Senator the Hon Mathias Cormann
Minister for Finance
Date: Friday, 27 September 2013
LYNDAL CURTIS: Mathias Cormann welcome to Capital Hill.
MATHIAS CORMANN: Good to be back.
LYNDAL CURTIS: The figures show that in 2012-13 there was a $543 million improvement in the estimate in bottom line from the Budget, is that a sign that we’re still in a Budget emergency?
MATHIAS CORMANN: Well that is not quite right. What you are doing is comparing the Final Budget Outcome from 2012-13 to the revised estimate in the 2013-14 Budget which was a Budget one year later when of course the 2012-13 financial year was nearly over. What you do need to do is compare the 2012-13 Final Budget Outcome with the 2012-13 Budget. If you look at what Labor promised at Budget time, it was a $1.5 billion surplus. What we have ended up with is an $18.8 billion deficit. So that is a deterioration of more than $20 billion.
LYNDAL CURTIS: You’ve watched this for a long time, you’re now the Finance Minister, you know that Budget figures are updated, they are updated formally in the Mid-Year Economic and Fiscal Outlook and they are again updated in the next Budget which, as you say, is close to the end of the financial year. So it is realistic to look back at what was done at the Budget time for Budget 2012-13 and ignore all the updates in between?
MATHIAS CORMANN: We’re not ignoring all the updates in between at all, but you must look back at what the promise was that was made at Budget time. Of course what we have witnessed under Labor over the six years of Labor is a constant deterioration of the Budget position. If you just look at the 2012-13 financial year, the one for which we’ve just released a Final Budget Outcome, in the lead up to the 2010 election in the Economic Statement then, Labor promised a $3.5 billion surplus that became a $1.5 billion surplus at Budget time and is now an $18.8 billion deficit. It’s a constant deterioration. In relation to the financial year we’re in now, the 13-14 financial year, at Budget time…well in the lead up to the 2010 election, Labor promised a $4.5 billion surplus, that became an $18 billion deficit in the most recent Budget and now of course a $30 billion deficit so far and still growing.
LYNDAL CURTIS: And what both you have said on this program previously and what the Treasurer said this morning that $30.1 billion deficit is looking like it will be a little bit worse. Not a lot worse, but a little bit worse at this stage.
MATHIAS CORMANN: Obviously what has happened as a result of Peter Costello’s Charter of Budget Honesty is that we do now have better information in the lead up to an election than what we have had in the past and that is a good thing. However, the trend under Labor has been one of constantly deteriorating Budgets.
You have got to remember that Labor in 2007 inherited a very strong budget position, a $20 billion surplus, no government net debt, $50 billion in the bank, collecting more than $1 billion in net interest payments, collecting more than $1 billion in net interest payments. Fast forward to 2013 and the position that Joe Hockey and I inherit is a position of a $30 billion deficit and growing, net debt heading for $200 billion and past $200 billion and of course right now as a result of Labor’s debt splurge, we are now having to pay $10 billion in net interest payments a year, that is pay instead of collect.
LYNDAL CURTIS: The Treasurer said that you are going through the Budget line by line. In the Mid-Year Economic and Fiscal Outlook, whether it is released in November or December or January, will people start to see your pathway back to surplus?
MATHIAS CORMANN: Well clearly as we said before the last election, we are now going through a calm, methodical, structured process to put the Budget back onto a credible and sustainable path and believable pathway back to surplus. Clearly that process will start in the Mid-Year Economic and Fiscal Outlook. If I can just make a point here though, because the Labor Party has been quite hypocritically jumping up and down in relation to the timing of the Mid-Year Economic and Fiscal Outlook. Firstly, we will make a decision on the timing of MYEFO when we’ve considered all of the relevant advice, secondly we have of course had a Budget Update in August with the Pre-Election Economic and Fiscal Outlook and finally the Charter of Budget Honesty Act explicitly provides for the release for the Mid-Year Economic and Fiscal Outlook by the end of January. So we are just going through normal, proper, methodical processes and of course we will fully comply with all of the requirements in the Charter of Budget Honesty Act.
LYNDAL CURTIS: The Treasurer also said this morning that you’re looking at ways to stimulate the economy, will that make that pathway back to surplus a little bit harder because you might be spending a little bit more than you expected?
MATHIAS CORMANN: Well what we said in the lead up to the election and what we will now implement is that we would pursue a plan for stronger growth and more jobs. Of course that involves stimulating the economy by scrapping the carbon tax, scrapping the mining tax, cutting costly unnecessary red and green tape which accumulated under Labor and of course investing in very important and significant productivity enhancing infrastructure across Australia. What we set out very clearly in the lead up to the election is that there are about 31 priority infrastructure projects with a cost of about $11.5 billion all up where we will be accelerating, expanding or adding to commitments in terms of infrastructure spend and all of that together is part of our plan to create more jobs and grow the economy more strongly.
LYNDAL CURTIS: You were taking some infrastructure spending from other areas to put it into your plans but there was part of figure that was not funded by that. How would that be funded? Will that be funded by debt?
MATHIAS CORMANN: Well I refer you to our election costings and what the election costings clearly identified is that we would spend about $11.5 billion on those 31 priority infrastructure investments across Australia. Projects like the WestConnex in Sydney and the East/West link in Melbourne and the Bruce Highway in Queensland, the Perth Airport Gateway project, the Swan Valley Bypass, you name it and of course just over $6 billion of that comes out of existing funds that are already provided for in the Nation Building programs currently in the Budget. There is about $700 million that is re-prioritised from principally urban rail projects and then there is an additional investment of about $4.6 billion on top of that.
LYNDAL CURTIS: And how is that funded?
MATHIAS CORMANN: Well if you look at our costings in their totality, what you will see and what we have discussed in the past is that as a result of our costings, as a result of all of our promises and our proposed savings measures, the Budget will be better off to the tune of about $6 billion over the forward estimates and debt will be reduced by about $16 billion over the forward estimates. Our promised investment in infrastructure is completely accounted for and fully integrated into our pre-election costings.
LYNDAL CURTIS: Now the Final Budget Outcome today says that real GDP grew at a slightly below trend rate in 12-13, what do you think the economy looks like now, are there still signs of softness, are you concerned about sectors of the economy now?
MATHIAS CORMANN: Well clearly there are a couple of points here. Australia is in a better position than other parts of the world. However, in recent times we have suffered somewhat from reducing, lowering terms of trade. We have obviously suffered from the impacts of slower growth in other parts of the world. Now, the truth of the matter is that is why it is so important for the Opposition to support our plans for a stronger economy and more growth. The challenges that we are facing right now in our economy make it so important for Labor to support our plans to scrap the carbon tax, to support our plans to scrap the mining tax, to support our plans to cut red tape and achieve $1 billion in cost reductions for business as a result of cutting unnecessary red tape.
LYNDAL CURTIS: Will those things help offset fully or only really party given the scale of the change in the terms of trade and the impact of the fluctuations in the dollar?
MATHIAS CORMANN: At any one point in time in the economy, there are some things that you can influence and there are some things that you cannot influence. Given the challenges and the opportunities for that matter from the things that you cannot influence, it is very important that we make every post a winner in relation to the things that are under our direct control. That is why we have got to focus on growing our productivity more strongly again, that is why we’ve got to make sure that we are as competitive as we can be internationally and that is why we’re so committed to scrapping the carbon tax, scrapping the mining tax, cutting red tape and so on. It is all about making Australia more competitive internationally, be as competitive as we can be so we are as resilient as we can be in the face of challenges that are coming our way and that we are in the strongest possible position to take advantage of our opportunities.
LYNDAL CURTIS: And finally just a point about terminology, you in the Press Release you and Mr Hockey issued today, you referred to what were forecasts as promises. Will the forecasts you have in your figures, can we consider them promises? That if you don’t meet them they will be broken promises?
MATHIAS CORMANN: Well the Labor Party on more than five hundred occasions promised a surplus in 2012-13, only to deliver an $18.8 billion deficit. Now of course we will be measured against the forecasts that we make in our Budgets. Essentially any Budget is your plan for the year ahead and at the end of the year, once it is all said and done and you’ve got the actual results coming in, clearly we would expect people like you Lyndal and everyone across Australia to judge us and to scrutinise us on how we have performed against our plan.
LYNDAL CURTIS: But as the Treasurer mentioned this morning there are variability’s in forecasts, they aren’t absolutely the truth because they are forecasts.
MATHIAS CORMANN: That is right and of course the question then is whether you have got good reasons and good explanations as to why you haven’t met your forecasts. I just make the general point that under Labor, invariably, the outcomes were worse than predicted at Budget time whenever there was an update. When you look at the record of the previous Coalition government, invariably the outcomes were better than what was predicted at Budget time. Obviously our intention as the government now is to under promise and over deliver. So hopefully, when we are having this conversation about our first Budget and we look at the actuals compared to what we forecast in our Budget plans, we will be able to have a similar sort of conversation about having exceeded expectations.
LYNDAL CURTIS: Mathias Cormann thank you very much for your time.
MATHIAS CORMANN: Good to talk to you.