SARAH FERGUSON: Joining me now in our Canberra studio to discuss the sale of Medibank is Shadow Finance Minister Tony Burke. Tony Burke welcome to 7:30.


FERGUSON: Now, Medibank is a profitable commercial business, it’s your Government that made it a for-profit company. What’s the argument for keeping it in the government’s hands?

BURKE: There’s a few different arguments. We, as you know have never supported the sale of it, we’ve been concerned -

FERGUSON: I’m just going to jump in; I know people don’t like me doing that at the beginning, but you didn’t repeal that act when you were in government yourselves.

BURKE: That’s right, we didn’t act on it either. With the legislation, sorry if I can get back to the previous question. The first issue is potential impact on premiums the Government has to make the case, which I don’t believe they have yet, that this won’t cause premium increases, there are other issues that affect premiums but the mixed market is one of them, is one issue. There’s also issues about the impact immediately on the budget bottom line, this does actually add to the deficit this sale, in the order depending on the year of close to half a billion dollars. It’s also the case that there are issues for the, for the workforce and for value for money for the tax-payer. We need to remember when the legislation went through under the Howard Government they then looked at the market and decided themselves to not go ahead with the sale.

FERGUSON: Alright, let’s look at the premiums because it’s not obvious that where the evidence is for this argument that a privatised Medibank would increase the premiums. ABC Fact Check took a very detailed look at that claim, the Menzies Centre for Health amongst others said that privatisation will not change anything much except that dividends would be paid to shareholders and not to the Government. So why do you say that those premiums are going to go up because there are very few people who agree with you?

BURKE: No I haven’t said that, I said the Government hasn’t made the case that they won’t. At the moment we have a mixed market, we have a market with health funds, one government owned for-profit, others privately owned for-profit and not-for-profit funds. The usual way markets work is the more mixed the market is the more competitive it will be. There are other actions which, put a cap on increases in premiums, but the experience that we’ve had with Liberal governments both with Tony Abbott was Health Minister and now with Peter Dutton is that they do go to the high end of premium increases. The one that Peter Dutton approved in December last year which takes effect next month is one for nine per cent the highest premium increase in a decade. So the market is -

FERGUSON: But at the same time you know that it’s the Health Minister, in fact sorry it’s the Government rather that makes the decision. This is a very heavily regulated industry, Medibank Private privatised can’t just decide the put up its premiums willy-nilly. That has to be approved by the Minister, the regulation is already in place to protect the customers.

BURKE: That’s right, the strongest power on limiting premium increases is the power of the Minister and a power that at the moment the current government is using to give the highest premium increases we’ve seen for a decade.

FERGUSON: It’s still not an argument against privatisation though is it?

BURKE: No, if I can complete because I said that’s the strongest, the strongest power that they have. The other issue is the market itself and there is no way of looking at this decision other than to say it changes the level of variety that exists within the market. It must by definition do that and the Government needs to make the case that the market will operate in the exact same way notwithstanding that, and I don’t believe they’ve done that. They have a document which they claim does that but for various reasons that document hasn’t been made public.

FERGUSON: And yet it’s already, we’re already looking at a mixed market, you’ve already got Medibank existing within that mixed market so why does it change if goes through to full privatisation?

BURKE: Well if you currently have three sorts of funds as I just went through and you take that to two, that is a significant shift in the mixture and if that’s going to happen the government needs to make the case that we won’t see upward pressure on premiums. The AMA have a view that there will be upward pressure on premiums and I appreciate ABC Fact Check in, and I’ve read the document my understanding is it deals with percentage increases rather than base rates and its base rates that people actually pay.

FERGUSON: Not strictly true that the AMA actually holds that view as strongly as they did certainly in 2006, I think they’ve said this evening that they are reassured by the Finance Minister’s statement that premiums will not go up.

BURKE: And the Finance Minister has said that, he hasn’t told us why he’s able to reach that conclusion other than it’s in a document that he won’t let us see.

FERGUSON: The Government has said that if this sale does go through some of the money, the money in fact will go to infrastructure projects, shouldn’t that be where your energy goes now into directing that energy towards health rather than towards infrastructure, isn’t that the better argument to be having?

BURKE: Well the first thing that happens immediately is the dividends disappear, so the day the sale happens the dividends which in some years have been smaller, some years have got up close to half a billion dollars. Those dividends disappear and disappear immediately, that makes an immediate hit on the deficit. In the short time that Joe Hockey’s been Treasurer and this was referred to in your package, there’s already been an addition of $68 billion in the deficit because of decisions taken by Joe Hockey. This is an additional one that adds to the deficit. This does nothing to improve the bottom line, this is an addition to the deficit by getting rid of the dividends.

FERGUSON: Tony Burke, thank you very much indeed for joining 7:30.


BURKE: Good to talk.



Tony Burke