Another minister in breach of the ministerial code of conduct?

Prime Minister addresses issue in Question Time

When the election was called on 11 April, the then Shadow Assistant Health and Ageing Minister Ged Kearney owned shares in twenty odd companies on the ASX, including Sonic Healthcare, CSL, Washington H Soul Pattinson, and Mineral Resources.

Following the Prime Minister's announcement of a new ministerial code of conduct in early July prohibiting ministers from owning direct shareholdings, Kearney divested hers. Sometime before 9 August she invested in 31 publicly listed managed funds, as detailed in her statement to the Register of Members' Interests.

Under 3.11 of the code, ministers are permitted to have investments in publicly managed funds, and public super funds and trusts, “where:

(i) the investments are broadly diversified and the Minister has no influence over investment decisions of the fund or trust; and

(ii) the fund or trust does not invest to any significant extent in a business sector that could give rise to a conflict of interest with the Minister’s public duty.”

Kearney’s investments meet the first hurdle as all 31 managed funds are broadly diversified and she would have no influence over investment decisions.

However, Kearney could fall foul of the second requirement as at least five of her managed funds have significant shareholdings in large Australian healthcare companies including Ramsay Healthcare, CSL, Sonic Healthcare, Cochlear, and Medibank Private.

• Vanguard Australian Shares Index ETF: 10.2% is in healthcare ($1.1 billion) as of 31 July 2022. The portfolio includes CSL (6.6% - $726m), Sonic (0.77% - $84.8m), Cochlear (0.66% - $72.7m), Ramsay (0.61% - $67.2m).

• State Street Australian Equities Index Fund: 10.35% in healthcare ($80.5m) as of 31 July 2022. CSL is the fund’s 3^rd largest holding with 6.81%.

• Pendal Sustainable Australian Share Fund: 13% of funds ($39.8 million) were invested in the healthcare sector, include CSL (10.8% of holdings), as of 31 July 2022.

• VanEck MSCI Australian Sustainable Equity ETF: 12.7% of funds ($11.3m) were invested in healthcare as of 31 August 2022. Holdings include CSL (5.14%), Sonic Healthcare (2.25%), Cochlear (2.06%), Ramsay Healthcare (1.9%).

• Perpetual Wholesale Ethical SRI Fund: 5.06% is in healthcare ($45m) as of 31 July 2022. Medibank Private is the 5^th largest holding (4.5%).

All these companies benefit from Medicare and other healthcare funding and/or favourable regulations like private health insurance rules.

It could be argued there is no conflict of interest because Kearney is a junior minister. Assistant ministers, or parliamentary secretaries as they were once known, have no real power. They do little more than sign letters drafted by the department, meet people their cabinet minister doesn’t want to meet, and introduce legislation to parliament. Control over health policy and spending sits with Health Minister Mark Butler, Cabinet and the Expenditure Review Committee.

However, Kearney still has some influence over health policy as she would frequently consult with private healthcare businesses in her official capacity and could be relaying industry concerns to Mark Butler during her regular meetings with him.

Open Politics is not suggesting Kearney would be raising issues with Butler on behalf of her funds’ portfolio companies, but to our mind her health investments create a perception of conflict of interest. Therefore she should consider divesting her holdings.

Indeed section 3.12 of the code recognises this perception risk and potential course of action, stating:

If a Minister becomes aware that a fund or trust has invested in a company that might give rise to a perception of a conflict of interest, the Minister should inform the Prime Minister immediately and liquidate the investment in the fund or trust if required to do so.”

Open Politics contacted the minister’s and prime minister’s offices for comment on whether the minister’s investments comply with the code. We are yet to receive a response.

Update 8 September: The minister's spokesperson told Open Politics on 7 September that the minister was not in breach of the code because her investments 'do not give rise to a conflict of interest with her ministerial duties.' However, as the Prime Minister advised the House of Representatives on 8 September, the minister has informed him that she will be selling her health investments.