Senator the Hon. Mathias Cormann
Minister for Finance
Date: Thursday, 24 October 2013
PAUL MURRAY: Earlier in the week the Abbott government, through Joe Hockey the Treasurer and also Mathias Cormann the Finance Minister, announced the Commission of Audit which they had promised during the election campaign. We invited Mathias Cormann to come onto the program today to talk to us about what that is meant to achieve but this morning we noticed that the Minister had put out a press release saying that the government had announced what is called a scoping study leading to the
potential sale of Medibank Private so we might start there. The Minister joins us now. Morning Mathias
MATHIAS CORMANN: Good morning Paul, good morning to your listeners.
PAUL MURRAY: Just take us through what you've got planned for Medibank Private because it's actually been on the Liberal party's agenda for sale for some time.
MATHIAS CORMANN: Yes, the Coalition has long been committed to the sale of Medibank Private. Our view is that Medibank Private is a commercial business which operates in a well-functioning and competitive market. There are about 34 other competing health funds that provide private health insurance across Australia so we think there is no compelling policy reason for the government to continue to own a health fund. On top of that we're concerned that the government is actually somewhat conflicted because we are both the regulator of the private health insurance market as well as one of its largest market participants. So we think there are good policy reasons for the sale of Medibank. It also would enable us, if the sale were to proceed, to direct the capital that would be released from that sale into other policy priorities or indeed to pay off debt.
PAUL MURRAY: I suppose people might argue that the one advantage of having something like a health insurer in government hands would be to put downward pressure on premiums. Does it have that effect?
MATHIAS CORMANN: It doesn't have that effect at all because Medibank like every other private health fund across Australia operates under the same laws and same regulatory environments as all health insurers. Because there are 34 funds in the market there is competitive tension in the market which keeps downward pressure on premiums and ultimately Medibank like any other health insurer every year has to justify the need for any premium change before it is approved. All premium rate applications
are closely scrutinised by the regulator which is the Private Health Insurance Administration Council. So that is an at arm's length process. Medibank for all intents and purposes is a commercial for-profit company which operates in the market like any other health insurer. The only difference is that it is owned by government but it operates as in independent government business enterprise.
PAUL MURRAY: Well if you sell it off Medibank Private members are going to be asking the question will it lead to higher premiums?
MATHIAS CORMANN: No, it will not. This is the point I am making. Medibank Private now and into the future, if a sale were to occur, if the process is bought to a successful conclusion, will continue to operate under the same laws and regulations as they do now. They would continue to have to seek approval for any premium change. Any proposal to increase premiums would continue to be scrutinised by the same regulator and Medibank operating in a competitive market with 34 private health funds would continue to have to be mindful of not getting too far ahead of the market if they wanted to maintain their market share.
PAUL MURRAY: Finishing up on that, is there a ball park figure for what Medibank Private might be worth?
MATHIAS CORMANN: The reason we're going through this scoping study process is to seek advice on the likely proceeds and a whole range of other matters. What we've said is that as a matter of principle we think that
Medibank Private should no longer remain in government hands. We are now going through a proper process to assess all of the various pieces of the jigsaw that we need to have information on.
The first step is the scoping study, once the scoping study comes back it will obviously provide us with information on those sorts of matters and then we'll make the next decisions on timing and the type of sale that we would conduct.
PAUL MURRAY: If we can move onto the Commission of Audit which you announced with Joe Hockey earlier this week, Joe Hockey told us during the election campaign that the Budget was in crisis. Is this Commission of Audit meant to fix the Budget, is it?
MATHIAS CORMANN: The Budget is in crisis. Labor left behind a Budget in very bad shape. If you look at just this financial year, we went from a promised surplus to an $18 billion deficit at Budget time to a $30 billion deficit at the time of the election and the position is still deteriorating. So what we've inherited from the Labor party is not only a Budget that was in bad shape at that point in time of the election, but it is also rapidly deteriorating. We have to reverse the trend. We've been going again through a calm methodical and proper process. In the first instance, we have started a process of scrutinising more rigorously all of the discretionary grants spending across government. The Commission of Audit is the next step as part of the process. Their job will be to look at all of the operations of government, right across the board, and down into the nitty gritty, to identify areas of waste, areas of duplication, opportunities to redefine the scope and the role and responsibilities of government, really to ensure that the operations of government are as efficient and as cost effective as possible so that we can identify some medium to long term structural saving opportunities.
PAUL MURRAY: Is it in effect what we've called previously a razor gang?
MATHIAS CORMANN: I wouldn't describe it that way. It is essentially a stock-take. Obviously over many years, and we haven't had one of those for nearly twenty years, so every couple of decades it's sensible to take a
step back. Government keeps growing which means that taxpayers have to fork out more and more money in order to fund the operations of government. Every couple of decades it is sensible to take a step back and assess whether all of the areas that government has themselves involved in, whether
government should still be involved in and whether all of the ways that government is currently operating are still the best way of going about things. Obviously from a taxpayer's point of view, taxpayers want to receive from government high quality services at the lowest possible cost and this
process really is focussed on making sure that taxpayers receive better services in a more efficient way.
PAUL MURRAY: Mathias, the Chair of the four person Commission is Tony Shepherd. People might recognise him as the President of the Business Council of Australia, he also comes out of Transfield Services is his business. You've got a Western Australia on there, which is pretty interesting, Bob Fisher. People might realise Bob previously, back some time ago, was Head of the Department of Industrial and Regional Development in WA and then moved onto Children and Family Services. So he's got both a government business and a social side in terms of his work in the State bureaucracy and he was the Agent General for WA in London as well. Is Bob on there to look after State issues is he?
MATHIAS CORMANN: Bob is a very highly regarded former senior public servant here in Western Australia. One of the key focusses for the Commission of Audit is going to be to identify areas of unnecessary duplication between the activities of the Commonwealth and other levels of government, principally State governments. From our point of view it was important to have somebody on the Commission that had a deep understanding and deep knowledge of the operations of State governments both in economic and social policy areas. So Bob Fisher is a great Western Australian who perfectly fitted that bill for us.
PAUL MURRAY: There are not that many West Australians on these federal government advisory committees over time.
MATHIAS CORMANN: It's fair to say that sadly there are not. It is something that this government over time will seek to address. In my own portfolio I have about eight government business enterprises and I'm also
responsible for the Future Fund and across all of those government business enterprises like Medibank, Australia Post, Australian Submarine Corporation, most of them with a national focus, there is not a single West Australian on any of them after six years of Labor, which of course is a highly unsatisfactory situation and something that progressively and appropriately and over time we will seek to address.
PAUL MURRAY: Ok, well we've got one on there now. When's the Commission of Audit report?
MATHIAS CORMANN: So the Commission of Audit is going to report in two phases. The first interim report will be received by the government at the end of January and the intention is for that to feed into the 2014/15 Budget process. That interim report will focus on the roles and responsibilities of government. On opportunities for efficiencies and effectiveness of government expenditure and medium term fiscal sustainability and then we'll have a second report by the end of March which will focus on the areas of public sector performance and accountability.
PAUL MURRAY: Thanks Mathias, thanks for talking to us.
MATHIAS CORMANN: Good to talk to you.
PAUL MURRAY: Mathias Cormann, Federal Finance Minister. Its been a long time since WA's had a Federal Finance Minister. You got to go back to the days of the Hawke government of course and WA of course had the great Peter Walsh and if Mathias can do anything along the lines of the achievements that Peter Walsh had in the Finance Ministry, he'll be doing well.