Should the Australian Government Privatise Medibank - Case Study Example

SUMMATIVE ACADEMIC ESSAY By Name Course Instructor Institution City/State Date Should the Australian Government privatise Medibank? Introduction The proposed privatisation of Medibank is not trendy, but as Zehavi (2012, p.197) indicates, it is not easy to unearth grounds for public policy to substantiate the on-going public ownership. However, investors will be worried by the in doubt policy setting the Medibank will endure. A number of investors, recalling the returns from the privatisations of the Commonwealth Serum Laboratories as well as Commonwealth Bank, will take the plunge with fervour, but others will cautiously evaluate the risks of the policy (Colley & Head, 2013, p.867). Any person worried about wealth inequity cannot back the privatisation of Medibank, which will undoubtedly be jointly owned; thus, decreasing the tax weight on Australian workforce. Additionally, after years of decline in labour’s income share, privatising Medibank would present additional returns to capital thus, heightening Australia wealth inequalities (Onselen, 2014). According to Bastos et al. (2014, p.252), the privatisation of Medibank would present more money to capital, impinging further the wealth inequality; reference has little belief that this is not the objective of the current Australian government. It is tricky to advocate, as antagonists do, that since a corporation is owned by the government, then it is inherently unproductive (Crowe, 2014). Those who desire to see Medibank go into private hands must substantiate why Australia must give up those dividends, as well as why the government must not partake as a capitalist too. They have to substantiate why, after those dividends are in existence, an increase in taxes will be an excellent public policy. The essay seeks to provide a critical analysis with regard to if Australian government should privatise Medibank. Critical Analysis According to Docherty (2014), the affluences for the Medibank rely much on the government policy. Barely a year passes devoid of experiencing a policy tweak; for instance, lately the Gillard government decided to use a means test to the rebate of the private health insurance, get rid of the rebate on lifetime health insurance, as well as heighten taxation incentives for workers with high earnings to hold insurance (Huyghebaert et al., 2014, p.31). Besides, every year the minister of health is required to set permissible increases in the insurance premium. Davidson (2014) asserts that it is not possible to list every Medibank policy situation; however, they can be grouped into a few possibilities. The most important possibility is business as usual situation, which reference terms as a prolongation of the friendly setting the company has enjoyed ever since the mid 90s during Howard government. From the time when the lifetime cover was introduced in 2000, the policy of health insurance has remained stable throughout Labor as well as Coalition governments (Black et al., 2013, p.298). The current political climate in Australia seems to support business as usual situation, but Medibank privatization is expected to be marred with politics both in opposition and government side (Carrigan, 2013, p.29). Even though scores of in the commentariat presumed that election of Tony Abbot was not imminent, or that his government will support private insurance as compared to that Rudd-Gillard Government, Medibank privatization under Abbott government proves the commentariat were wrong. McGrath (2014) posits that investors must discern that privatization of Medibank will extremely be subsidized. For instance, this year direct budgetary subsidy is estimated to be $5.3 billion, with another $1.6 billion in form of rebate exemption of the private health insurance from levy. Additionally there is considerable taxation returns inevitable in consequence of individuals taking out insurance to evade the Medicare levy surcharge (MLS) (Carrigan, 2013, p.30). With regard to any industry standards, Cai et al. (2014, p.403) believe these are enormous subsidies, and different from the automakers the fiscal rationalization for aid to private health insurance has by no means been an issue to the review of Australian Productivity Commission. However, most studies exhibit that private health insurance is a costly means to finance health care (Fahim & Siddiqui, 2013, p.27; Colley & Head, 2013, p.869). This is to the level that people desire to share their costs of health care, the most upright as well as resourceful way is by means of one nationwide insurer, such as Medicare. Another policy scenario is the basic review of private health insurance, which would seemingly make out a proposal to stop all subsidies. According to Fahim and Siddiqui (2013, p.27), a government that is market-oriented could decide on higher co-payments levels prior to the Medicare cuts that are safe, whereas a Marxist government could select an entirely free system. Undoubtedly, both are fiscally valid but Medibank bears every competition cost, and therefore the investors risk in the privatization of Medibank is an outburst of fiscal accountability in public policy bringing about more evenhanded as well as resourceful way of subsidizing health care by means of one national insurer. Therefore, maybe Medibank privatization it is not such a big risk (Crowe, 2014). Privatization of state owed companies begun with the 1991 sale of Commonwealth Bank, and ever since a massive amount of state- as well as Commonwealth-owned companies have been overflowing in the Australian market for investors to grab. Even though the idea is to ease up capital for the investment plans of Australian Government, one limitation is to be watchful on how they may uphold or enhance their effectiveness while still performing along public sector lines (Matsumura & Tomaru, 2012, p.249). The ides of boosting productivity as well as efficiency lies beneath the notion of openly motivated competition as well as reduced political along with the government intrusions. Hard lessons were learnt due to insufficient competition in the telecommunication industry way back since 1997. Telstra as a dominant player as well as premium provider had been seen as not having the incentives to reduce prices, cut costs, as well as enhance services. Therefore, the then administration thought that partial-privatization of the company could act as remedy to this situation, as the company ownership was shifted to the consumers. Full-privatization devoid of the government regulation might be challenging as Telstra individually was a redoubtable antagonist, particularly with its infrastructure that was excessively developed. According to Zehavi (2012, p.201), any radical changes in prices might have ruthlessly hurt Optus, which as a result could have led to the collapse of the competitive setting. Still even with this assumption behind us, ii one clearly examine Telstra at the moment, he/she may well at ease state that privatization has made Telstra more productive and has assisted develop a telecommunications industry that is more competitive, with a several key companies. The significances of government regulations as well as competitions on the long-standing impact of privatization can be elicited in Qantas context (Onselen, 2014). Subsequent to Qantas’ privatization, Australians has been spoilt with countless alternatives as well as affordable prices owing to heightened competition in the aviation industry. Nonetheless, can this be accountable for Qantas’s declining market share that as a result resulted in its infamous economic miseries? The big question here is whether Medibank will follow Telstra’s path and turn out to be more successful or will it grow to be like Qantas. Presently, Australians opinion with regard to Medibank privatization has been strongly off-putting with polls pointing out that just 22 percent of the public concur with the government decision and even those in the midst of Coalition followers, the like-minded just make up 32 percent (Docherty, 2014). This privatization opposition according to reference is mainly because of the precedence set by the past sale of state owned companies. Formerly, privatization was frequently carried out simply on the case of making use of the private sector effectiveness, to enhance the performance of undercapitalised or overstaffed government owned enterprises (McGrath, 2014). Scores fear that Medibank privatization will result into the dismissal of workers as well as a decline in the benefits and services offered to members of Medibank, mostly in rural branches that are less profitable. Irrespective of whether this certain privatization case is, actually, financially beneficial, public opinion might harmfully impact the current government (Naito, 2013, p.101). Conclusion In conclusion, the essay has discussed issues raised in the arguments over the likely privatization of Medibank, given that the likelihood of privatization was raised in the late 90’s and the intentions was announced by the government in 2006. In the essay, it has been observe that a number of policy holders perceive that Medibank is a distinctive public body because of its noteworthy portion of its monetary coffers, which are gained from individuals people who buy policies. Some foes of the privatization have wondered whether the Abbott’s government has the right to sell Medibank while others hold the view that members of Medibank have rights to determine the way of the sale or give them the right to compensation. The privatization of Medibank has drawn much debate, and therefore it is a dangerous move that may be advantageous for Australians at large or it might be a destructive loss. The public expects that Abbott Government decision to privatize Medibank will be successful like privatizations of companies like Commonwealth Bank as well as Telstra, and not a devastating end like Qantas. References Bastos, P., Monteiro, N.P. & Straume, O.R., 2014. 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Matsumura, T. & Tomaru, Y., 2012. Market Structure And Privatization Policy Under International Competition. The Japanese Economic Review, vol. 63, no. 2, pp.244-58. McGrath, P., 2014. Health insurer NIB expects Medibank to pursue takeovers after privatisation. [Online] Available at: http://www.abc.net.au/news/2014-03-26/health-insurer-nib-expects-medibank-to-pursue/5347662 [Accessed 6 May 2014]. Naito, T., 2013. Privatization Of Public Firms And Urban Unemployment In An Integrated Economy. Review of Urban & Regional Development Studies (RURDS), vol. 25, no. 2, pp.93-106. Onselen, L.v., 2014. Privatising Medibank makes sense. [Online] Available at: http://www.macrobusiness.com.au/2014/03/privatising-medibank-makes-sense/ [Accessed 6 May 2014]. Zehavi, A., 2012. Welfare State Politics in Privatization of Delivery: Linking Program Constituencies to Left and Right. Comparative Political Studies, vol. 45, no. 2, pp.194-219. Read More