Senator the Hon. Mathias Cormann
Minister for Finance
Date: Tuesday, 22 October 2013
LYNDAL CURTIS: The federal government is getting the old team back together to review everything government does. A former Howard Minister, a former Howard economic adviser and a former Coalition staffer and Howard government departmental Secretary are part of the Commission of Audit. It will headed by the Business Council Chief, Tony Shepherd. The Commission’s been given a very broad brief indeed to look savings, job cuts and privatisation amongst other things and there are indications in the Terms of Reference that may be the Treasurer Joe Hockey was serious when he declared the age of entitlement over. I spoke a short time ago to the Finance Minister, Mathias Cormann.
Mathias Cormann, welcome to Capital Hill.
MATHIAS CORMANN: Good to be here.
LYNDAL CURTIS: You've announced the Terms of Reference for your Commission of Audit, is anything ruled out?
MATHIAS CORMANN: The Commission of Audit will be a very comprehensive review across the whole of the government. Our objective is to make sure that the operations of government are as efficient as possible, that taxpayers' money is spent as wisely as possible, so the Commission of Audit has a job looking at everything across the whole of the government.
LYNDAL CURTIS: Does that include programs you took to the last election and you planned to implement?
MATHIAS CORMANN: There are two important aspects here. Firstly, of course, the Commission of Audit is going to do a comprehensive job as it sees fit. Then the second part of that process is of course going to be what recommendations the government will accept, having received the report.
The commitment that we've made very clearly is that we will not be implementing any recommendations, which conflict with our pre-election commitments that we took to the last election.
LYNDAL CURTIS: You've asked the Commission of Audit to look at savings, to look at consolidating, rationalising, flattening structures, that means there will be cuts, won't there?
MATHIAS CORMANN: We are focussing on making sure that the operations of government are as efficient as possible. Now obviously within the same funding envelope there's always capacity to spend money better, to make sure that people across Australia get better services from government for the money that they invest in government services. So really the objective here really is to make sure that taxpayers get better services from government, funded in the most efficient way possible. We think that is a very important task indeed.
LYNDAL CURTIS: But if you're consolidating and rationalising and flattening structures that would at least mean that jobs might go, would they be within the envelope you've already set out for losing public service jobs?
MATHIAS CORMANN: Look, we're not going to speculate about what may or may not be in the recommendations from the Commission of Audit. Let me just make a couple of observations. We took a very clear policy to the last election, which was that we would reduce the size of the public service by 12,000 through natural attrition. Right now there are redundancies taking place as a result of decisions that the Labor party took in government in various Budgets and Budget updates. So as far as our policy is concerned, our policy is very clear. It is a reduction in the size of the public service by 12,000 through natural attrition. What the Commission of Audit may or may not recommend, let's deal with that when we receive their report.
LYNDAL CURTIS: You've also asked the Commission of Audit to look at appropriate price signals, at targeting spending to those most in need, is this the end of the age of entitlement.
MATHIAS CORMANN: We are very much looking to the Commission of Audit to make recommendations to the government about how our Budget can be put on a more sustainable medium to long-term footing. Right now we're in a situation where we've inherited a very bad Budget position from Labor and the Budget position is deteriorating. But beyond that the government is facing in the normal course of events some additional fiscal challenges on the spending side, in particular related to the ageing of the population. So there are a whole range of issues that we have to deal with in a calm, methodical and orderly fashion. Firstly we have to reverse the trend that Labor has left behind, to put the Budget back onto a believable pathway back to surplus. But then of course we have to very much focus on the medium to long term fiscal challenges that we're facing given the ageing of the population and other issues.
LYNDAL CURTIS: It also says that where possible the Commission should identify options to address Budget risks in the medium to long-term, including introducing appropriate incentives to encourage self-provision of services by individuals over time. Is that code for, you don't really need the government's help with this anymore, do you, so you can fund it yourself?
MATHIAS CORMANN: I think that those words are not code, those words are very clear in their own right and interrupted
LYNDAL CURTIS: So they make recommendations that say to people, over time, they don't actually need the government help they're currently receiving?
MATHIAS CORMANN: What we do have to do as a nation is have a sensible conversation about what the role and responsibilities of government should be. Because of course any additional role, any additional responsibility brings with it a requirement to raise additional taxes. Moving forward, wanting to make sure that our economy is as competitive as possible, that our fiscal arrangements are as competitive as possible, it is important that we ensure that our spending is targeted at areas where a national consensus very clearly indicates that these are the sorts of areas that government should be involved. We should ask ourselves the question, at what additional cost some of these additional areas come in terms of the broader economy ultimately.
LYNDAL CURTIS: Joe Hockey said that the government would not be breaking election promises but did want to get the Budget under control. Is it breaking a promise if you implement something from the Commission of Audit that you did not take to the last election, say you look at privatising more things than just Medibank Private?
MATHIAS CORMANN: There are a couple of questions there. Firstly we are totally committed to repair the Budget, we're totally committed to put the Budget back on to a believable pathway to surplus and to achieve a surplus of 1% as a share of GDP within the decade. What we have said, very clearly, is that we will be implementing all the commitments that we took to the last election. As far as the sale of Commonwealth assets is concerned, the potential sale of Commonwealth assets, the government has only got a policy to sell Medibank Private. That is a long standing policy. The legislation passed through the parliament in 2006. The Labor party never repealed that legislation and we will have something more to say about that very soon. We do not have a policy to sell any other Commonwealth assets. Now as part of its role, the Commission of Audit will look at the roles and responsibilities of government and we'll make a judgment on whether there are some areas where government is currently involved, where government should not be involved. Now, I'm not going to speculate. The Treasurer and I are not going to speculate about what the Commission of Audit may or may not recommend in relation to this. But right now the government only has a policy to sell Medibank Private. We don't have a policy to sell any other Commonwealth assets. Let's cross the bridge in terms of how we would deal with the recommendations from the Commission of Audit when we actually receive them.
LYNDAL CURTIS: Finally, you also announced today that you're increasing the debt limit to $500 billion. You were very critical for Labor increasing the debt limit. You're doing more than is necessary putting in place a 40 to $60 billion buffer, why are you doing that?
MATHIAS CORMANN: Labor's approach to debt and deficit was reckless and irresponsible. Wayne Swan first set a debt limit of $75 billion and then he came back to the parliament very shortly thereafter and increased that debt limit to $200 billion and then $250 billion, and then to $300 billion. In May this year the Budget that Wayne Swan delivered already indicated that gross debt was going to reach $370 billion over the forward estimates. Yet he didn't take steps to increase the debt limit at that time, which was highly irresponsible. We said so at the time. Right now we are on track to reach the $300 billion legislated debt limit by 12 December this year. So what we have in front of us is advice from Treasury that government gross debt will exceed $400 billion. We've also got advice from the Australian Office of Financial Management that it should be, in order to provide certainty and stability to the markets, there should be an appropriate buffer. So what we've done today is start to clean up Labor's mess. We've made sure that the debt limit that we're putting to the parliament will be the absolute upper limit that will be required. Now, obviously the debt limit doesn't equal debt. Our intention is to reduce debt. We have to reverse the trend that Labor has put in train over the 6 years that they were in government. Our objective is to reduce debt. Our objective is not to deliver $500 billion worth of debt. We're just putting a debit limit in place that will give the government enough flexibility to manage affairs properly and responsibly.
LYNDAL CURTIS: Mathias Cormann, thanks for your time.
MATHIAS CORMANN: Always good to be here.