatment.
Waiting for approvals kept people off work longer. Injured workers were stuck at home for weeks while their conditions deteriorated. And all that to save a few dollars upfront.
The bureaucracy also became needlessly convoluted. One review found that conducting a simple “welcome conversation” with a new client involved 49 distinct steps.
Meanwhile, provider groups warn that funding has not kept pace with costs, leaving real incomes of health professionals such as physiotherapists stagnating. This unsustainable funding has forced providers to increase co-payments, creating access barriers. ACC data showed cost had become a major barrier to treatment for vulnerable groups, including low-income earners and Maori.
These operational failures have created the fiscal crisis already mentioned. The deficit from this single government entity has become so large that it is now distorting the entire government’s fiscal position.
For Australian readers, imagine if your NDIS liabilities grew so enormous that Treasury had to create special accounting rules to quarantine them from the main budget. (Given current trajectories, not an impossible scenario, I know.)
But the accounting adjustments cannot hide the underlying reality. ACC itself says it is spending about NZ$2.1bn more than it collects in levies each year. Without policy changes, New Zealanders can expect to face steep levy increases.
The economic cost extends well beyond fiscal damage. BusinessNZ estimates the total productive capacity loss at NZ$12.2bn for 2023-24, with much of this attributable to declining rehabilitation performance. For a country already struggling with poor productivity, this represents a significant structural impediment to growth.
The scheme’s failures push costs elsewhere. When ACC delays treatment, the bill lands on the taxpayer-funded health system or on injured workers and their families who must pay privately. The scheme founded on the principle of “community responsibility” is now failing that very community.
And still, what makes this collapse remarkable is the continuing mythology. During last year’s 50th anniversary, officials still called ACC “unique in the world”. CEO Megan Main boasted that no country has “our comprehensive, no-fault injury cover”. Indeed, but not always in a good way.
The pride in ACC runs deep. It represents how New Zealanders see themselves: pragmatic people who chose collective care over American-style litigation. And fair enough, if only it worked.
Yet this mythology has prevented the kind of scrutiny that might have caught these problems earlier.
It is hard to criticise a scheme that everyone believes is a source of national pride. But when a government must invent new accounting measures to exclude a scheme’s deficits, and when its liabilities approach half of one year’s government revenue, the mythology becomes dangerous.
The National-led government has committed to ACC reform, but the path back will be hard and expensive. Restoring basic case management and properly funding rehabilitation will require both political will and significant investment.
New Zealand’s ACC should serve as a cautionary tale. The NZ$60bn liability and the accounting tricks to hide it are not mere technicalities. They show that government monopolies can drift into dysfunction without competitive pressure and proper accountability.
They are symptoms of what happens when sacred cows become too holy to slaughter.
