Senator the Hon Mathias Cormann
Minister for Finance
Date: Thursday, 27 March 2014
GRANT GOLDMAN: I see the Finance Minister Mathias Cormann has rejected Labor claims the sale of Medibank Private will increase the Budget deficit. How would it do that? Well the Opposition, the finance spokesman Tony Burke , how many portfolio does this bloke got to have? Tony Burke, sorry I digress. He says the Government will lose annual dividends of up to $500 million by privatising Medibank, adding to the deficit. Well I’ll get straight to the Finance Minister, Mathias Cormann on the line. Good morning Mathias.
MATHIAS CORMANN: Good morning Grant.
GRANT GOLDMAN: Thank you for taking the time. Who says it will be such a bad thing selling it anyway?
MATHIAS CORMANN: It is a good idea to sell Medibank Private because there is no compelling policy reason for the Government to continue to own and run a private health fund. Medibank Private is a commercial business, which operates in a highly competitive, well functioning, well regulated market and there are better things we can do with the capital that is currently tied up in our ownership of Medibank.
GRANT GOLDMAN: Okay, the sale of Medibank is at that imminent? Are there people surrounding it ready to make a bid for it?
MATHIAS CORMANN: What I announced yesterday is that the Government has decided to proceed with the sale in the 2014-15 financial year. That is subject to market conditions. We will only press ahead with it, if in our judgement there is an appropriate window to achieve the best possible return for taxpayers from that sale.
GRANT GOLDMAN: What do you think it will be? A ballpark figure?
MATHIAS CORMANN: I’m not going to put a number on it. We want to get the best possible price. It will be up to the market ultimately to determine what the actual value of Medibank Private is at this point in time.
GRANT GOLDMAN: Just say its $5 billion, where does that money go? It doesn’t just go into consolidated revenue it will be destined for something? Paying off a debt perhaps?
MATHIAS CORMANN: It won’t go into consolidated revenue. It will be reflected on our balance sheet. What we’ve said we would do, is we would recycle the capital that is freed up from the sale of Medibank Private to re-invest it in productivity enhancing infrastructure, which will help us grow a stronger economy.
GRANT GOLDMAN: Okay, we’re talking about Western Sydney here, there’s a big call for Tony Abbott to be involved in Western Sydney, and the infrastructure building as we move towards a new airport there. That’s got to be much needed for sure.
MATHIAS CORMANN: As we’ve said, we’ve already made significant commitments to invest in expanded infrastructure right across Australia, including and in particular in Western Sydney. The WestConnex project for example is pressing right ahead with our very strong support. There will be some other announcements in the lead the up to and in the context of the Budget.
GRANT GOLDMAN: The income stream for Government from Medibank Private was about half a billion dollars after its all sorted out.
MATHIAS CORMANN: Well that is not quite right actually.
GRANT GOLDMAN: No? That’s what we’re reading...
MATHIAS CORMANN: What the Shadow Finance Minister Tony Burke, showed today is why Labor in government made such a mess of the Budget. Medibank Private last year recorded a record profit of $233 million. That is 84 per cent higher than the previous year. Tony Burke is saying to us that we should take more than double that out in dividends out of Medibank Private. He wants us to take more than double what they made in profit out of Medibank Private every year and ... interrupted
GRANT GOLDMAN: How can you do that?
MATHIAS CORMANN: Yes, how can you do that?
GRANT GOLDMAN: I’d ask any businessman to tell me how you can do that.
MATHIAS CORMANN: It’s a very good question. You can’t. You certainly can’t do that in a sustainable way. What Labor did in Government, they raided Medibank’s capital reserves, running down their capital reserves. That is not a sustainable way to own and run a business. What we’ve said, if we were to do what Labor says we should do, which is take $500 million in dividends out of Medibank Private every year, that would push up the cost of premiums for Medibank policyholders.
GRANT GOLDMAN: Just quickly then, how is that income stream replaced? What is it replaced with?
MATHIAS CORMANN: Medibank Private as a private, for-profit company will be paying income tax to the Government, that is appropriate. As a private business, they will have the freedom and the flexibility to grow more strongly. And the stronger and the more profitable they are the more income tax they will pay to the Commonwealth.
GRANT GOLDMAN: The frightening the people thing from the Labor Party right now will be that they will shove the costs through the roof. Well we’ve got competition, you can hardly do that and succeed.
MATHIAS CORMANN: They can’t. Medibank Private is competing in a market with 34 private health funds. After they’ve been sold , they will still have to compete for customers with other health funds. They still will be subject to regulation when it comes to premium settings. No lesser organisation than the ABC Fact Checkers, hardly apologists for the Government, have come out to support our assertion that a sale of Medibank would not be pushing up the cost of premiums.
GRANT GOLDMAN: Okay, we’ll watch and see who’s going to be the eventual owner. Thanks for your time this morning.
MATHIAS CORMANN: Good to talk to you.
GRANT GOLDMAN: Bye now. The Minister for Finance, Senator Mathias Cormann.