Malcolm Turnbull has ditched the idea of outsourcing the Medicare payments system to head off an intensifying Labor attack claiming his government will privatise Medicare itself.



But the ALP has seized on new details of a Productivity Commission inquiry into competition for a range of government services, commissioned by the treasurer, Scott Morrison, to back its claim and pronounce the election a “referendum on Medicare.”

“Medicare will never ever be privatised,” Turnbull said on Sunday after the Labor leader made the defence of Medicare the centrepiece of his official campaign launch. “It will never ever be sold. Every element of Medicare services that is being delivered by government today, will be delivered by government in the future. Full stop. That is the fact. What Bill Shorten is doing, is peddling an extraordinary lie, so audacious, it defies belief.”

The government had been looking at digitising the Medicare payment system and outsourcing some back-office tasks currently performed by public servants, as a way to cut costs. It has set up a departmental taskforce to consider options.

But with Labor alleging that this process amounts to a privatisation of Medicare itself – including in advertisements featuring the former prime minister Bob Hawke and direct calls to voters – the Coalition has been forced to rule out the idea.

“We will continue to improve the way that Medicare interfaces with their customers, with citizens, and patients, but it also all be done by government and within government,” Turnbull said. “I repeat, there will be no outsourcing of any elements of the Medicare service that are currently delivered by government.”

But Shorten used the “scoping study” released by the Productivity Commission as part of an inquiry commissioned by Morrison in April to back his claims about the government’s intentions, clearly signalling the Medicare attack will feature heavily in his final two weeks of campaigning.

The Productivity Commission is looking at how to implement recommendations from a review of competition policy which have been accepted by the Coalition. That review said that while governments should remain as “market stewards” for “human services”, they should also look for ways to increase “competition and contestability”.

“This election is a referendum on the future of Medicare – and your vote will decide the fate of healthcare in this country,” Shorten said as he launched his campaign in western Sydney on Sunday.

“We all know the endgame they’ve got in mind … Now the Liberals are trying to pull off the biggest fraud of this campaign. Pretending their taskforce doesn’t exist and that privatising Medicare isn’t part of their plans.

“Today we have new proof of their true intentions. The Liberals have given the Productivity Commission new riding instructions, to investigate privatising human services and Americanising Medicare.

Labor’s finance spokesman, Tony Burke, said Turnbull’s denials were at odds with what his government was doing.

“Either he is holding inquiries and setting up taskforces and getting work done for absolutely no purpose or he is lying before an election,” Burke told Guardian Australia.

Labor is relying on the proposal for a GP copayment in the 2014 budget and the ongoing freeze to Medicare rebates for doctors – which are also the subject of an election campaign by GPs – to reinforce its assertion that the Coalition poses a threat to Medicare.

The Coalition produced a video clip of the shadow treasurer, Chris Bowen, speaking to the press club in 2009, when he was minister for human services, also talking about using the private sector to deliver some IT services for the portfolio.