Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
PAUL MURRAY: Mathias Cormann is the Finance Minister of course. He is in Canberra and he joins us now. You are on Paul Murray Live. Minister congratulations on the Budget, but I have got to say the debt ceiling is now at $600 billion. That is a huge amount of money. It is $25,000 for everyone from the baby born today to the person who dies tomorrow. I know that the debt is only just below $500 billion, but can you explain to people watching us right now why the credit card is now at more than half a trillion dollars.
MATHIAS CORMANN: When we came into Government we inherited an unsustainable, unaffordable spending growth and debt growth trajectory. Debt today is less than what it would have been if Labor’s policy settings had stayed in place. We inherited spending growth of about 3.7 per cent per annum above inflation on average. That is down in this Budget again to below 2 per cent, 1.9 per cent in fact on average over the forward estimates. Spending as a share of GDP, as a share in the economy, when we came into Government was heading to 26.5 per cent within the decade and rising. We have turned that around. We are bringing that down to about 25 per cent over the forward estimates, which is just slightly above the long term average of 24.8 per cent. So spending is better under control now. Net debt is expected to peak the next financial year, the 2018-19 financial year and is expected to go down to below 9 per cent by the end of the medium term. But having said that, there is a forward trajectory. We have to ensure that Government can continue to operate, that financing arrangements for Government are secure and that there is certainty for financial markets and the market generally. That is why we are making prudent decision now to give the Government the necessary headroom to operate in a sensible and responsible fashion.
PAUL MURRAY: Can we look at the Budget numbers again in terms of surplus and deficit here because there is one number in particular that is in the forward estimates and it is not the never, never, it is in fact just after the next election. But I want to have a look at this here. So we go from the deific this year at 29.4, then you save $8 billion to 2021 and then you magically save $18.9 billion in 2019-20. What the hell is happening in two years that isn’t happening a year after that or a year before that?
MATHIAS CORMANN: It is not magically. The first point to make is that payments over the forward estimates are actually, as a result of estimates variation, as a result of what is happening in the economy and with demand in demand driven programs, there is $12 billion less spending than what had been anticipated at the most recent Budget update before Christmas. Overall, expenditure overall, is less than what had been anticipated in last year’s Budget. But what we have had to do in this Budget is reverse a series of spending reduction measures that were not going to get through the Senate. That has a particular impact in the next financial year, in the 2018-19 financial year. There is also a one off factor, a peak in the payments to the States out of the Disability Care Australia fund. So there are a range of reasons why as a result of one of the factors in 2018-19 the number is a bit higher. But you are quite right, by 2019-20 we are nearly into balance, we are just to the tune of about $2.5 billion in deficit. That is better than in last year’s Budget. The projected surplus for 2020-21 at $7.4 billion is materially better than what we had projected this time last year.
PAUL MURRAY: I will let my colleague Janine Perrett a question. It would be rude of me not to do let her do so on Budget night. What have you got for the Finance Minister?
MATHIAS CORMANN: Hi Janine.
JANINE PERRETT: Hello Senator Cormann. I just want to ask you on the bank tax. For many years you were a virulent critic of a mining tax. Now the banks are amongst the biggest taxpayers, they certainly pay more than a lot of resource companies, most of the gas companies. You also went to an election with the centrepiece being a $50 billion company tax cut, which you argued was vital for the economy. So, how does whacking the banks with a $6 billion a virtual tax help the economy?
MATHIAS CORMANN: Firstly, we remain committed to the business tax cut, our ten year Enterprise Tax Plan, reducing the corporate tax rate for all businesses to 25 per cent. We have been able to legislate the first three years, reducing company tax to 25 per cent for businesses with a turnover of up to $50 million, but we will be re-introducing legislation later this week to roll that out, consistent with our ten year Enterprise Tax Plan for all businesses over the initial ten year period. When it comes to the banks, we would have preferred if we could have got back into balance as soon as possible on the anticipated trajectory as a result of spending reductions. But there were about $14.7 billion worth of spending reductions that clearly were not going to pass the Senate and will not in the future. There is no magic bullet here. If we cannot legislate spending reductions through the Senate and we do not want to increase the deficit and the debt any further, then the only other way that you can get yourself back into balance is by increasing revenue through policy decisions on the revenue side. We are focusing this measure specifically on the biggest banks. It is a major bank levy. So it is not quite like Labor’s bank deposit tax, which was targeting all banks, and bank deposits in particular that were subject to the Financial Claims Scheme. We are focusing on the major banks and it is a much better targeted measure. The major banks, between them, generate around $30 billion worth of after-tax profits per year. We are asking them to make a $1.5 billion additional contribution, on top of their contribution through corporate taxes to help repair the budget. An additional $1.5 billion contribution per year, out of $30 billion of after-tax profits.
PAUL MURRAY: Minister, this new bank tax is going to make $1.2 billion this year, next year, the next few years to come. The petrol tax you are going to raise... interrupted
MATHIAS CORMANN: It will raise $6.2 billion over the forward estimates, $1.5 billion a year.
PAUL MURRAY: Petrol this year, $6 billion. FBT, $4 billion. Beer, $2.3 billion. What about smoking taxes? This year it is going to be $11.6 billion, then it is $12.7 billion, then it is $13.9 billion, then it is $15.1 billion. Now I am not being a smarty pants because I am a smoker, but I am saying this, would you be willing to admit on national television that the single most addicted person, to tobacco, in Australia is the Federal Government? Because without it, you are screwed.
MATHIAS CORMANN: I could make the point Paul, that the tobacco tax is a tax that is easily avoided by not smoking. You know that from time to time, I might be partial to this very bad and unhealthy habit. But this is a tax that can be avoided. You do not have to pay the tobacco tax if you do not want to.
PAUL MURRAY: That is a good point, but I would just love to see the Federal Budget that always seems to say ‘Let’s hope that it falls by 10 per cent every year,’ and eventually you will be happy if it is one person paying $5.7 billion for a packet of smokes. Finance Minister thank you so much, we will talk again very soon.
MATHIAS CORMANN: Always good to talk to you.