Senator SINODINOS (New South Wales) (16:59): I rise to join the debate on the Fairer Private Health Insurance Incentives Bill 2012 and related legislation. I begin by taking up a point that was raised by my colleague Senator Cormann in his contribution. He referred to a report from 1993 commissioned by—I think he would have been the Minister for Health—Senator Graham Richardson that was about private health insurance. That report found that coverage in the community of private health insurance had fallen to very low levels. We are talking about participation rates in the low 30s from memory. At the time I thought it was remarkable that the Labor government had commissioned such a report, simply because there had been a history of Labor, with almost a malignant neglect, seeking to reduce the private health insurance sector in Australia to something of a rump. It was heartening that he did that because that encouraged a debate in the community about private health insurance and the coalition went to the 1996 election with promises around a private health insurance incentive. Over the next few years that became a private health insurance tax rebate, which essentially is the measure we are talking about today in this series of bills before the Senate.

The point to be made about that measure is that it was quite deliberate, quite calculated and had a policy rationale. It was not simply a handout to the big end of town, as some people are alleging. The whole purpose of the incentive was to encourage people to exercise greater choice and to facilitate that choice. Just as we sought to do that in the education system—that is, the split between public and private schools and the assistance governments give to independent schools—so it was in the case of health: we were seeking to provide an incentive which facilitated choice. This had a benefit to the health system as a whole—that is, to take pressure off the public hospital system. That was the rationale in part for the measure. It was to provide a form of tax relief in its own way, but it was also to provide a measure to encourage the greater use of the private hospital system and to reward people who put their own resources into private health insurance. It encouraged a greater pool of people into private health insurance and it restrained the growth in premia and the like. That was important because the bigger the insurance pool, the more you can restrain the growth in the costs of premia.

We have a situation today where the government has decided, allegedly on budgetary grounds, that it must do something about this particular measure. I dispute that the government is doing this simply on budgetary grounds. I believe there is a history of Labor wishing, if not to negate this measure entirely, then at least to substantially cripple it. If we go back to when Labor went into opposition in 1996, there was a history of them attacking our initiatives around private health insurance. I believe that was driven by ideological considerations around their concern or their support for the public hospital system. We all support a strong and viable public hospital system, but we need to have other strong pillars to the health system and having a viable and strong private health system is one of them. So Labor for a long time opposed what we had done in government on private health insurance, but, as my colleagues have read onto the record, Labor increasingly came to the view that it was not politically sustainable to keep attacking this private health insurance incentive. From the 2004 election onwards, after the ill-fated experiment with one Mark Latham, Labor realised that having a hit list of independent schools was not a good way to show that it was for the community as a whole rather than sections of the community. It is important to put some ideological context around this: that there has for a long time been a view within Labor that the private health insurance system should be gutted or crippled.

Finally, there is a mechanism here in these bills which seeks in part to achieve Labor's objective. I do not believe it will end private health insurance as a whole, but it will significantly dent it and it will dent it by making cover ultimately more expensive and reducing the pool of people who are covered or who downgrade their cover. That will be to the cost of not only those people who, as Senator Brandis said, have been saving their money in order to afford such health insurance, but it will also be at a cost to the public hospital system, which will be under greater pressure. This is an important point because the health reforms that the Labor government introduced under the rubric of the Council of Australian Governments in recent years do not in any way have a structural reform component to them. I do not believe they will lead to better health outcomes. We have a situation where the pressure on the public hospital system as a result of Labor's health reforms will not abate and we are adding to that pressure by taking this incentive away.

This is one of a series of measures which this government has taken to means test various benefits. There is a rationale for means testing. We cannot offer everything to everybody and means testing has its place within the social security system and the like. The fact of the matter is we do not want millionaires to get pensions and the rest. However, this increasing trend toward means testing is starting to butt up against another objective of all governments which is: how do we reduce effective marginal tax rates? What is happening with more and more means testing as we go up the income scale is that we are adding more and more of these poverty traps into the system. There was a very good article written recently by Judith Sloan in the Australian, which went through the impact this sort of means testing on effective marginal tax rates. In brief, it means that, when we are means testing on family income as a whole, there is often then a disincentive if we increase the means testing for the secondary income earner—often the woman in the household—to cut back their hours of work because the family as a whole find that they lose income if they undertake more work. They start to lose income that comes through government benefits and the like, including incentives of this sort.

We have to look at this issue of private health insurance not only in the context of the merits of the debate around the contribution that governments make to the health system, but also in the context of the macro implications for the tax and transfer system. I believe that the Treasurer, Wayne Swan—someone who in the past has professed great support for tackling these sorts of poverty traps and high effective marginal tax rates—is undermining one of his own objectives by measures of this kind. My view has always been that if you want to tackle what you broadly describe as allegedly middle-class welfare by taking benefits away, means testing and all the rest of it, you should be compensating those people by at least reducing tax rates so that you improve incentives to work and save. That would be a much more balanced system, but that is not what we are doing here. This is essentially an ideological measure dressed up as a budgetary measure. Part of the sleight of hand in this process has been to prevent the cost of the private health insurance incentive, if it were allowed to keep on going over the next 30, 40 or 50 years. Of course, I could sit here and go through every element of the budget and do a similar analysis of the cumulative cost, whether it is the age pension, assistance to the automotive industry, assistance to other sections of the community—

Senator SINODINOS: Higher education. You could come up with a humungous number. On the other side of the ledger, I could go through tax revenue and accumulate that over a period and come up with a humongous number.

Yes, there are budgetary pressures that come over time from growth in all sorts of budgetary outlays, but that of itself is not an argument for choosing to cut back one outlay rather than another. There has to be a policy rationale for what you do, and what I am arguing here is that the rationale is more ideological than it is essentially budgetary. Why ideological? I mentioned earlier the longstanding antipathy to these sorts of measures which promote greater choice between public and private sectors, but there is another element to this, and that element has been added by none other than your distinguished colleague, Mr Acting Deputy President Cameron, the Treasurer—it is his Monthly essay, his vituperative attack on three Australians who are risk takers and entrepreneurs out there earning their keep and providing jobs for their fellow Australians.

What I found remarkable about that contribution is that it was a deliberate attempt to set one Australian against another. It was a deliberate attempt to set allegedly working-class Australians and middle-class Australians against other Australians. I thought it was deplorable for that reason, because what unites most Australians today is a set of aspirations. We all want to do better. We do not want to be penalised for having a go. Having a go is as important to us as a fair go, and I thought that essay highlighted that the Treasurer was interested merely in seeking to stoke the politics of envy for reasons perhaps related to trying to get the public debate off the leadership crisis in the Labor Party and onto more fertile territory.

The ACTING DEPUTY PRESIDENT (Senator Cameron): Senator Sinodinos, can I draw your attention to standing order 193. You are getting very close to an imputation of improper motives against the Treasurer, so I just draw your attention to that.

Senator SINODINOS: I appreciate that, Mr Acting Deputy President. I would never want to impute impure motives to such a pure individual as the Treasurer. But may I say that this particular measure does smack, in part, of the politics of envy. The point I was making is that it seemed to be part of a suite of measures and seemed to be in part authored by a Treasurer who seems to be very keen on the politics of envy.

The coalition has always believed that choice is important, in both health and education, and I believe this measure is one that appeals across the various income groups in the community. My colleague Senator Brandis spoke about the number of low-income Australians who use the private health insurance incentive or have private health insurance cover. Indeed, to go through some electorates close to my own heart, let me start with the electorate of Dobell. In Dobell, 46.1 per cent of voters have private health insurance—not 20 per cent, not 25 per cent, but 46.1. The number of persons covered by private health insurance in that electorate is almost 60,000 people. In Robertson, another fine upstanding electorate, 55.5 per cent of voters have private health insurance. The total of persons covered with private health insurance in the electorate is 73,869. That is a lot of Australians in Robertson who are covered by this measure.

If I go to a safer Labor seat, Blaxland, once occupied by the Hon. Paul Keating, 42.7 per cent of voters have private health insurance. The total of persons covered by private health insurance in the electorate is 60,516. In the seat of Grayndler, the cradle of Anthony Albanese, 60.1 per cent of voters have private health insurance. It is even higher than those seats on the Central Coast. The total of persons covered by private health insurance in the electorate of Grayndler is 77,898. They are the people who the Hon. Anthony Albanese is going to be harming through this particular measure. If we go to Hunter, a safe seat in the Hunter Valley, 51 per cent of voters have private health insurance. The total of persons covered by private health insurance in the electorate is 66,346. In the seat of Newcastle—a good working-class seat; I was born in Newcastle—55.2 per cent of voters have private health insurance. The total of persons covered by private health insurance in the electorate is 69,726. In the seat of Shortland, next door, just to round it off, 50.8 per cent of voters have private health insurance. The total of persons covered with private health insurance in the electorate is 65,971.

People scrimp and save to have the peace of mind of private health insurance. And what we are talking about here is not some select group people in Vaucluse, Toorak or the relevant parts of Adelaide or Perth—Peppermint Grove or wherever. We are talking about a swathe of people in a swathe of electorates who would be disadvantaged by this particular measure going through. So I stand up here disillusioned with the promises Labor made that it would retain the private health insurance incentive. I am very disillusioned and concerned about the deterioration of the risk pool and the impact that that will have on upward pressure on premiums for all 12 million Australians with private health insurance, with more people forced to utilise overstretched public hospitals.

After years of waste and mismanagement Labor is hiking prices for working Australians to pay for their own budgetary and other shortcomings. My concern here is that, at a time when the cost of living is without a doubt the No. 1 issue in federal and state politics across the country, here we have a government adding to the cost of living. We have already had initiatives around the carbon tax, which will add to the cost of living—and may I say that the evidence mounts every day that those costs are going to be higher than the government has estimated. Already we have received information around increases in landlord leases and the like, reflecting an increase in the carbon tax going through their books. What we have is a tax that will cascade through the stages of production. It is not a GST, where there is only a price effect on the final consumer; it will cascade through the various stages of production. The cost of living is being exacerbated and then we have other measures like the private health insurance incentive means testing that we are talking about here today, which will add to that as well.

I come back to a point I made earlier: the government is in danger of creating even further poverty traps and even further entrenching effective marginal tax rates up the system. The main impact of that would be on secondary income earners in families. I do not believe this was a tough decision for Labor to take. We get a lot of breast-beating and braggadocio about tough reforms and tough fiscal decisions. This was not a tough decision for Labor to make, given its history of promises to remove the private health insurance incentive in the past. It backflipped on that promise and then said, hand on heart, that it would keep it. Sadly, that promise as well has not been kept. It is one of a number of promises that have not been kept.

They can say that they were mugged by reality on the first day of coming to government. We are not talking about that; we are talking about attempts to do this some years after coming to government. The only other explanation I can think of is that, apart from the ideological intent behind this measure, budgetary pressures forced the government into taking these measures. All I can say is: if only the government had listened to the coalition at the time of the global financial crisis! We supported the first round of stimulus but we were prudent, we wanted to wait, because it was clear Australia was not going to be affected in the same way as other countries. We were prudent then and we have been proven right by history in that regard. Unfortunately, Labor put into the system a whole series of programs. For example, with Building the Education Revolution, there are still schools around the country receiving grants. Once the program was implemented it was very hard to stop. We all acknowledge that, but the point is that it can no longer be presented as a fiscal stimulus program, continuing as it does at a time when the economy has been in more than recovery mode.

Sadly, we were saddled with a much bigger debt and deficits coming out of the global financial crisis than were necessary, and that has necessitated the government taking all sorts of measures. Yet, disappointingly, last year when there was a window of opportunity for the government to take more stringent budgetary measures, they squibbed the opportunity to do so. There were $22 billion worth of savings in last year's budget but $19 billion worth of new spending, so the net bottom line contribution over the forward estimates was $3 billion.

People say, 'Okay, what's the coalition committed to doing?' The coalition is committed to restoring this sort of measure as soon as it is affordable. We see it as having a policy rationale that is robust. We want to maintain a strong private pillar in the health system and we believe that is going to benefit the health system as a whole. We believe that, if we can come to power within 18 months, there is sufficient time to reverse this measure and some of the damage that will be done in the meantime to the health system as a whole.

I call on the government, if they are serious about health reform, to also review the COAG health reforms that they have put into the system. I do not believe, as I said earlier, that these reforms will necessarily lead to structural change in the system in the way that we want. They will not restrain the growth in health costs or improve health outcomes. I call on the government to take a more comprehensive approach. It is a pity that the government did not respond to our calls for a committee to further review this legislation and perhaps have a broader overview of what can be done to promote a better, more affordable and sustainable health policy going forward.

Finally, Mr Acting Deputy President Cameron, I did not have the opportunity to check out what the private health insurance statistics may be around places like Springwood in the seat of Macquarie. I am certainly going to make it my business to do so and to remind people in that electorate that it is very important for them to maintain their private health insurance and the impact that this measure will have on their capacity to do so.