Australia's healthcare system also costs less than half America's

Thanks dad for the article. Interesting commentary on pension funds towards the end of the article and some insight in the last 2 paragraphs as to why health care is so much more expensive here in the States when compared to Aussie, which has approx a twentieth of the people?

Aivars Lode


Future Fund shows it has no confidence in Telstra chiefs
November 20, 2010

Fund votes against every motion at telco's annual general meeting.

One conclusion from the Future Fund's decision to vote against every motion put up at Telstra's annual meeting yesterday is that the tenure of chairman Catherine Livingstone and chief executive David Thodey is now bound up with the pace of the fund's retreat as a shareholder.

The fund cited specific reasons for voting against Telstra's remuneration report, a reduction in maximum number of directors from 13 to 11, and the confirmation of a new director, Nora Scheinkestel.

The lower cap on director numbers and the appointment of Scheinkestel, a finance and banking specialist whose portfolio of board seats includes AMP and Orica, created a full board that still does not have enough telecommunications experience, it said.
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And it said Telstra's remuneration plan was too vague, about how the $1 billion ''Project New'' attempt to upgrade Telstra's sales marketing effort will be evaluated, and about how long-term incentives that depend partly on cash flow will be affected by the $9 billion cash payment Telstra will book if it sells copper network into the new National Broadband Network, as planned.

Only one Telstra director, John Zeglis, has a telco background, as AT&T general counsel, and chief executive of AT&T wireless. Nora Scheinkestel continues the pattern of appointing well-credentialled generalists.

Project New also came in for criticism for containing no public targets when it was rolled out to investors in August and September. Telstra's shares are down about 22 per cent since early August, when it posted soft earnings and predicted flat revenue and a high single digit profit decline in the current financial year (those forecasts were confirmed yesterday, with Livingstone predicting that Telstra will maintain its 28¢ a share payout this financial year and next).

The fund lobbied Telstra ahead of the meeting. It voted against the motions after failing to secure a board appointment it was prepared to back, and after failing to get the clarity it wanted on the remuneration plan. Significantly, it did not campaign publicly ahead of the meeting, and it says it will continue to ''engage constructively''.

But this was, in effect, a vote of no-confidence in Telstra's leadership, and it could snowball.

The Future Fund is headed for the door. It sold down from a 16.4 per cent stake to 10.9 per cent in a block trade in August last year, and announced last month that it had sold another 1 per cent or 114 million shares, leaving it with just under 10 per cent, or 1.2 billion shares.

It gave itself three to five years two years ago to get its stake down somewhere near Telstra's share of overall market capitalisation, and still has more than 1 billion shares to go.

And the recent sale was done on-market in small parcels that never accounted for more than 14 per cent of the daily trade. At that rate the fund will be a major player for a couple of years, and a lightning rod for other dissatisfied institutional shareholders.

I HAVE returned this week from a trip to Wall Street, where the answer from chief executives, economists and analysts to my opening question - is it safe? was pretty much unanimous: it's still too early to tell: concern lingers that America's private sector is unprepared for the baton-pass from public sector stimulus that is under way.

But quite a few of the people I spoke to also had a question for me: how did Australia escape the global financial crisis? I got better at answering as I progressed, and argued that it was more than luck.

Sure, Australia is sitting on a commodity motherlode at a time when its own part of the world is continuing to grow strongly. But in ways that mattered in 2008 and 2009, it is also the more nimble and responsive economy.

Loans including home loans are made here mainly at variable rates, for example, so cash rate cuts by the Reserve Bank during the crisis flowed quickly into the system. That did not occur in the United States, where mortgage rates are fixed: US mortgages are theoretically renegotiable when rates move lower, but the process broke down in the crisis, as house prices plunged and loan to valuation ratios rose.

Banks here are also not limited to the house they are lending on for collateral, as occurs in many US states. Australian borrowers are therefore less likely to over-extend, and less likely to default. They simply have more to lose. Australia also had, and has, a smaller debt problem.

This is partly because it was carrying less debt going in, but it is also because it is on the way to funding its pension obligations, through the national superannuation scheme that began as a wages trade-off in the '80s, and through the Future Fund, which will cover Commonwealth employee superannuation payments.

US public pension plans are unfunded, and liabilities are growing as investment returns fall, and interest rates stay low.

Australia's healthcare system also costs less than half America's relative to GDP, partly because malpractice awards are capped. They are uncapped in the US, and are a catalyst for the over-prescription of drugs and procedures by doctors who are desperate to show they are covering all the bases.

Caps on healthcare damages are one of the reforms now proposed in draft form by President Obama's Fiscal Commission, which proposes to cut the deficits by $US4 trillion between 2012 and 2020. But the debt reduction debate will run for years before much happens.

mmaiden@theage.com.au