Should the Australian Government privatise Medibank Private?

1871 Words Nov 27th, 2014 8 Pages
Should the Australian Government privatise Medibank Private?

Since the 1990s the Commonwealth and State governments of Australia has privatised a sizeable portion of the public sector (Reserve Bank of Australia 1997). The prospect of privatising Medibank has been a controversial matter since its proposal by the Howard government in 2006, although the former government failed to do so, the Abott government announced on March 26th, 2014 that the company will be sold off through an initial public offering (IPO) in the 2014-15 financial year (Mcllroy 2014). This essay will argue that Medibank Private should be privatised and sold publicly through an IPO for short and long term economic and social benefits. In order to determine the validity
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It is claimed by many academics that privately owned businesses function more effectively and efficiently than state owned businesses. This is another reason why Medibank should be privatised. Currently Medibank Private competes against 34 other health insurers and is the biggest health insurer in Australia holding 29% of the market share with over 3.8 million Australians covered (Skylley 2014). Medibanks healthcare delivery division employees 4,800 people and have some 2.5 million patient interactions every year (Skylley 2014). The sale of Medibank was even supported by the Australian Competition and Consumer Commission chairman Rod Sims who recommended relinquishing control over such assets to maximise productivity and to create greater consumer benefits (Durkin 2014). A more effective and efficient Medibank would not only create a more competitive market but will also make the health insurance market more open and efficient. Megginson and Netter (2000) quotes two sources to prove this. First was from Majumdar (1996) who found that central and state owned governments have average efficiency scores of 0.658 and 0.638 respectively whilst mixed enterprises had scores of 0.92 and private enterprises with scores of 0.975 during 1973 and 1989. Scores closer to 1 are more efficient and scores closer to 0 are least efficient. His next source Tian (2000) examines 513 mixed ownership…

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