Monday, 4 December 2006
Medibank Private Sale Bill 2006
Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Hansard source
Can I conclude this debate on the Medibank Private Sale Bill 2006 by thanking all those who have participated. I do not know where to start with Senator Ludwig’s contribution. Perhaps I should leave it to just sit on the record, because it is hardly worthy of response. It is extraordinary to hear the government being criticised for selling things when his own Labor government in Queensland is busy selling energy retailers—as it properly should—and privatising government businesses, as other Labor governments around the country are busy privatising government businesses and as his own federal Labor Party in government privatised any number of government businesses. In the 21st century there is hardly a civilised and sensible government in the Western world that is not either in the practice of or contemplating the privatisation of government businesses, because most of us have been mugged by the reality that governments should not own and operate commercial businesses. But apparently the federal Labor Party has not caught up with the 21st century, as evidenced by its industrial relations policy, which is also a back-to-the-future policy.
The decision we have made that Medibank Private Ltd, a private health insurance business, should be floated is part of a wider package of reforms that the government has determined to proceed with to help ensure the sustainability and viability of the whole private health insurance industry in this country. It is all about helping improve the affordability of private health insurance, something that our government is committed to and which the Labor Party has very questionable credentials on. The Labor Party for many years railed against the 30 per cent private health insurance rebate. While it now professes not to oppose the private health insurance rebate, we will be urging Australians at the next federal election not to trust the Labor Party on that issue. So the Labor Party speaks with great cant and hypocrisy on this question of affordability of private health insurance, given its track record on the question of the rebate for private health insurance.
Unlike the Labor Party, we are very strongly committed to a viable and competitive private health insurance industry, affordable for Australians, with the government playing a proper role as the regulator of that industry. So it is the case that the government, if re-elected at the next election, will offer shares in this company to the Australian public by way of an initial public offering, as the legislation prescribes, with a shareholder limit of 15 per cent for the first five years of its sale.
It is of course disappointing to us that, unlike the coalition in opposition, where we supported the Labor government on the sale of Qantas and the Commonwealth Bank, the opposition has taken a knee-jerk, negative view of this matter. In our view, opposition speakers have made absolutely no case as to why this business should remain in public hands. That really is the test these days. We are in the 21st century. We have learnt a lot through the 20th century as to why governments should not run commercial businesses, as evidenced by the collapse of a variety of government owned state banks at enormous cost to taxpayers. Now the onus is on those who say that individual businesses should remain in government hands. That onus is not being met by those in this chamber who have argued that the business should remain in government hands. They have not made the case as to why Medibank Private should remain a government owned business.
Medibank Private Ltd is one of 38 private health insurance businesses in this country offering their services to ordinary Australians, in an industry that the federal government has the responsibility to regulate—and it is a significantly regulated business. It is exactly the same case as Telstra. Once Telstra was opened up to competition, and a whole range of telecommunications companies came into the industry—an industry for which the federal government has responsibility for regulation—the case for government ownership evaporated. And that is the case with respect to private health insurance. There is no longer any case for the government owning one of 38 private health insurance businesses in this country. It is our strong view that taxpayers should not have their funds tied up in a private health insurance business of this kind. Private health insurance is now a highly competitive business and is not a place for governments.
It is a fact that this business, Medibank Private Ltd, lost no less than $175 million in 2002 on its operations. That was a cost borne by taxpayers. Flowing from that, taxpayers, as the shareholders in this business, were required to make a capital injection of some $85 million in 2004 because of the risks of being in this business and the need for a proper capital adequacy ratio. I give, and have given on many occasions, great credit to the current management for restoring the fortunes of this company. But that history, which highlights as in any commercial business the risks of operating that business, does demonstrate why taxpayers should not be involved in this industry.
The opponents of the sale have made, as they always do with these issues, a series of wild and unsubstantiated claims. Can I start with the first—that is, that premiums will go up as a direct result of the sale. There is absolutely no basis for that assertion. There has been no evidence adduced to support that wild and unsubstantiated claim. Indeed, we have on the contrary produced evidence to demonstrate that, if anything, it is likely that there will be less upward pressure on premiums as a result of us exiting ownership of this business.
And of course the opponents of the sale conveniently ignore the fact that, as Minister Abbott and I announced back in April, the government will retain its authority over the question of whether premium increases will or will not be approved. So we retain that ultimate authority over any proposal to increase premiums. In any event, to the extent that premiums increase—and we all know why private health insurance premiums increase—with 38 businesses in this industry, customers are free to select another private health insurer if they believe the premium escalations are unwarranted.
There is also this wild and unsubstantiated claim that the government does not actually own Medibank Private Ltd. No-one actually believes that proposition but it is peddled in this place. We have tabled and presented clear legal advice that demonstrates that of course, as anyone would ultimately understand, the government does own Medibank Private Ltd. The ALP, the opposition, implicitly accepts that proposition by arguing that it wants to keep Medibank Private Ltd in government ownership. By definition, it therefore accepts that the government does own the business.
We believe this sale is a very important and very timely step in the development of the private health insurance industry in Australia. This will be the first Australian private health insurance business listed on the Australian Stock Exchange and, therefore, for the first time all Australians will have the opportunity to invest in a private health insurance business. We think that is quite a critical and important step. A listed Medibank Private Ltd will then be able to raise capital, expand the business, move into other business areas and offer more services to its customers—developments which, almost by definition, as a government owned business, remain very difficult, if not impossible, for it to pursue at the moment.
We very strongly believe that the whole private health insurance business will benefit from the largest company in that industry being privately owned and competing on a level playing field. It means that the government—as in the case of Telstra—can concentrate solely on its role as the regulator, and not as the owner of one of the businesses in that industry or an investor in that industry. We have already announced that as a result of our proposed disinvestment in this industry we have put $500 million extra into medical research grants in this country. We have also announced a $170 million commitment to establish a medical research fellowship scheme. These are much more sensible uses of taxpayer funds than having them at risk, at large, in a commercial private health insurance business.
There have been questions adduced as to why the government is legislating now for the sale when we have stated that the sale itself will not occur until 2008. We have made it clear that, based on the commercial advice available to us in relation to T3, to have announced that Medibank Private Ltd would be floated in this term of government could have had significant implications for the T3 float. Therefore, before the formal T3 float, we ruled out Medibank Private Ltd being sold in this term—that is, before the end of 2007—in order to ensure that we gave clear air to the T3 float.
I am glad we did that because, as is now evident, the T3 float was highly successful. But we then announced that although the float would be delayed for those reasons we would, nevertheless, seek to have the parliament approve the sale of this business now to enable the government to press ahead with the significant and comprehensive sale preparations which are involved in any float. Yes, it is a lot easier to do a sale through a trade sale. It is more complicated to do it through an IPO but, for the reasons enunciated, we do not believe it appropriate to sell this business through a trade sale. We want to enable all Australians to buy shares in this business through an IPO, and that does take a significant amount of preparation to effect.
There are a number of things which we will now, subject to passage of this legislation, proceed with—for example, moving the business to a fully commercial footing, undertaking the detailed vendor due diligence process and determining the share offer structure, including our proposal to have a special entitlement for current MPL customers. Of course, we will be going through the process of engaging a full advisory and implementation team.
I will allude briefly to Senator Murray’s proposed second reading amendments to this bill and, in doing so, thank Senator Murray for his considered report on the Medibank Private sale in the Senate Standing Committee on Finance and Public Administration report on this bill. He has given it a lot of thought. I welcome the fact that he has made the point that a strong public case has not been found for retaining this business in public hands. I welcome that position adopted by Senator Murray—and a lucid and practical position it is—but Senator Murray has proposed a second reading amendment and specific amendments to the bill. They essentially go to the question of the method of the sale. Of course we treat them seriously but the premise upon which we do not accept Senator Murray’s amendments is that we reject out of hand the proposition that somehow the government does not own this business—which, as I have said before, is nonsense—and we are not going to do anything to suggest that that proposition has any legitimacy whatsoever. As I said, the ALP, by implication, rejects that proposition by arguing that the business should remain in government hands.
As I said before, we think that this business should be sold by way of a public float. We think that is good for the industry. We do not believe there is a sufficient market available to sell this business via a trade sale, so it should be offered by a public float. We therefore think that all Australians should have the opportunity to buy a share in this business. We think it should be conducted by the normal comprehensive public float, which enables a mix of institutional and retail investors to ensure this business is able to establish itself on a proper commercial footing.
It is a fact that, in Australia, having a certain proportion of shares owned by institutional investors is quite important to the stability and future of a business. To say that only customers of this business should be able to buy shares is quite wrong. It would be as though only customers of Qantas could have participated in the Qantas float, or only customers of the Commonwealth Bank could have participated in that float—and the same applies to the Telstra float. Nevertheless, as is the case with Telstra in respect of shareholders in T3, we have said that we will offer some form of entitlement to Medibank Private Ltd customers, but only in the sense that they are customers and have shown a loyalty to this business, which we want to recognise. We are not doing so in any respect with regard to this false assertion that there is some proprietary interest held by customers of this business. That has been categorically rejected by the government and its legal advisers.
When you buy a service from Medibank Private Ltd, in effect you are buying insurance. You are entering into an insurance contract, as you would with any normal insurance company. You are not acquiring some proprietary interest in this business. On that basis we reject out of hand the amendments proposed by Senator Murray, while acknowledging the thoughtfulness of his position that a public case has not been found for keeping this business in government hands. We think all Australians should have the opportunity to participate in the float of this business.