Saturday, March 29, 2014

Medibank disaster

I expected an Abbott government to be bad for us but it's turning out to be even worse than I feared.

The projected sale of Medibank is the latest example. A bad move which will benefit the few at the expense of the majority, but it'll go ahead because of a mixture of ideology and self-aggrandisement.

Abbott has declared that he wants to be remembered as 'the infrastructure PM'. A short term windfall of four or five billion dollars for Medibank will allow him to build something towards his wish. But it's such a short term objective and it's bad management.

Keep Medibank in public ownership and its contributions of several hundred million dollars a year would go on year after year. Commit that to infrastructure and we and future generations would continue to benefit, rather than the little we'll get for a one-off headline-grabbing spend.

Ideologically the sensible course is the middle road, naturally. There are various things that are of such national interest that they need to be in public ownership.

Others need to be in public ownership to ensure the common good, Commonwealth Bank and Medibank being prime examples of that.

Had ComBank not been sold off we'd have much more influence over the banking sector.

Each time the Reserve Bank lowers interest rates there are howls of protest because the banks don't pass it on in full or quickly. Had ComBank been in public ownership they would have immediately passed on the full rate decrease and the competition would have been forced to follow.

Same with Medibank. Keep it in public ownership and premiums/benefits can be controlled, which means that competitors are also constrained in what they do.

But when they go into private ownership the interests of the shareholders become the focus, as it must. Profits have to be maximised and, of course, top executives will have massive salary increases and big bonuses.  That means either higher premiums or reduced benefits, or both. And the other players will follow.

So the budget loses an annual income of several hundred million dollars, we lose influence over the private health insurance market, we'll end up paying more for less.

Another reason to vote them out next election.


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