When making personal injury claims, many of the claims we work on are governed by the provisions of the Workers Compensation Scheme, Motor Accidents Compensation Scheme and Civil Liability Act 2002.
Within this legislation it is prescribed that 5% discounts must be applied to calculations of future economic loss. This is premised upon historical interest rates and is based on the assumption that monies paid for future loss of earning capacity will earn 5% per annum in a bank and this discounted accordingly.
Lets assume that a claim can be made for a seriously injured person that was earning $1,000 per week and this 47 year old will not be able to work again. Therefore the losses theoretically may be $1,000 per week x 52 weeks x 20 years = $1,040,000.
Operating on a 5% interest rate the actuarial calculation would have to be as follows:
$1,000 x 666.4 weeks = $666,400.
If that $666,400 remained in your bank account over 20 years at a interest rate of 5%, would receive the equivalent of $1,040,000 which an injured person would have earnt but for their injury.
At the time of this publication, the current official cash rate as determined by the Reserve Bank of Australia is 0.25% and the interest rate on a standard Commonwealth Bank savings account is about 0.85%. It is fairly clear to see that the injured person in this situation would fall well short of that amount of money that they have lost, because of this unfair calculation.
A 3% interest rate for the purposes of these calculations would be much more fair and reasonable for injured people and we will lobby our professional associations and governments to amend the relevant legislation and regulations to allow this fairer financial calculation.
If you have any questions about a personal injury claim, please do not hesitate to contact our personal injury lawyers on 13 43 63.