Senator the Hon. Mathias Cormann
Minister for Finance
Date: Monday, 21 October 2013
JANINE PERRETT: And now to our nation's capital where even though Parliament is not sitting, some senior polys are still hard at work and none more so than our favourite Finance Minister, Senator Mathias Cormann. Welcome back to the show.
MATHIAS CORMANN: Good to be back.
JANINE PERRETT: In your new exalted position, congratulations.
MATHIAS CORMANN: Thank you.
JANINE PERRETT: Yeah. And I know you've got a bit of a cold so we'll be kind to you tonight. You've got a big week ahead Senator. The details of the Commission of Audit come out, the RBA Annual Report and your favourite Mining Tax legislation is rumoured to be coming to fruition, to get rid of it. So let's start with the first one, all eyes on the Commission of Audit, what can we expect to come out this week?
MATHIAS CORMANN: Well obviously what we said before the election is that we would put the budget back on to a believable pathway to surplus and of course in a calm methodical and orderly fashion we've set out to do that.
We've already started to assess all of the discretionary grants spending. We will be announcing very soon the Commission of Audit, which will have the job to make recommendations on how the operations of Government can be made more efficient. It will make recommendations which will feed into the next budget process and of course we are hard at work at identifying ways to bring the budget back to surplus in a credible fashion as soon as possible.
In the meantime we are taking steps to take all of that lead out of our saddlebag, which has accumulated under Labor like the Carbon Tax, the Mining Tax and so on, so that our economy can grow more strongly again, which will help us with our budget as well.
JANINE PERRETT: Now just to the Commission of Audit, in the days when you were in Opposition and there was a so-called budget emergency when it looked sad. People thought that you - the impression they were given was that you would you do a very quick Commission of Audit to announce the spending cuts because it was necessary. It now appears you'll be taking a longer term view and doing a broader review and not in so much of a rush. Is that correct?
MATHIAS CORMANN: Well, a couple of things. Firstly of course, during the election campaign we announced a whole series of savings as well as a whole series of policies and what we said during the campaign was that those policies and savings would leave the budget better off over the forward estimates to the tune of six billion dollars. The Parliamentary Budget Office last Friday came out and gave our costings a big tick of approval which of course proved once and for all that Labor's scare campaign over the last few years about a supposed coalition black hole was completely dishonest and inaccurate.
Now the Commission of Audit is going to report to Government in two phases, there'll be an initial report which will feed into the 2014/'15 budget process and then there'll be a final report which will give us some recommendations beyond that. But in a general sense the purpose is to ensure that the operations of Government are as efficient as possible, that tax payers' money is spent as wisely as possible.
We are looking for structural recommendations in terms of structural change that will help us achieve those efficiencies. The easy savings, for want of a better word, or the initial set of savings of course were identified in the lead up to the election. The Commission of Audit was always meant to take us beyond the savings that we've identified in the lead up to the election.
JANINE PERRETT: But is it fair to say that the sense of urgency that surrounded the budget position does not seem to be there now and you're more willing to let it go a bit longer and look more broadly, that there's no great rush?
MATHIAS CORMANN: No that is not fair to say. We do face a budget emergency, we have inherited a budget in a mess from the Labor Party. A thirty billion dollar deficit this year and growing, Government net debt heading for two hundred billion dollars and growing. We are on track to reach the legislated three hundred billion dollar gross debt ceiling by Christmas, so we do have to take important action. But, what we are doing though is we're doing that in a calm and methodical fashion.
The way to respond to a budget emergency is not through a panicked chaotic approach like it was the way, way too often under the Labor Party, making things worse rather than better. When you face an emergency you actually got to make sure that you take a calm methodical structured approach so that the decisions you make actually will lead to sustainable efficiencies and savings over time and not just leave you worse off than when you started.
JANINE PERRET: So still in a budget emergency but not so much of a crisis that you have to do emergency measures hurried?
MATHIAS CORMANN: Well it is a budget emergency. You've got to remember in 2007 the Labor Party inherited a budget with no Government net debt, with a twenty billion dollar surplus, with about fifty billion dollars worth of cash at the bank and the Government was collecting more than one billion dollars in net interest payments. Fast forward to now and of course the position has massively deteriorated. I know that the Government always blames the global financial crisis in '08 or '09 but the point is that they - somebody's just interrupted me…
JANINE PERRETT: Sorry keep going, I'm sorry about that.
MATHIAS CORMANN: …like the Sydney studio just spoke to me in my ear, I'm not sure why but…
JANINE PERRETT: We're very sorry about that, that happens to me all the time, welcome to our world. But yes, you were saying with the previous government you slipped and called them the Government and I think you meant the previous government…
MATHIAS CORMANN: The previous government…
JANINE PERRETT: …always blames the GFC.
MATHIAS CORMANN: Well the previous government blamed the GFC but of course what - what you've got to remember is that they benefitted from the best terms of trade, the highest commodity prices on record, even at their lowest point more than fifteen per cent above those under the Howard Government. And the promises they made about returning the budget back to surplus from 2012/13 onwards, were all made after the GFC, after the information in relation to the GFC was known. To cut a long story short…
JANINE PERRETT: Good.
MATHIAS CORMANN: …the budget is in a mess. There is a budget emergency but the way to deal with an emergency is by making calm methodical well considered decisions, not by going back to the bad old Labor way of panicked chaotic dysfunctional decision making.
JANINE PERRETT: Okay, you won't say it but I still say then it must be an emergency where you can still have a reasoned way to deal with it rather than a crisis where you have to rush and panic, no panicking.
MATHIAS CORMANN: Well we are making decisions in the national interest in a calm and methodical fashion, that's right.
JANINE PERRETT: Okay. You mentioned the debt ceiling before which we reach in Jan - in late December, I think. Joe Hockey said last week, talk about raising it another hundred million. Given what we've just seen in the US what can you say to calm the horses here that go, oh no, debt ceiling US, we're not in any way in their position are we?
MATHIAS CORMANN: Well the point we made in May when the former government and the former Treasurer Wayne Swan released the last budget, was that it was quite reckless and irresponsible for Wayne Swan not to legislate at that point in time to lift the debt ceiling, given that he was forecasting gross debt to head for three hundred and seventy billion dollars over the forward estimates and to nearly three hundred billion dollars by Christmas at that time.
Since then, of course, there's been a twelve billion dollar deterioration in the budget bottom line for 13/14. So what we said to Wayne Swan in May was that it was quite irresponsible for him not to legislate an increase in the debt ceiling at that time. What we're now doing is given the mess we've inherited from the Labor Party, given how the budget is trending and of course the position deteriorated by about thirty billion dollars over the forward estimates from the budget in May to the pre-election economic and fiscal outlook in August. Well we will be legislating to increase the debt ceiling, that will be one of the early pieces of legislation that will come before the Parliament after the Carbon Tax repeal legislation of course.
But I would suspect - I mean in Australia the approach to the debt limit has always been more mature, by both sides. We have supported in the final analysis all of the proposed increases in the debt ceiling that were put to the Parliament by the former government…
JANINE PERRETT: So… [Over speaking]
MATHIAS CORMANN: …and you would expect the Labor Party to do the same.
JANINE PERRETT: Yes. So it'll be a lot calmer and more grown up than we've seen in the US.
MATHIAS CORMANN: That would be our expectation.
JANINE PERRETT: Just back to the budget emergency and the calm and methodical way. Many in the financial community are asking, back to my point about the fact that there was urgency before the election, the mid - the MYEFO that many expected would be coming out before Christmas is now being put back to January. I gather there was a bit of consumer confidence issues there. Again isn't that another indication that things aren't so urgent, that you're not rushing that out?
MATHIAS CORMANN: Well, that's not quite right. Firstly the legislation, the Charter of Budget Honesty, does provide that the mid-year economic and fiscal outlook can be released by the Treasurer up until the end of January after the budget. Now, what we have said is that we would be releasing the mid-year economic and fiscal outlook before Christmas and of course you know, we are currently working through all of that, making sure that all of…
JANINE PERRETT: So you are still going to release it at Christmas, because there was an impression given that it might be put off 'til January. So you're saying it will still be before Christmas?
MATHIAS CORMANN: We are. The legislation provides that it can be released by the end of January but we have already announced that we would be releasing it before Christmas, indeed.
JANINE PERRETT: Okay. Now you must be delighted, you're dreaded hated Mining Tax, it looks like the legislation will come forward this week. Unlike the Carbon Tax, do you expect Labor to - to wave this one through, you don't expect a fight on it I would assume, it hasn't been mentioned as a fight?
MATHIAS CORMANN: Well, if the Labor Party was focused on our national interest, if they were focused on what is required to strengthen our economy at a time when we are still facing some significant global economic challenges then they would support it - our Repeal Bill that is. You've got to remember that the Mining Tax not only is tying up an important industry for Australia in massive additional unnecessary red tape. It hasn't raised any meaningful revenue, it won't raise any meaningful revenue and yet the former government already spent all the money they thought it would raise and more.
So what we're putting forward and what we will be putting to the Parliament is a package which abolishes both the Mining Tax and the spending - the unfunded spending that the Labor Party recklessly and irresponsibly attached to it. And so the incredible situation actually is that abolishing the Mining Tax package will leave the budget better off to the tune of many billions of dollars. So if the Labor Party is interested in helping us improve the budget bottom line, if they're interested in helping us strengthen the economy and create more jobs then they would support that legislation. If they just want to play politics or stick with misguided ideology then they won't. So let's see what they do.
JANINE PERRETT: Let's see, and I'm sure you'll be celebrating. And I have one more quick question because we're nearly out of time, but one commentator today raised the question when the RBA Annual Report comes out this week, they might announce a profit. The previous government did a bit of a cash grab for that profit which was criticised by your side. If there's a profit what will you be doing with it?
MATHIAS CORMANN: Well you're certainly right in saying that the previous government fleeced the RBA as they've fleeced a whole series of Government business enterprises because they were trying desperately to keep the illusion of a surplus in 2012/13 alive for as long as possible. they quite recklessly ran down the capital available to the Reserve Bank. Look, obviously let's see what the results are and this is of course very much in the area of responsibility of the Treasurer and - I mean let's see what the results are. We'll make some decisions once we've got all of the information in front of us.
JANINE PERRETT: Thank you very much.