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Health sector rallies as Morrison claims victory

Scott Morrison

Off the back of a Coalition victory on Saturday night, share prices in the health sector have reacted positively.

The bounceback in health care shares, along with the banks, has led to an 11-year high for the ASX as a whole.

Why such strong movement in healthcare?

The Australian Labor Party intended to bring in a 2 per cent cap on price increases for private health insurance for the next two years.

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When this policy was announced, combined with a broader expectation of a Labor win, investors became less inclined to buy shares in private health insurance for fear of a cap on profits as a flow-on effect.

However, with the Coalition winning the 2019 election, the cap on private health insurance will not be introduced.

This has led to strong gains of up to 11 per cent for some private health insurers.

Cautions from the experts

Goldman Sachs’ analysis of the private health insurance sector suggests that it can be a risky market in the long term.

While many in the industry saw Labor’s policy as a hit, Goldman Sachs also believes it addressed the industry headwinds of a falling participation rate and increasing youth exit.

Goldman Sachs does not believe special offers, such as Medibank’s 2 per cent discount for youths, will adequately address this issue.

In fact, Goldman Sachs believes the sector is overpriced and that investors should approach with caution.

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Health sector rallies as Morrison claims victory
Scott Morrison
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Cameron Micallef

Cameron Micallef is a journalist at Nest Egg, writing primarily about personal wealth and economic markets. 

Prior to this, Cameron worked for Australian Associated Press. He graduated from the University of Wollongong with a double degree in communications and commerce.

You can contact him on: This email address is being protected from spambots. You need JavaScript enabled to view it.

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Anonymous - This is silly. Most countries would think 3 per cent was fantastically low. Further, who measures how much economic activity is being destroyed by.......
Anonymous - What a load of rot! What is he comparing the detriment to, and how much does the GFC effects factor into his farcical calculations? ....
Anonymous - In other words, sack advisers and cut costs. It's the financial version of #me too movement.....
Anonymous - If that's after tax pay then I'm screwed.....