Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
RAY HADLEY: We will just delay traffic and other matters because we have the Federal Finance Minister, Mathias Cormann on the line now. Senator Cormann, good morning to you.
MATHIAS CORMANN: Good morning Ray, good morning to your listeners.
RAY HADLEY: You have heard Alan from much earlier this morning and no doubt heard about his interview with the Prime Minister. Why do we need to lift that debt ceiling to $649 billion yesterday?
MATHIAS CORMANN: Well we know what the funding requirements of the Federal Government are over the next four years and in order to provide certainty to financial markets and provide certainty to markets generally that the Government can continue to operate, that was what needed to be done. Let me just say though, that when we came into Government, we did not just inherit a situation at one point in time, we inherited a forward trajectory. The previous Labor Government had locked into legislation spending growth, which locked in growth in debt. Now, the debt situation today is lower than what it would have been if we had not legislated a whole series of spending reductions, which over the current medium term, that is the ten years to 2027-28 come to more than $250 billion in net spending reductions that we have legislated. If it had not been for that, debt over the next ten years would be $250 billion higher, but instead this is $250 billion that we either do not have to borrow, or that we can use to pay down debt once we get back into surplus in 2020-21 and onwards.
RAY HADLEY: Well that surplus is $7 billion is it not? It is a long way short of $600 billion.
MATHIAS CORMANN: The surplus in 2020-21 is projected to be $7.4 billion and we are projected to be in surplus all the way through to 2027-28. Government net debt, which is the most important indicator is expected to peak as a share of the economy at 19.8 per cent next year and it is expected to go down to 8.5 per cent as a share of the economy by 2027-28.
RAY HADLEY: But would you not agree in simple terms and we have been through this a hundred times, the Howard-Costello Government inherited debt of somewhere between $96 and $100 billion. When they finished their terms of Government, they returned surpluses to the incoming Labor Government of around $20 billion, $22 billion. I mean we are now talking telephone numbers, not all that far down the track. I mean $75 billion, as Alan just enunciated, was what the ceiling was when Kevin Rudd announced that he needed $75 billion. Then it goes to $200 billion, then it goes to $475 billion and now it is up to $600 billion. Now you are talking about 2028 when you and I probably will not be in a position to comment on this in any way shape or form. But what do we leave our children and grandchildren? I mean it is insurmountable. It is like that sleep you have when you start to count to a billion and you never get there.
MATHIAS CORMANN: Well firstly, it is a very fair question and of course the reason we have made such a big effort in bringing spending growth down and the reason we are making such a big effort to get back into surplus as soon as possible is because it is irresponsible for us to keep borrowing from our children and grandchildren to pay for our day-to-day living expenses today. It is also true that the Howard Government left in 2007 a very strong Budget position, with a strong surplus and with money in the bank. The Rudd and Gillard Labor Government increased spending in two significant waves. Firstly, in the context of the GFC, they increased spending by 17 per cent in real terms above inflation in their first two years. That was said to be crisis level spending in response to the GFC, but that became the new base from which spending continued to increase. Then as they knew they were about to lose, they locked into legislation spending growth and spending promises in relation to schools, in relation to the NDIS, in relation to State and Territory hospitals which were not funded, which were essentially going to blow out the debt and deficits by much more than what has actually happened given that we have been able to get spending better under control. When we came into Government, spending as a share in the economy was heading for 26.5 per cent. We have brought that down in this Budget to 25 per cent over the forward estimates, which is back quite close to the long-term average of about 24.8 per cent.
RAY HADLEY: But wouldn’t you be concerned? I watched Chris Bowen, the Shadow Treasurer on Sky News this morning. He was not super critical and said that he would support the vast majority of things that were proposed last night, or the Opposition would. Aren’t you concerned that Labor is fairly happy with your Budget? Would that not indicate that it is a Budget that a Labor Party was more likely to produce than a conservative Government?
MATHIAS CORMANN: The thing is we have tried very hard to get all of our spending cuts through the Parliament. We have got a fair chunk of them through as I have said before. But there is about $14.7 billion worth of spending reductions that the Senate clearly was not going to pass. If we had just left that on our books it would have been rather irresponsible because the Budget would have continued to deteriorate because we were not able to get the Budget repair measures through the Parliament that we kept on our books. If you cannot get the Budget back into balance through spending cuts because the Parliament does not let you do it, then the only other way that you can do it, sadly, is through tax increases. That was not our first choice, but it was the only responsible course of action in the circumstances.
RAY HADLEY: Would you be talking to the cynics who say that this is all about the Newspolls that your Government’s lost and that all of a sudden maybe, just maybe, those people who would not normally vote for you, will be a little more compliant and the next Newspoll will not be 12 in a row, heading towards the 30 that Mr. Abbott lost, but it will all of a sudden be 11 lost and one won.
MATHIAS CORMANN: Let me tell you. Every single day, what we think about is how we can put Australia on the strongest possible foundation for the future. Budgets are about making choices for the future. It is about making the choices that we believe will put the country on the best foundation, the best trajectory for the future. Of course, in the lead-up to the next election, we will present ourselves to the Australian people, we hope that they will give us a tick of approval for our performance and for the plan that we take to the next election. When it comes to Budgets, and this is not a partisan statement. I believe that all Governments, when they work through the Budget with all of the information in front of them, what we think about very deeply is how we can make the right decisions for our country.
RAY HADLEY: You will be happy to know that Tony Abbott will be on the program next Monday commenting on the Budget with me. Given that I gave him the opportunity to discuss with me and my listeners your discussions with him, I will now give you the right of reply. Did you cop a dressing down? And did you give a dressing down back? Did you shirt front him Mathias or not?
MATHIAS CORMANN: I do not normally talk about private conversations.
RAY HADLEY: No, well I hope you do not.
MATHIAS CORMANN: Given the conversation that you had with him, which I saw those reports, we did have a very direct conversation. I did remind him that we had had private conversations prior to that about my views, about how he can best contribute to the Coalitions efforts. I certainly did not step back in any way from what I said earlier this year. I was a very loyal supporter of the Abbott Prime Ministership. I was there supporting Tony Abbott from the day he became leader all the way until, literally, the last moment.
RAY HADLEY: So you were loyal until it counted, when you had to vote for Mr. Turnbull?
MATHIAS CORMANN: No. I voted for Tony Abbott. That is a matter of public record. I walked out of the party room with Tony Abbott after he lost.
RAY HADLEY: A couple of other people did too, but I do not they voted for him Mathias.
MATHIAS CORMANN: It is a matter of public record, let me assure you, there is no question about that.
RAY HADLEY: I do not disbelieve you.
MATHIAS CORMANN: But when Malcolm Turnbull became the Prime Minister, I accepted appointment in his Cabinet. I am a loyal team player and I do the best I can in my job every single day.
RAY HADLEY: Will there be a man hug sometime down the track?
MATHIAS CORMANN: I am going to be catching up with Tony at a function tonight. Looking forward to it.
RAY HADLEY: Maybe you could give him one of those bromance man hugs we see from time to time from footballers.
MATHIAS CORMANN: I will tell him that I am acting on your recommendation.
RAY HADLEY: Please do. Get a photo and send it to me.
MATHIAS CORMANN: That sounds good. Alright mate.
RAY HADLEY: Thanks for your time.
MATHIAS CORMANN: Good to talk to you Ray.