Filling a Hole
The Government is there to govern, so they say. While many businesses rage against red tape and wish that the bureaucracy would get out of the way and let business do its thing (namely, running businesses) there are a few legacy operations that hark back to the days of state-owned enterprises - a time when governments operated behemoths in direct competition with private industry.
One of the final remnants of this is Medibank Private. Through it, the Federal Government holds almost 30% of the private insurance market - one that is certainly a growth industry for the future. But they won’t own it for long…
With the impending IPO of this company valued, this week, at roughly AU$5 billion, the Federal Government will again fill the coffers with a cash injection courtesy of another sell-off. As we saw between 1996 and 2007, the sale of Government assets is a poor and temporary band-aid slapped across underlying structural issues within the economy.
When Treasurer Joe Hockey opened the cupboard last September, he would have found slim pickings courtesy of his previous Coalition titleholder. With the oft-repeated debt and deficit disaster’ the focus of so much of the Government’s strategies, the obstructionism of the Senate is only making things harder to redress.
Oh, and a pretty poor sales job hasn’t helped.
Symptomatic of the traits that have led them into this position, the Federal Government is either so ideologically driven or so desperate for cash (or both) that they are willing to offload an asset that is currently returning over a billion dollars per year to Treasury’s coffers. Medibank Private has made – and continues to make – serious money every year. To put it another way, the Government could receive the total current value of the sell-off by halfway through a second likely term – with more money to be accumulated in the years following.
Little wonder then that Mum-and-Dad investors are queuing down the road to get a slice of that delicious pie.
So we’re stuck at an unfortunate position. The last truly valuable government asset is about to walk out the door. Meanwhile, its current owner has been almost totally fruitless in developing a revenue stream to replace it.
Once Medibank Private goes, there is very little left to sell.