2019 CEO Survey: Rohan Mead, Australian Unity

Australian Unity managing director Rohan Mead. Picture: David Caird

Every year The Australian’s John Durie asks some of the biggest names in Australian business five key questions about what’s coming in the year ahead.

Here, in his own words, is what Australian Unity MD Rohan Mead sees ahead in 2020.

Read more from the 2019 CEO Survey.

How is your company affected by low-interest rates and what is needed to boost the economy?

Australian Unity is an investor in social infrastructure and, as both a borrower and as an investment manager, we are materially affected by market and official interest rates. On the one hand, we are positive about the relative availability of investment capital for key social infrastructure assets, such as hospitals. On the other, we are concerned at the potential imbalances being inflated into real asset values and the exacerbation of the “self-provision panic” of baby boomers. Baby Boomers who are facing their retirements in the shadow of lower investment returns.

It’s a truism, but confidence is key. After decades of defined contribution superannuation and as a middle-sized, open trading economy – our community is relatively financially and economically literate, particularly when compared to some of the defined pension and more self-involved economies of the OECD. The community that we interact with through our operations is very alert to the fact that current interest rate levels do not signify good economic health.

With the industrialised world, Australia included, facing mass-ageing for the first time in human history, our community has a strong sense of the challenges facing the economy and policymakers. Household income growth is stagnating, and anxiety is growing about the sustainability of the social safety net – with specific concerns about the quality, accessibility and affordability of healthcare and aged care.

In this novel and uncertain environment, policymakers have to find ways to engender the confidence of businesses and households to invest, innovate and spend.

What is the impact of government regulations on your company including those applying to the financial sector?

Following the financial services royal commission, there are two ongoing royal commissions into aged care and disability. These are areas in which Australian Unity has growing involvement. Additionally, our health insurance business has been navigating sector reforms introduced by a government keen to contain growing disquiet about cost and value. At the same time, we have been responding to the ongoing development of the regulatory ambit in the areas of cybersecurity, data governance and quality standards in human services.

These commissions of enquiry have done and/or are doing important work and the other areas of regulation development are also in unquestionably important areas. That said, the volume, extent and prescription of regulation are, on any reasonable measure, extraordinary and the interaction between regulatory regimes is now giving rise to its own risks for firms. In large part, we are where we are in response to the complexity of our modern world, albeit with a large measure of that complexity being self-inflicted. But there are real questions to ask about the cost: effectiveness ratio of our regulatory approach. The costs are substantial and growing, both direct and indirect. Do we need a change in approach? Do we need to address underlying incentives in key markets? Rather than throwing more and more regulation at symptoms—are we doing enough on root causes?

What percentage of company revenues are spent on research and development and how is your company using technology to improve performance?

We make ongoing, substantial investments in R&D and technology. We have a particular emphasis on how data insights can drive the effectiveness of our human services operations and on how digital business models and AI can help improve the effectiveness of our allied health interventions with clients. For example, how digital monitoring and measurement can be deployed to improve the quality and speed of recovery for people after joint replacement.

In support of this priority, we established a dedicated Customer & Digital function in 2017 with executive committee representation. This function is charged with driving research and innovation, testing new technologies and exploring new business models across the company’s operations.

What are the three major policy issues facing the country and what should be done about them?

As our economy shifts its emphasis to services, including human services, and as we seek to address the challenges of mass-ageing—we face challenges in remaining competitive in global terms and affording the social goods and services that we expect and at the level of quality that we expect. As part of broader economic reform, Australian Unity would nominate the following three key policy issues:

● Productivity: growth and improved dynamism at the firm level. Because of the sheer scale of the challenges looming, new business models in human services will have tobe developed – demanding flexibility in industrial relations settings and the sensible remapping of entrenched demarcation lines. Without in any way disregarding safety and quality, firms need to be unleashed to experiment and innovate, to invent new ways of addressing community needs.

● Workforce: we need effective, long term policies to deliver the clinical, healthcare, allied health and care services workforce. Our community will be needing a net additional workforce over the coming decade in the hundreds of thousands in what is already Australia’s largest workforce segment.

● Skills training: we need to apply our best thinking and suitable resourcing to renewing our VET system.

What are the major impediments to long term growth facing your company and what can or is being done about them?

With almost overwhelming community needs for social infrastructure (both hard assets and services) unfolding over the coming decade and with old approaches to meeting these needs likely to be ineffective, cost-prohibitive or both—we need to return to the real productivity reform challenges and opportunities identified in key reports such as the Harper Competition Review and the Productivity Commission’s Shifting the Dial.

In a positive vein, earlier this year, Australian Unity (a 179-year-old mutual) welcomed the passage through the Australian Parliament of legislative reform that delivered formal recognition of mutual entities, also allowing them to raise funds through the issue of as pecific financial instrument –the Mutual Capital Instrument. Previously mutual entities, including Australian Unity, generally could only raise funds by increasing debt, which effectively restricted growth. Mutual Capital Instruments will allow mutual entities to raise permanent capital without compromising their mutual status. Australian Unity believes that the resilience and competitiveness of the Australian economy are supported by an increased diversity of corporate form.