Thursday, 23 October 2014

Developing our potential in the far-west desert

During the Winter break 2014, a select number of students were selected to participate in the University of Sydney Business School's Regional Industry Placement Program. Here, they share their insights on what they gained from the program.

Adapting to a brand-new environment

Joining the University of Sydney Business School's Regional (Broken Hill) Industry Placement Program and working as a member of a consulting team was a unique experience that we could never find elsewhere. Four of us came together and worked on 3 different projects, involving financial and legal advice for small business owners, and business plans for a commercial and a social business idea. Working on these projects helped us gain a deeper understanding of the difficulties and uncertainties of doing business in a rural and aging community. As our supervisor - a business owner in the area - told us, when you are in a small community, people tend to pull you down when you rise above the crowd.

Our team, our unit coordinator and our supervisor

We departed Sydney, bound for Broken Hill, during the final exam period which was somewhat stressful as we had to fulfil our working commitments while undertaking our exams at the same time. However, after flying on the smallest airplane some of us had ever seen, our IPP cohort arrived in  a kingdom forgotten by the outside world, Broken Hill.

Learning by doing

The majority of businesses in Broken Hill are small businesses, especially family-owned businesses. We felt a bit helpless at the beginning because we had not yet learnt much about start-up businesses in our degree. Adding to this was the fact that Broken Hill's isolated market is very different to more concentrated and saturated urban markets. But in this new environment, we learnt things that we could probably never have learnt had we only studied and worked in large cities.

By observing how our unit coordinator, Peter Vymys, communicated with clients, we learnt useful strategies to lead the conversation. Later on when we had to face the clients by ourselves, we could use such skills to effectively conduct meetings and attain the information that we needed.

Immersing ourselves in real business issues was not like sitting an exam where the information is provided to you. In fact, we had to identify clients’ needs and expectations, then gather sufficient information to give advice on the best course of action for our clients. Through this, we came to understand the importance of communication between consultants and clients. We even attended a cultural awareness workshop about Aboriginal culture and studied Aboriginal culture and history, in order to better understand the context underlying the problems that our client was facing. Whilst working on this project, we were greatly inspired by the Aboriginal peoples' positive attitude towards their history and future. Furthermore, by getting to know the locals, we gradually adapted to Broken Hill and discovered its unique beauty and identity.

Our client for the project

The beauty of Broken Hill

You never know who you might run into in a small community. In fact, we were pleasantly surprised to meet the Mayor of Broken Hill in a pub on a regular Friday night and received an exclusive invitation to visit the local mine (which was closed for maintenance). The people within Broken Hill seem to maintain qualities and virtues that those in big cities forget or overlook, given their fast-paced life. For example, we met friendly strangers who warmed our hearts with their generous offers, such as giving us a complimentary private museum tour, teaching us how to dance, inviting us over for dinners and movies, or allowing us to pick mandarins from their garden.

The Mayor of Broken Hill

One of the highlights within the IPP experience was perhaps the chance to travel. With the help of our dedicated unit coordinator, and other students sharing our accommodation, we hopped on our cars and drove around the town, exploring nature and viewing the clear night sky a few kilometres outside of town. We also stumbled across sacred Aboriginal rock art sites during our trek in Mutawintji National Park.

Getting out and about to see other parts of Broken Hill-Menindee Lake

Someone once said that stepping into Broken Hill is like going back to the 50s or 60s. We spent hours wandering in the museums, galleries and historic sites, learning about how the mine used to operate in the past; about how the Royal Flying Doctor Service started; or about how Pro Hart's artworks reflect the hardship of a mining town. We are also proud to become life members of the Silverton Hotel (located in Silverton, 26 kilometers north west of Broken Hill) after completing the mysterious 'pub challenge'. No life member is permitted to reveal anything about the challenge, so I will leave it to you to explore!

Pro-Hart's Rolls Royce

Leaving behind a legacy

6 weeks of placement had gone by so fast, and it was time for us to present our findings to our clients and say goodbye to Broken Hill. There were ups and downs in working with each other, but having overcome the obstacles that we faced, we each learnt more about ourselves, about teamwork and about leadership. We were all happy that although we gained so much from Broken Hill (new learnings, new perspectives, new friends, etc), we were still able to leave behind a legacy of having put together a business plan that would become the foundation for the businesses to build upon. We hope that one day, Broken Hill will be able to thrive and grow.

Returning to Sydney, my team and I all felt more confident and motivated to continue learning and developing ourselves so that each and every one of us can continue to contribute to improving the communities we live and work in.

Song Tran and Eleanor Liu
Current students at the University of Sydney Business School

Tuesday, 14 October 2014

The Life of a Deloitte Cadet


In July 2013, I began my cadetship at Deloitte in Deloitte Private’s Audit division. I was told that it would be an amazing opportunity and privilege to receive such an offer as many penultimate students would have wished to have taken advantage of opportunities like this back in high school and during their first year of university. The problem is who knows what they want to do after enrolling in their degree? Have we set our goal and already have in mind what it is that we want to do? Or was this just the degree the safer and more secure option? All these queries have made me hesitant about my choice.

Hi, my name is Vicki, and I’m studying a Bachelor of Commerce, majoring in Accounting. As for my second major, I am still undecided. The struggles I am facing with undertaking this cadetship include all the sacrifices and time commitments. There are difficult expectations to meet at times, including the tight deadlines to meet, especially during the “busy season” as well as the lack of spare time for socialising and struggling to choose a second major. 

I began working with Deloitte at the start of this “busy season”. Post financial year end is a tough time for auditors, so I was quite overwhelmed when I was thrown straight  into the deep end. Only having one day to attend classes makes it difficult to fit in all the lectures and tutorials; not to mention PASS classes. Whether we have part-time or full-time work commitments, I’m sure that some of us would have had to skip at least one class throughout our degree. With this in mind, I have been considering my options for a second major; one that I can squeeze into my one-day timetable along with my Accounting major. Since I’m nearing the end of my second year, I would appreciate any suggestions on this.

Despite all the time sacrifices, I do not regret any of the choices I’ve made. Working at Deloitte has been one of the toughest but enriching opportunities that I’m glad to have been given. This opportunity has allowed me to gain opportunities that other students may not have been able to receive. For example, I’ve travelled interstate for work. In fact, I flew down to Wagga Wagga on my second week on the job. Due to the deadlines and late hours I’ve experienced through working as a cadet, I've slowly adapted to becoming more organised. I am managing my time a lot better, and I am pleased that some of my grades have been increasing. I suppose applying what I’ve learnt from the workplace to my classes at USYD has helped. Plus, I don’t have the burden of competing with every other student who is attempting to secure a graduate job or internship. 

Even though it may appear that I’ve locked myself into a life of audit, I’ve slowly realised that this isn’t anything like the past. Everyday people change careers; everyday people change their minds about what they’re passionate about. At the end of this cadetship who knows, maybe I’ll decide that I’ve had enough of it, and try something different. I might even study a postgarduate degree and get another job, or maybe I’ll stick with it. Overall, this cadetship has had its ups and downs, just like any other opportunity in life.     

Vicki Wong
Current student at the University of Sydney Business School

Friday, 10 October 2014

On the Road: A Pathway to Growth


A shot of other explorers on the road

As a study abroad student from the University of California, Los Angeles, I experienced my first Australian mid-semester break this past week. For some students, the break was filled with endless amounts of sleep and relaxation, while for others, it contained traveling to different countries in search of cultural shock and experience. But for me, the week long break was packed with adventure, bonding and personal growth.

It all started with the collaboration of the fantastic four: One Colombian, One Sweden, One Californian, and one from Washington State.

A picture of us in front of our Jucy van. From left to right: Cristal McClure, Juan Camilo Vargas, Simon Sundstrom and myself.

The unlikely formation of this diverse travel group added to the emergence of one’s self into new and exciting experiences that tested my courage and fed my bottomless appetite of wanderlust.

My mates and I rented a Jucy camper van and decided to drive down the coast from Brisbane back to Sydney. We had a rough estimate of a plan and decided to simply “wing it” in order to have a true college road trip experience. Juan and Simon flew to Brisbane on the morning of Sept 25th to collect the van while Cristal and I decided to leave later that evening in order to attend our tutorials (yes, we actually are good students!). Leaving that evening became our first mistake. Our second mistake was choosing to fly with Tigerair. The weather was stunningly beautiful with warm rays of sunshine and light gusts of refreshing winds...until a thunderstorm rained down on Sydney in all of its glory and might. Our flight was cancelled and the next available flight we could re-book took off Sept 28th. This minor setback provided Cristal and I with the opportunity to further explore Sydney and bond over homemade chocolate milkshakes (the sweetness cut the edge off of our bitterness).

During the afternoon of Sunday, Sept 28th, Cristal and I arrived in Brisbane after a short comfortable flight. Little to our knowledge, the adventure would begin the minute we stepped off the plane.
Below is a detailed schedule of our Australian road trip:

Sunday (Sept 28th): Grocery Shopping. Arrived at the Gold Coast and made last minute accommodation booking at a Camper-van Park. Went out and explored the night life at Gold Coast.

Monday (Sept 29th) & Tuesday (Sept 30th): Beach day at The Gold Coast - Surfers Paradise

Wind surfers taking advantage of the breeze at Surfers Paradise

Tuesday (Sept 30th): Traveled to Byron Bay and stayed at the Arts Factory Hostel. Made new back packing friends and attended a talent show.

The Arts Factory logo basically describes what the hostel is all about

Wednesday (Oct 1st): Drove to Nimbin to explore the town and then to Minyon Falls in the Nightcap National Park to have lunch with other mates we ran into on the road.

A picture of the crew at Nimbin

Thursday (Oct 2nd): Snorkeled with turtles at Byron Bay. Drove to the town of Yamba to explore and then to Coffs Harbour. We stayed the night in a sketchy parking lot.

Me snorkeling in the clear water
A close up photo of one of the turtles

Friday (Oct 3rd): Beach day at Sapphire Beach. Drove to Port Macquarie and stayed at a camper-van park.

A picture of Sapphire Beach

Saturday (Oct 4th): Traveled to Newcastle and rented out ATV’s to ride on the sand dunes. We spent the night in a parking lot right next to the ocean. Cristal and I found a small pub and danced to the live music, which encouraged the locals to get up and dance.

Cristal and I showing off our muscles on the heavy duty ATV's

Sunday (Oct 5th): Drove to Hunter Valley and participated in a “Cheers” tour which included a full day of wine tasting at four different wineries in addition to cheese/chocolate tasting and a delicious lunch.

A picture of us at a winery in Hunter Valley

The expedition turned into a bank of memories that only the four of us would be able to fully share and withdrawal no matter how hard we tried to narrate the trip to friends and family. The destination was simply the journey itself. Seeing Australian nature from a ground perspective and feeling the heartbeat of land and ocean match the pulse of my own was nothing less of intimately beautiful.

Growth came in many different forms.

Time stopped as I looked deep into the eyes of a magnificent turtle, feeling my body surrounded by cool ocean, water rushing in my ears, hearing nothing but the splash of the sea current. I felt limitless. The experience reminded me of why we must keep on fighting the grand fight to protect our ocean’s biodiversity.

Driving in Australia tested my ability to learn and abide law. Putting myself in a stressful situation with lives in my hands helped me grow as a responsible adult.

My heart beat fast as I rode along the sand dunes at top speed with the wind and sand blowing through my blonde hair. I learned how to trust myself and my own abilities.

Trying the taste of sweet and bitter wines for the first time expanded my horizons to new cultures and new perspectives from wine connoisseurs.

May it be a road trip, studying abroad for the first time or opening your heart to new and exciting experiences, maturity is the goal and growth is the progressive side effect.

Jennifer Crane
Current student at the University of Sydney and Marketing & Communications Intern at the University of Sydney Business School 

Thursday, 9 October 2014

Reflections on being a KPMG Cadet

Growing up, I thought that accounting was all about numbers. I wasn’t particularly interested in this profession until completing an assignment back in Year 10 Commerce. After rigorous amounts of research on which degree to study, which firm to apply for and the Chartered Accountants Program, I was set on being an accountant. However, little would I have thought that I would set foot into a Big 4 accounting firm three years down the track …

Back in June 2012, immediately after finals, I started my cadetship at KPMG with roughly twenty other cadets. It was a truly humbling experience going from being a first-year uni student one day to an employee in a global accounting firm the next. However, the support provided by KPMG is phenomenal and everyone is always willing to lend a helping hand. I still remember one of the senior managers teaching me how to “tick-and-bash” my first set of financials in the week I started.

Despite being an ‘undergraduate’ at KPMG we are all treated equally and being a cadet is not coffee runs and photocopying - you are a valuable employee and an important member of the audit team where your comments and ideas are always taken into consideration.

This has also been a time to ask questions and make mistakes, where instead of looking silly or being told to do something again, my queries are answered with great detail, and I am corrected and taught better ways to complete a task. From speaking with the client alone on the first day to completing an audit by myself with minimal assistance from my in-charge and manager, I have matured and become a lot more independent and confident.

Being a cadet definitely has its perks – Friday night drinks, EOFY and Christmas parties, audit dinners, the annual ball, and all expenses paid interstate work trips. My cadetship has also assisted me financially as I have been able to fund myself to attend summer school in the US this year and an internship in Shanghai during the upcoming holidays.

Work hard, play hard - Livin’ it up with some of my fellow cadets in the Gold Coast earlier this year!

Besides all the parties, audit has truly been a great eye-opener. Due to the nature of the work I am constantly meeting and working with new people, both within KPMG and when I am out visiting clients. For example, I have learnt about different industries including broadcasting, aged care, charities and industrial gases (Yes, that included learning the process of making Helium and LNG for an audit).

My cadetship has provided me with a deep understanding of the commercial environment whilst challenging me to meet deadlines and manage the expectations of managers. I have grown personally and professionally; developing my teamwork, social, problem solving and time management skills. I have also learnt how to become flexible and stay calm when working under pressure; as well as experienced having meetings at 8.30AM with the client to suit their demanding schedule, in addition to studying for mid-semester exams during audit busy season for a German company.

Now that I am back doing full-time uni I truly miss the journey I've had with KPMG – from the fun times of pranking and joking around with my colleagues, to more serious times where our audit team would work late nights for days in a row to meet tight deadlines (… compensated by time in lieu and free dinners).

Arvo coffee with my friend from high school and current colleague, Bernice Kwok, a fifth-year Bachelor of Commerce/Arts student at USYD. She completed the Industry Placement Program with KPMG and was subsequently offered a graduate job.

My cadetship has been an invaluable experience and a great investment into the future, giving me a head start into my career. It has also assisted my studies in financial accounting at uni and is definitely one of the best decisions I’ve made in life!

Leanne Ho

Current student at the University of Sydney Business School

Tuesday, 7 October 2014

“Where will I be in 10 years?”

powered by AIESEC Sydney - bringing leadership development to youth since 1948

AIESEC group picture

This is a question you as a student at a globally competitive university will probably ask yourself from time to time. Some of us find ourselves worrying about whether what we are doing will emotionally profit in the future.

That is okay.

Success is not built overnight on firm and reliable earth. It is built on soft and unstable ground that takes years of maintenance and additional support. To be successful means you must patiently improve and bring value to all your life’s aspects, as well as create value in others around you. Your road to success will be long and tiring, but improving these skills below will help make the journey a bit more easily enjoyable.

1) Self-awareness:
Knowing what you are capable of will give you an idea of who, what, where and when to efficiently place your precious time and effort. Knowing what you are not capable of will help you improve where needed. Using a twenty dollar bill to hammer a nail is not worth the effort if you can buy a hammer across the street. Efficiency is key.

2) Cultural awareness:
After university, the comfort of a spoon-fed community consisting of similar minded people will not easily exist. Sure, you can put forth the effort to find them, but that is not realistic for those of us with a limited amount of time. Instead, get to know different people. Be open, share stories, share hobbies, work together and most of all connect. Understanding and interacting with people from different lifestyles makes your journey to success vibrant with life and energy.

3) Effective communication.
What you say can either make you or break you. Your communication skills can affect the outcomes of major decisions. Misunderstanding can occur, and can leave both parties confused and irritated. Work on your communication skills by carefully wording what you say to be concise, comprehensible and diplomatic.

Keep these in mind. Success is not a paved road. It is rugged, even at its best, yet rewarding.
Your future is a never ending journey filled with challenges that should not be pushed away, but embraced with hope.

You’ve got this.

For more information about AIESEC Sydney, please visit us online.

Justin Pepito
Current student at the University of Sydney Business School

Thursday, 2 October 2014

Business in the Face of War

The following article has been extracted from Inside Enterprise, a Business School sponsored, student-run publication.


In war, the choices made by businesses can govern the fate of hundreds of thousands of soldiers and civilians. This is no more so than in the turmoil rife in the Congo, where for the past sixteen years businesses have been indirectly funding rebel militia operations and exploiting the shattered lives of the destitute.

The Civil War in the Congo
Since 1998, continual conflict between government forces, Rwandan rebel groups and armed Congolese militia factions have left 5.4 million people dead, 2.75 million displaced, rapid escalation in the rates of malnutrition and a state of near dystopia in the Democratic Republic of Congo (DRC). Yet ironically, at the heart of the staggering humanitarian crisis is what most would consider an economic gift: precious metals and ores buried deep beneath the surface of this landlocked African nation. The use of forced labour, abduction and child soldiers in the fight for these resources has precipitated enormous bloodshed and societal chaos. Many of these minerals are purchased by the tonne by large overseas electronics companies that produce devices such as smart-phones and laptops, devices that millions around the world use every day. The crippling war in the DRC, it is alleged, has been prolonged not only by government corruption and power-hungry warlords, but by the business leaders who purportedly finance the conflict in the name of company profits. The choices of Western businesses have a monumental impact on the situation in the DRC and there has been active debate over how firms should best respond to this crisis.

The Response from Businesses
For years, electronics firms have claimed that the complexity of the supply chain and its opaqueness has meant that it was logistically impossible to determine whether their products have been contributing to the civil war. In 2010, after years of mounting media attention linking Western business to the crisis in the DRC, Barack Obama signed the Dodd-Frank Wall St. Reform which required companies to fully disclose and report their usage of the notorious conflict minerals tantalum (coltan), tin, tungsten and gold. The reform came into full effect as of May 2014 yet surveys from April 2013 state that only 7.5% of manufacturers were prepared to comply with the new regulations. Companies such as Toshiba, Canon and Panasonic have been criticised for not doing enough to achieve conflict-free supply chains and, recently, the National Association of Manufacturers along with the U.S Chamber of Commerce – both powerful business bodies – sued to try and stop the Dodd-Frank Act.

However, there are an increasing number of firms who are taking active measures in response to growing consumer awareness and moral concern over the gadgets they purchase. Apple has recently announced audits for its downstream suppliers by publishing a list of smelters and ethical sourcing regulations, while Motorola has similarly begun implementing a program to trace minerals in its products and forced its suppliers to verify conflict-free sourcing. While the pushes by Apple and Motorola to ensure a conflict-free supply chain are providing early case studies for other companies to follow suit, many commentators are nevertheless predicting a widespread withdrawal from DRC trade by firms who see compliance with legislation such as the Dodd-Frank Act as simply too costly. At the crux of action, businesses must decide whether to stay and accept the costly action required to regulate the supply chain or to boycott the entire crisis and evade moral accountability.

Regulating the Supply Chain
The leading approach to avoid a boycott alternative is to improve the regulation of the DRC’s mining industry through cooperation with both local and Western governments. A focus must be to enhance the stability of the ore market in the DRC and to develop a system of certification and transparent auditing. Long-term, fixed price contracts from upstream purchasers could mitigate fluctuations in an already cyclical industry and facilitate better income security for workers.

However, few companies are willing to enter into long-term contracted business in a nation where corruption is rife and laws and regulations are frequently non-transparent. Incentives for compliance to standards critical to economic rehabilitation as well as incentives for electronics companies must have an agenda to contribute to community and conservation projects, create value and jobs for what is a much struggling economy, and educate consumers and pressure groups. Commenting on the DRC situation in 2002, Simon Hicks wrote “we need to move the strategy from doing business despite war to doing business instead of war”, suggesting the need for firms to forgo short-term profits in order to achieve long-lasting social change. Unfortunately, in the face of precepts such as profit margins and shareholder value, few businesses are ready to make any significant sacrifice without adequate compensation.

Boycotting Exploitation
Alternatively, given the irrefutable link between the exploitation of Congolese minerals and the ongoing civil war, a boycott of products originating in areas under conflict zones may appear to be a reasonably logical solution. A ban would guarantee that businesses are not funding activities run by armed militias while assuaging burgeoning consumer concern over the source of purchased electronic devices. However, a boycott on Congolese minerals could have a devastating grassroots impact on the people and economy of the DRC.

Far from stemming funding of the war, sanctions impact those already most vulnerable by restricting the utility of resources, depriving artisan miners of their livelihoods and exacerbating the detrimental cycle of poverty and hunger already endemic. Several NGO reports spotlight how an economic boycott could pressure armed rebel military groups to be even more parasitic toward the innocent and vulnerable and fuel further destitution. Businesses must decide whether avoiding involvement and retracting Congolese trade in order to placate financial stakeholders is ultimately an ethical move itself. While a boycott would ensure that there is no indirect funding from these companies exacerbating the bloodshed in the DRC, for many, walking away from a situation and avoiding the problem altogether represents a relinquishment of corporate social responsibility.

Facing the Dilemma
Businesses are more than just profit-creating entities. Alongside governments and NGOs, they can play a critical role in alleviating the DRC crisis by challenging their supply chains to adopt a regulatory framework: one that endorses socioeconomic stability and investment through the provision of employment, skills, training and livelihoods. Distancing business operations from conflict under the banner of a boycott and disengaging from the problem altogether could in fact be disastrous to the fate of hundreds of thousands of those already vulnerable and suffering at the hands of the rebel militia.

Timothy Le
Current student at the University of Sydney Business School

Thursday, 25 September 2014

Why the Medicare Co-Payment Could Cost You Less.

The following article has been extracted from Inside Enterprise, a Business School sponsored, student-run publication.

With the introduction of a new $7 doctor’s fee announced as part of the 2014 Federal Budget, effectively ending the reign of free healthcare in Australia, Geordie Costello explains the logic behind the move and how it could cost you significantly less in the long-run.
 

I am sitting in the waiting room of my local doctor’s office. What am I doing? Waiting of course, what else does one do in a doctor’s office? Having forced myself through all the celebrity magazines, there is nothing left but to sit back and gaze around the unadorned room. Or is there? I decide to play a game, maybe not a tasteful game, but one that will help kill the time. It is called ‘pick the ailment’. Some patients are easier to pick than others. A boy sitting two seats to my left has plaster around his arm, the obvious conclusion that he has fractured it. The woman directly across from me sits hunched over a bucket and looks to have a terrible virus. Other patients prove more of a challenge, probably carrying illnesses with less obvious symptoms. I start to wonder if there is someone in the waiting room who does not really need any medical attention? After finally being called in to see the doctor, who prescribes me a ‘good night’s sleep’ for my case of the ‘sniffles’, I realise that person is me. Not to worry, the whole doctor thing is free right?

Wrong. There is an old saying, ‘there ain’t no such thing as a free lunch’. If you are not paying for a good or service, it just means someone else is. As taxpayers, we all incur the costs of healthcare, albeit some more than others, and that cost is currently rising at an alarming rate. The Australian Institute of Health and Welfare has released the latest statistics on primary healthcare funding, of which general practitioner (GP) billing comprises a large percentage. Controlling for inflation, Australian government expenditure has increased from $669 to $1,005 per person over the last 10 years, an increase of 50%, or an average annual growth rate of 4.2%. Unless we are willing to pay considerably higher taxes, redirect funds away from other vital areas, or let the government budget collapse into long-term decline, these rising costs need to be addressed.

Part of the reason for these increased costs is that, as a common good, healthcare leaves itself vulnerable to exploitation. This problem is known as the ‘Tragedy of the Commons’. The term stems back to 1830’s England, where herders were allowed to let their sheep graze on common land. If overgrazing occurred, only the herders overgrazing would reap the benefits of fatter sheep, yet all would share in the costs of the damaged land. To understand the likely outcome in this situation, we can use a little ‘game theory’, and ask ourselves what is the best response of the herder, given the responses of all other herders?

If you are a herder and none of the other herders are overgrazing, your best response is to overgraze and reap all the benefits. But what if half the herders are overgrazing? The benefits of overgrazing are smaller, but the cost to the commons occurs regardless, so you might as well overgraze. Then again, what if all the herders are overgrazing? In this case, you are incurring a huge cost to the commons, so even the smallest benefit of overgrazing may mitigate this loss.

Given that overgrazing is always your best response, and hence, are the best responses of all other herders, we arrive at the Nash Equilibrium, a point where everyone overgrazes and the commons is destroyed. This concept is called ‘free riding’ and is currently occurring in our medical system such that we are all likely to have overgrazed once or twice in our lives. The extra benefit I received from seeing the doctor was minimal but, ignoring the opportunity cost of my time, the personal cost of my doctor’s visit was zero. I was free riding on the collective, given the true cost of my visit is assumed by the taxpayer. This ‘true’ cost is based on the Medicare Benefit Schedule (MBS), which details a list of items that the government will cover, and the amounts they cover for.

With the MBS data provided by Medicare, we may be able to estimate the current prevalence of free riding behaviour. The MBS lists a number of items. The most common is called ‘Item 23 (Level B)’. It relates to a GP consultation lasting between 0-20 minutes that involves only one of the following: taking patient history, conducting a clinical exam, arranging an investigation, implementing a management plan or providing preventative healthcare. This is your standard GP consultation and it costs you about $36.30.

There also exists ‘Item 3 (Level A)’ which refers to “professional attendance for an obvious problem characterised by the straightforward nature of the task.” This item costs $16.60. Given level A people do not truly require medical assistance, it seems conceivable that free riders like myself are ubiquitous in this group.

The MBS data illustrates a sobering picture. In 2013, 12 visits for every 100 people in Australia were committed by free riders, and the problem appears to be worsening. Since 2003, the average annual growth rate per capita has been 7.6%. This is a conservative estimate, given that a GP is incentivised to charge a Level B to a free rider, as the criteria can be easily met and they would receive more than double the benefit from the government.

So, I hear you ask, how does charging a $7 fee solve this problem? Well, it may not eliminate free riding altogether, but it is certainly a step in the right direction. By charging a small fee, the government introduces a ‘user pay’ element into the Medicare system. This is not too dissimilar to our government subsidised rail network. According to Infrastructure NSW, each train trip costs the taxpayer on average $9.45, while the average on-peak fare is about $4.70.

Like the rail system, a Medicare fee reduces free riding behaviour as everyone must now face an explicit cost. Even though it is a reasonably small cost, it would be enough to convince me to just wait out my sniffles or head up to the Chemist to buy some Sudafed. In other words, with a $7 fee the personal cost of going to the doctor now exceeds the benefit.

Of course, all systems have their drawbacks. Most people’s first impression would be that a fee will unfairly penalise the lowest income earners and the sickest people, those already burdened by the increasing exemption of GP Bulk Billing. Firstly, less bulk billing is a fallacy. Bulk billing rates of GP’s reached their highest point ever in the 2013 December quarter, at 81.9% Australia wide and 86.7% in NSW. There is simply no such thing as the ‘good old Bulk Billing days’. Those days are now.

Despite this, the flat fee announced in the Federal Government’s 2014 Budget may cause sick, low-income earners to avoid the GP or instead seek out emergency rooms. The government has partly mitigated this concern by providing a ten visit safety-net for pensioners, concession cardholders and children, and by suggesting to the states and territories that higher fees should be charged for emergency room use. Yet by far the most effective and fairest policy would be to means-test the fee. This would reduce the burden on low income earners and further eliminate free riding behaviour, given that high income earners would face an explicit cost that better reflects their ability to pay.

Nevertheless, next time you leave the doctor’s office, remember that the annoying $7 fee you just paid has prevented countless free riders from unnecessarily going to the GP, saving you, the taxpayer, $36.30 for each one. And that is why the Medicare co-payment could cost you less.

Geordie Costello
Current student at the University of Sydney Business School