Tony Abbott confirms plan to privatise Medibank in drive to wind back deficit

http://www.theguardian.com/world/2013/oct/23/abbott-confirms-plan-privatise-medibank

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The prime minister is attempting to prepare the ground for cuts and changes to the delivery of government services flowing from his proposed commission of audit, saying the government has to become more efficient and the deficit must be wound back.

Tony Abbott used an interview on the Melbourne radio station 3AW to confirm the government would move to privatise the health insurer Medibank Private once it had completed a scoping study. He did not rule out further privatisations down the track but insisted the government would act in accordance with its election mandate.

Abbott also defended the government's decision to raise the debt ceiling by $200bn despite attacking Labor consistently throughout the past parliament, and through the election campaign, for raising more debt.

The prime minister reasoned that the government wanted to increase the debt ceiling to $500bn to avoid the spectre of an ongoing partisan stoush like the recent government shutdown crisis in the US – although it appears unlikely that either Labor or the Greens will oppose the increase.

Of the changes ahead, Abbott played down the prospect that the commission of audit would propose tax increases. That, he said, was "almost inconceivable".

But he said the new government had to get the budget back on a sustainable footing and the transition would not be universally popular.

"If we are going to get debt under control, if we are going to get the budget under control – back into the black – yes, inevitably, things will have to change," Abbott said on Wednesday morning.

"There will be some things the public don't like but I think the public understands the government has been living beyond its means.

"We can't continue. And that's why, amongst other things, we are having this commission of audit."

On the sale of Medibank Private – which has been the Coalition's policy for several years – Abbott said the government would complete a scoping study and then consider when to go to market.

"We want to do what's right for taxpayers. We've got to maximise the price so we've got to do it at the right time, not the wrong time."

Asked about whether premiums would rise without government involvement in the health insurance sector, Abbott said premiums were regulated and the government would need to be convinced that rises weren't "commercial gouging".

Abbott did not rule out pursuing further privatisations down the track but said the only current plan concerned Medibank Private.

"We will honour our election mandate. Who knows what the recommendations of the commission of audit might be? But we will only act on recommendations in ways which are consistent with the mandate."

During the election campaign, the then shadow communications spokesman Malcolm Turnbull told the communications union that the Coalition had no plans to privatise Australia Post.

The treasurer, Joe Hockey, on Wednesday morning used a separate interview to play down the need for substantial privatisations beyond Medibank Private and suggested any efficiencies and savings found within areas like health would be redirected within the same portfolio.

Labor has said the Coalition promised before the election not to cut essential services such as health and education, but the wide terms of reference for the commission of audit had left these things on the table.

The shadow finance minister, Tony Burke, told the ABC: "I don't think anyone in Australia when they heard Joe Hockey give a guarantee that there would be no cuts to health, thought that would give him permission to slash funding to hospitals. And yet the way he has redefined it, that's exactly what he'd be able to do."

Hockey also announced on Wednesday that the government would make a one-off $8.8bn grant to strengthen the financial position of the Reserve Bank of Australia.

This decision by the government is in line with RBA advice, but the practical effect of it will be to increase the budget deficit by that amount for this financial year.

"The Reserve Bank reserve fund currently sits at just 3.8% of the bank's assets at risk," Hockey said in a statement. "Since the election, the governor of the Reserve Bank has written to me indicating that the Reserve Bank board believes that it would be appropriate for the Reserve Bank reserve fund to be increased to 15% of the bank's assets at risk."

Hockey said he'd accepted that advice.

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