Illustration: David Rowe.
A few years back a Canberra man stole tens of thousands of dollar coins from the Royal Australian Mint. He worked there. He smuggled them out in his shoes and lunchbox.
How much easier would it be to spirit away coins if you owned the mint and ran it?
Owning and running the mint is now a real prospect for anyone who’s keen on money. The Commission of Audit wants it privatised after 2016.
It’s easy to imagine the worst. The mint can churn out up to 10 million coins a week. The new owner might get a request from the government for 7 million and churn out a few million extra. They could leave through the loading dock. There would no need to pack them into shoes.
Not a risk worth worrying about? Perhaps not. Coins are small change, although they add up.
The Commission of Audit doesn’t seem concerned. It wants the government to go further and consider privatising Note Printing Australia where the risks are even bigger. NPA runs the factory in Melbourne that churns out orange-pink $20 notes and green $100 ones.
The new owner could profit even without running the risk of printing extras. It would gain an awful lot of knowledge while manufacturing the apparently unforgeable high-tech notes, knowledge that would be useful if it or its associates had a business on the side.
Of course I am not saying either of these things would happen, merely that they are risks the Commission of Audit appears not to have considered.
And they are far from the most serious. The commission wants the government to consider outsourcing parts of its massive payments system, the one that processes $400 million in payments each day for Medicare, Centrelink and the Pharmaceutical Benefits Scheme.
The system needs upgrading. The commission thinks handing it over to someone else would have the “potential benefit of avoiding major capital outlays”. Instead of the Commonwealth making major capital outlays it would pay an annual fee. The effect would be the same as it had borrowed, but the borrowing would be done by someone else. The government would be able to say it hadn’t run up debt.
What it would lose would be hands-on control. When everything went well there would be no problem (although big new computing projects rarely go well). When it didn’t the government rather than the operator would be held to account.
It is the same in those states where electricity has been privatised. It may be the fault of the private company but when the power goes off it’s the government that gets held to account. It’s a responsibility it can’t shirk. And nor can it shirk the responsibility for delays in the processing of its cheques and bank transfers. The public won’t let it. Keeping accountability but transferring control risks political annihilation.
It might have been too much to expect the commission to look deeper and consider the risks of what it was recommending. It probably didn’t think they would be adopted. But there’s a whole other report it could have written about the implications of its program, if it was aware of them.
The most serious relate to health. Pushing up the price of each standard prescription from $36.90 to $41.90 changes little unless it cuts back on the use of prescription medicine. Otherwise it’s just a transfer of health costs rather than a reduction.
If it does change behaviour (and it should) fewer Australians will take prescription drugs. The likely effect will be more serious harder-to-treat conditions later on. Drugs are incredibly cheap compared with hospitalisation. They save the health system a fortune and will save even more as more of us age and run the risk of being admitted to hospital. A commission really concerned about long-term health costs would have recommended making them cheaper. (To its credit it suggested some other measures which would help.)
General practitioners perform the same role. They, too, are cheap compared with hospitalisations. They account for less than 10 per cent of health expenditure. By keeping people out of hospital they save the system a fortune. Ensuring that none can offer their services for free under Medicare, and banning them from waiving co-payments the commission would ensure that some of their patients decided not to visit. Some would develop more serious and harder to treat conditions as a result.
They are implications that touch on the role of government, a role the commission may not understand or may not believe in.
They are why its recommendations should be approached cautiously rather than embraced.
Peter Martin is economics editor of The Age.