Senator the Hon Mathias Cormann
Minister for Finance
Date: Thursday, 27 March 2014
SANDY ALIOSI: The Federal Government yesterday acted on its election promise to sell off Medibank Private health insurance. A sale that is expected to reap around $4 billion. Money the Government says that will go to infrastructure projects. But there are concerns about putting Medibank Private in private hands may put pressure on premiums and Labor says it will increase the Budget deficit. For a response to those concerns we’re joined by the Finance Minister Mathias Cormann and he’s speaking here to Marius Benson.
MARIUS BENSON: Mathias Cormann good morning.
MATHIAS CORMANN: Good morning Marius.
MARIUS BENSON: Now you’ve made this decision to go ahead with the Medibank sale on the basis of a scoping study. You say you can’t release that study for commercial confidence reasons. But can you go to this specific question of pressure on premiums and just paraphrase without breaching any confidences, what the scoping study says will be the impact of the sale on premiums?
MATHIAS CORMANN: The scoping study confirms that post sale Medibank Private will continue to compete in a very competitive market, will continue to compete for customers with other health funds and will continue to be subject to regulation when it comes to premium settings. No lesser organisation than the ABC Fact Checkers have confirmed our assertion that the sale of Medibank Private will not have any impact whatsoever on premium changes.
MARIUS BENSON: And does the scoping study agree with the ABC?
MATHIAS CORMANN: Indeed it does.
MARIUS BENSON: On the question of the impact on the budgetary position, it sounds a bit counterintuitive but Tony Burke was saying because you’re going to lose maybe up to half a billion dollars a year in premiums that the budgetary position will actually be worse. Do you agree?
MATHIAS CORMANN: I don’t agree. What Tony Burke showed yesterday is why Labor made such a mess of the Budget. Medibank Private had a particularly good year last financial year and made a $233 million profit, which was up 84 per cent on the previous year. Now Labor in Government went for one special dividend after the other. They raided Medibank’s capital reserves. That is not sustainable over time. So the proposition that somehow the Commonwealth would be able to draw half a billion dollars in dividends on a yearly basis is just a ridiculous proposition and just shows why Labor doesn’t know how to manage the Budget.
MARIUS BENSON: The Senate, your House, has been a bit of a problem for the Government with various bits of legislation. But you actually had the legislative basis for this Medibank Sale already in position. It’s been dormant since 2006, introduced by the Howard Government, so is there no problem? You can do this as you want to?
MATHIAS CORMANN: We have complete authority to proceed with the sale of Medibank Private through an initial public offering. And the point I would just make the point here is that in six years of Labor, Labor decided not to repeal that particular legislation. So we would argue that Labor over the last six years, at least implicitly, supported the proposition that Medibank Private would be sold eventually.
MARIUS BENSON: Can I go to the future of financial advice, the changes to laws governing financial advisers? You put it on hold earlier this week, is it now in abeyance at least until the Budget session in May?
MATHIAS CORMANN: We remain committed to improving our financial advice laws to restore the balance between appropriate levels of consumer protection and ensuring affordable access to high quality advice. The legislation which was introduced into the House of Representatives continues to go through the usual Parliamentary process. There is a Senate Economics Inquiry which is due to report in the middle of June. In the meantime, what I have said is, that I will not press the button right now in terms of the Regulations related to the legislation and I will be consulting in good faith with all relevant stakeholders to ensure that we have got everything right.
MARIUS BENSON: There is still a lot of talk today, Mathias Cormann, on the Prime Minister’s decision to re-establish Knights and Dames in Australian Honours. Do you think it’s a good idea?
MATHIAS CORMANN: I think it’s a very good idea.
MARIUS BENSON: Why?
MATHIAS CORMANN: Why not? It’s a great way to recognise the contribution of extraordinary and pre-eminent Australians. I think it is a fantastic decision the Prime Minister has made and I support it 100 per cent.
MARIUS BENSON: Did he talk to you before announcing it?
MATHIAS CORMANN: I can’t say he did. I found out like everybody else. But that’s fine. That is the Prime Minister’s prerogative as the Head of the Government.
MARIUS BENSON: Do Australians want it?
MATHIAS CORMANN: Look, I am sure they do.
MARIUS BENSON: On what basis are you so sure?
MATHIAS CORMANN: The Prime Minister has exercised his prerogative. I think that it is a wonderful thing to have this opportunity to recognise the contribution that has been made by extraordinary and pre-eminent Australians.
MARIUS BENSON: John Howard says he stands by his view that re-instating Knights and Dames is somewhat anachronistic.
MATHIAS CORMANN: Well that’s fine. Different people will have different views.
MARIUS BENSON: Can I just ask you quickly about the WA Election which is only nine days away? You have been hammering the carbon and mining tax, that’s very well rehearsed. The Opposition on the other hand is saying the Audit Commission Report on Government Economy is now before you, 900 pages of nasty surprises, will you be releasing any of the Audit Commission recommendations between now and voting day, Saturday week?
MATHIAS CORMANN: Well we did exactly what we said we would do before the election. We commissioned the National Commission of Audit to look right across Government for opportunities to improve efficiencies across Government, to ensure that Government spending is as efficient and well targeted as possible. We are currently going through an orderly, methodical process as we put the Budget together to assess all of the recommendations that have been made. In the usual way, in the normal way for any Budget process, obviously this will ultimately lead to the Budget which will be released on the second Tuesday in May.
MARIUS BENSON: We shall all look forward to it. Mathias Cormann, thank you very much for speaking with us this morning.
MATHIAS CORMANN: Always good to talk to you.
SANDY ALIOSI: The Finance Minister, Mathias Cormann speaking to Marius Benson.