Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
KIERAN GILBERT: Good morning and welcome to the program. The Governor of the Reserve Bank has endorsed the Government’s position on company tax and that cut that the Government has been planning and hoping to get through the Senate. During a speech to the economic forum in Sydney last night, Phillip Lowe called for Australia to remain competitive with other economies in the corporate rate. Let’s go to the Finance Minister Mathias Cormann. Minister thanks so much for your time this morning. While the Governor did endorse a cut in the company tax rate, he also made it clear that this needs to be done in the context of balancing the budget, so is there some sort of compromise necessary in order to also reduce the outlays that are going to total about $50 billion in terms of the company tax cut over the ten years.
MATHIAS CORMANN: No, a company tax cut is not an outlay, it is less revenue over that period. It is not an item of expenditure, it is less revenue. The Governor is absolutely right, he is Australia’s most senior, independent economist and what he has pointed out is that Australia competes internationally for capital investment. If we want to grow our economy more strongly, create more jobs, we need to attract more investment. If we want to achieve increases in real wages we need to improve productivity. A lower, more competitive business tax rate in Australia will help us boost investment to generate stronger growth, create more jobs, boost productivity and over time real wages. The truth is that ... interrupted
KIERAN GILBERT: Yeah, but it might not be an outlay, but it is still as you say less revenue. He is talking about, and I will quote him, he says a complication is the corporate rate, he says we have to respond to this while achieving a balance between recurrent spending and fiscal revenue. That is the point. It is a $50 billion hit to the Budget can it be justified at that extent?
MATHIAS CORMANN: That is not right. You are misrepresenting what he is saying. The Government is focussing on getting expenditure under control. Over the medium term, the decisions that we have implemented so far have achieved improvements in the Budget bottom line. Net improvements in the Budget bottom line to the tune of about $250 billion. That is as a result of reductions in expenditure growth. We need to do both. That is what the Governor of the Reserve Bank is saying. We need to do both, making sure that our tax settings are internationally competitive. The truth is that our business tax rate is very high by international standards today. That is why we need to bring it down, because our international competitive position today when it comes to our business tax rate is too weak. We need to be able to attract capital investment into Australia to boost growth, boost productivity and over time increase real wages. At the same time and the Government is doing this, at the same time, we need to continue to ensure that our expenditure growth trajectory is sustainable and that it is balanced with the revenue that we can draw out of the economy.
KIERAN GILBERT: Now you have been in negotiations with the crossbench, how are the prospects, are you still hopeful of getting full ten year plan through?
MATHIAS CORMANN: We are committed to the ten year enterprise tax plan, reducing our corporate tax rate down to 25 per cent for all businesses. That would put us into the middle of the road of OECD countries. Now, with the United States proposing to reduce its corporate tax rate from 35 per cent at present to 15 per cent, it is even more important that we achieve out achieve our ten year enterprise tax plan objectives. We understand that we don’t have the numbers in the Senate. We will work and continue to work with Senators of all parties to get as much of our agenda through as possible.
KIERAN GILBERT: Now we are facing heatwaves in the southeast, warnings of blackouts in New South Wales. Does the Government accept some responsibility here as well for the lack of certainty in the national energy market, in the national energy policy, given there are a number of contradictions in the Government’s approach to this right now. You want states to lift moratoriums on gas, yet you knock back an energy intensity scheme which the chief scientist says would promote the use of gas. There seems not a lot of coherence in what the Government is arguing in this space.
MATHIAS CORMANN: I don’t accept that at all. The Government’s approach is one that is entirely technology agnostic. It is true that our objective is to ensure that we achieve better energy security. We need to have a reliable supply of energy, which is affordable. We need to achieve that at the same time as we continue to reduce emissions in line with our emission reduction targets. We are working with the states through the Council of Australian Governments and with Alan Finkel in order to lay out a road map for the future. We have got to look back at what has happened in recent years. State Labor governments around Australia, irresponsibly, have imposed excessively high renewable energy targets that have driven up not only the cost of electricity, they have also significantly reduced the energy security across large parts of Australia. This has led to less stability in our energy market. These are things that we have got to address in a clear-eyed way. The Prime Minister has set up an energy subcommittee of Cabinet which will focus very strongly on all of these matters. We will continue to ... interrupted
KIERAN GILBERT: You say all of the above and you’re agnostic. That is not actually true is it, because you have ruled out an energy intensity scheme, an emissions intensity scheme, which the chief scientist promotes and advocates and actually promote the use of gas, which you are also saying the states need to do. There are contradictions here and it is not all of the above is it?
MATHIAS CORMANN: It is all of the above when it comes to technologies. We certainly don’t want to pursue policies, as Labor did, which drive up the cost of electricity without actually achieving the necessary improvements in energy security. We want to ensure that there is a reliable supply of energy, that there is an affordable, reliable supply of energy in a way that helps us to achieve our emissions reduction targets. There is a lot of work underway at present, including and in particular with Professor Finkel, who is reviewing national electricity market on behalf of the Council of Australian Governments. Let’s just see where that takes us. These are matters that are very much in the area of responsibility of my friend and colleague Josh Frydenberg.
KIERAN GILBERT: Yeah indeed and I know that the Government always attacks the Labor for being ideological on this but isn’t the Government also guilty of some ideologically opposition on things on the surface make a lot of sense to achieve your own policy outcome?
MATHIAS CORMANN: We have had all these Labor experiments in the past and all they delivered were higher prices electricity prices, less energy security without actually contributing to a global reduction in emissions. Labor’s policy when it comes to all of these things, carbon taxes by any other name, led arguably to increases emissions in other parts of the world well above the reductions that might have been driven in Australia. So there is a lot of work to be done here. We have been entirely technology agnostic. We are focused on improving energy security and on affordable energy supply because that is very important for our international competitiveness. It is an important part of us being able to continue to growth the economy strongly into the future.
KIERAN GILBERT: Talking to a lot of your colleagues during the week, there was a sense of relief with that performance of Malcolm Turnbull that finally the gloves were off and that he was taking on Bill Shorten with a manner in which many of you had thought he could but had not until this point. How significant was that speech to Parliament?
MATHIAS CORMANN: It was a very important speech in that Bill Shorten has been personally quite nasty for some time. The Prime Minister had been very patient and generous in not pushing back earlier. I thought it was a great speech. I think that all of us in the Coalition were very pleased to see that the Prime Minister pushed back on Bill Shorten.
KIERAN GILBERT: Okay Mathias Cormann, appreciate your time this morning, as always thank you, live from Perth.