The successful float of Medibank Private adds to a relatively short list of trouble-free privatisations at the Commonwealth level. Selling off government assets has an unhappy history in Canberra.
The Keating government managed the sales of the Commonwealth Bank and the combined Qantas-TAA entity competently. But the Howard government experience was a series of stuff-ups. The first tranche of the Telstra sale was significantly underpriced, costing taxpayers $12 billion in 1997 dollars — the equivalent of around $20 billion now. After criticism of the handling of the first tranche and the role of overpaid (literally) private advisers, the second tranche of Telstra was significantly overpriced, which was good for taxpayers but left those beloved “mum and dad” investors deep in the red for years. The sale of the government’s vehicle fleet was bungled and led to extended litigation with Macquarie Bank. IT outsourcing within the public service saw firms like IBM and Telstra scoop up massive contracts while delivering IT services so bad they often left public servants without computer access for days. The sale and leaseback of Commonwealth-owned properties saw windfall gains for private buyers who quickly made their money back and then some, by charging exorbitant rents to the former owners. The Australian National Audit Office reports into the sales are a series of scathing reviews of ideology triumphing over common sense, inexplicable rushes and bureaucrats being gulled by the private sector.
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Finance Minister Mathias Cormann, however, has quickly and quietly proceeded to sell Medibank Private — something that should have been done a decade ago — and got around $700 million more than the $5 billion sale figure we’d all long figured the insurer would fetch. It’s significant that the only press reports critical of yesterday’s commencement of trading were of the asinine variety: Fairfax carried a report about small investors whining they couldn’t sell stock quickly enough, and The Australian Financial Review reported with a straight face an investment banker’s complaint that the government priced it too high to see a surge on the first day of trading. “You need to make sure that you price these things so that you attract people to your next transaction and the government wants to sell some assets,” he muttered darkly. The screen jockey was wrong: Cormann priced the sale just right, securing a good outcome for taxpayers while not risking the Telstra 2 outcome of investors being left deep underwater.
And getting this right was important: a botched sale would merely have added to the deep voter antipathy toward privatisation, the one liberal market reform the Australian electorate has never warmed to and one that, based on the Commonwealth experience, you could forgive it for not doing so. Instead, it bodes well for the government’s program of further privatisations of bodies such as Defence Housing Australia. Unfortunately, the other really important privatisation, that of Australia Post, appears to be off the agenda; indeed, its moment may have passed as the internet sends AP permanently into the red.
In a government that has lurched from one bungle to the next, Cormann’s sale of Medibank stands out for its competence and quiet efficiency. Just for once, the Coalition indeed underpromised and overdelivered.