Senator the Hon Mathias Cormann
Minister for Finance
Date: Monday, 29 September 2014
CHRIS UHLMANN: Medibank was the name the Whitlam Government gave to the first attempt to introduce universal health care in 1975. It didn't last long. Less than a year later, the Fraser Government had gutted the plan and turned Medibank into a State owned health insurer. Now another Government wants to sell it. And Finance Minister Mathias Cormann is overseeing the sale. Mathias Cormann, welcome to AM.
MATHIAS CORMANN: Good morning.
CHRIS UHLMANN: Will investors be the winners and those whose are members of Medibank Private be the losers out of what we are seeing with the float?
MATHIAS CORMANN: We believe that Medibank private policyholders will be the winners because Medibank Private in private hands will be able to perform even better than they have under Government ownership. The truth is that in 2014 there is no reason for the Federal Government to still run a private health insurance business. The health insurance market is a very well functioning, competitive market and well regulated.
CHRIS UHLMANN: Customers will be worrying about premiums. Will they go up?
MATHIAS CORMANN: I would point you to none other than the ABC Fact Check, which supported the Government's assertion that the ownership of Medibank private is completely irrelevant when it comes to premium settings. The truth is as I have just mentioned, Medibank Private will continue in private ownership to have to compete for customers and that will provide a limit to what can happen to premiums. And secondly premium changes in private health insurance are regulated and of course those regulations won't change as a result of the sale.
CHRIS UHLMANN: Customers have been paying into Medibank Private for a long time by way of their premiums. Wouldn't they get something out of this sale?
MATHIAS CORMANN: The customers of Medibank Private have been purchasing health insurance, not an ownership stake in Medibank. Like any other business that somebody purchases a product or service from, you don't become an owner by purchasing a product or service. You purchase that product and that is the same with Medibank policyholders.
CHRIS UHLMANN: The last Government to float Telstra T2 went bad, so do you fear that this one might and that will be a bad thing for you and the Government?
MATHIAS CORMANN: The reason we are proceeding is because we have made the judgment that this is the right time to proceed with this sale. There are good public policy reasons to proceed with this sale. One of them being that right now the Government is actually conflicted by being both the regulator and the largest market participant in this market. Furthermore, the Government is able to realise the capital that is currently tied up in Medibank Private and use it for better purposes into the future.
CHRIS UHLMANN: You talk about the Government being both the regulator and owning this particular company. Of course anyone looking at investing in it will be looking at risks. What about the private health insurance rebate? Any change to that will of course change the risk profile of this company.
MATHIAS CORMANN: All of the detail and all of the relevant information that is necessarily put out into the marketplace will be put out in the prospectus, but this is obviously the same risk that is faced by 33 other private health insurance funds including other funds that are publically listed.
CHRIS UHLMANN: As Finance Minister, are you worried that the housing markets in both Sydney and Melbourne aren't too hot at the moment?
MATHIAS CORMANN: The short answer is no and obviously the prices in the housing market are always a matter of supply and demand and obviously if prices are too high over an extended period, there will be a market response to that.
CHRIS UHLMANN: The Reserve Bank is worried and it is looking at putting controls on lending.
MATHIAS CORMANN: The Reserve Bank operates independently, in a non-political way and that is appropriate.
CHRIS UHLMANN: If the Reserve Bank is worried, surely you should have cause to be worried.
MATHIAS CORMANN: The Reserve Bank is doing its job. They have got a very particular job as an independent, statutory authority which operates away from politics. From our point of view, we believe that the checks and balances are in place and the market can operate properly and at this stage we are not worried.
CHRIS UHLMANN: Gas prices in Australia, there are concerns also that not enough is being kept for domestic consumption. Do you think that the Government should intervene to make sure that not all gas from the east coast is exported?
MATHIAS CORMANN: This goes beyond my area of responsibility, but there are a few points I would make. Firstly, gas prices in Australia are lower than they would have been if we hadn't repealed the carbon tax. Secondly, if we want to ensure we have affordable and competitive access to energy supplies, including gas, the best way to ensure that is by increasing supply. So whatever policy response we pursue has to be very mindful that anything that reduces supply will put upward pressure on prices.
CHRIS UHLMANN: What about in Western Australia, where the Government there does have some control over the domestic share of the market. It is a conservative Government as well.
MATHIAS CORMANN: These are matters for State Governments around Australia. Let me hasten to add it was policy that was put in place by a previous Labor Government in Western Australia.
CHRIS UHLMANN: In Western Australia?
MATHIAS CORMANN: That's right. I will leave that to the Western Australia State Government to deal with.
CHRIS UHLMANN: Do you think it is working though?
MATHIAS CORMANN: That is a matter for the Western Australian State Government to comment on.
CHRIS UHLMANN: Do you think companies in Australia are paying enough tax? There is a report out this morning that suggests that some of them are only paying ten per cent of what's due to the Australian taxpayer.
MATHIAS CORMANN: The Government's position is very clear. Any company that generates profits in Australia should pay their fair share of tax in Australia. Our advice is that our anti-avoidance laws in Australia are amongst the toughest in the world, but having said that we are very conscious of the fact that we need to continue to be vigilant and we are working very hard to build a stronger tax administration and to pursue whatever policy response is required both domestically and internationally through the G20.
CHRIS UHLMANN: Are the laws strong enough? Is the tax office doing enough to police tax havens?
MATHIAS CORMANN: As I have just said, our advice is that we have one of the most stringent anti-avoidance laws when it comes to tax avoidance in the world. But we are very focused on making sure that whatever recent and new development there is, that we respond to it as effectively as possible.
CHRIS UHLMANN: Mathias Cormann, thank you.
MATHIAS CORMANN: Always good to talk to you.