Senator the Hon. Mathias Cormann
Minister for Finance
Date: Tuesday, 22 October 2013
JOE HOCKEY: We've got to make sure it works. And that the results are credible and they will feed into our budget.
WALEED ALY: That is the Treasurer, Joe Hockey, and he's announcing today that the Government will move to increase the Commonwealth's debt limit from three-hundred billion dollars to five-hundred billion dollars. We were scheduled to hit our limit, the maximum amount of debt that the Federal Government could take on, by about Christmas.
It's a big increase though, about two-thirds increase on what the debt limit was. But another significant announcement was made today by the Government, the Treasurer also announced a commission of audit, of Government spending, to look at the ways the Government can save money. It looks at a range of things including potential sales of Commonwealth assets. Medibank Private being the most obvious one, are there others?
Standing alongside Joe Hockey at that press conference was the Finance Minister, Mathias Cormann, who joins me now. Thank you very much for your time.
MATHIAS CORMANN: Good to be here.
WALEED ALY: Privatisation, right. So what does that mean should the ABC start looking for advertisers?
MATHIAS CORMANN: Look, in relation to privatisation of Commonwealth assets our policy is to sell Medibank Private. That has been our policy for a very long time... interrupted
WALEED ALY: Yeah.
MATHIAS CORMANN: And, indeed, the Parliament legislated for the sale of Medibank Private back in 2006, which is legislation incidentally which Labor, over six years in government, never repealed. In fact, it was Labor in government which shifted Medibank Private from a not-for-profit into a for-profit corporate entity.
WALEED ALY: So I understand your point about Medibank Private, I'm just interested in the scope of this. What sort of things are you looking at with a view, potentially, to privatising them?
MATHIAS CORMANN: Well, the point I was going to make is that the Government has got a clear policy in relation to Medibank Private. We do not have a policy to sell any other Commonwealth assets. What we have said is that the Commission of Audit has the responsibility to look right across the operations of government with a view to help us repair the budget, with a view to help us ensure that the operations of government are as efficient as possible, that taxpayer's money is spent wisely. As part of that we do want them to look at those issues related to the roles and responsibilities of government.
WALEED ALY: Right. So it's kind of like a razor gang. But how you define...
MATHIAS CORMANN: That's your description.
WALEED ALY: ...government activity - yeah, you know, and it's common phrase. But how do you define the activities of government? I mentioned the ABC for example, is there anything that you fund that could come into view here?
MATHIAS CORMANN: Well, all of the operations of the Commonwealth Government, in all of its parts and components is going to be subject to the review...
WALEED ALY: So what's an operation then?
MATHIAS CORMANN: Well, everything that is part of government. And, obviously, government businesses enterprises are part of the operations of government. Anything that is linked to the Commonwealth Government is going to be subject to the review. But the important point here is there are two parts to this. We think it's important from a public interest point of view for the Commission of Audit to have free range to do its job as it sees fit, but ultimately it'll come down to the Government to make decisions on what recommendations we will and what recommendations we will not adopt.
And what we have already said is that we will implement any recommendations from the Commission of Audit in a way that is consistent with the commitments we took to the last election.
WALEED ALY: Okay. The search for waste in government spending is not merely an accounting exercise, it's also an ideological exercise. Because what you might regard as wasteful I may not regard as wasteful, depending on what my political position is.
I mean pick an example - just the first one off the top of my head - the decision to go to war in Iraq. Someone might look at that and say oh it was a huge waste of money because they disagree with that decision, another person might agree with it. So ideology and political persuasion is going to matter here.
And I note that among them - and this is being chaired by the Business Council President, Tony Shepherd, also you've got Amanda Vanstone, former Howard Government minister on board here. Is there an ideological direction to this commission that you've put together? Is it a fair interpretation to say that there is a clear ideological direction here that is very much yours?
MATHIAS CORMANN: I don't think that it is a fair interpretation. I think that there are people from a range of different perspectives. There are five commissioners there. Of course, the chair is Tony Shepherd but we've also got Tony Cole, a former treasury secretary, Bob Fisher who is a former senior public servant at a state level in social service delivery areas in Western Australia. We've got Amanda Vanstone and, of course, we've got Peter Boxall.
I mean there is a diversity of skills and experiences and backgrounds there. They are the right people for the job. And I repeat what I said earlier, ultimately the commission will make recommendations to Government...
WALEED ALY: And then you'll decide, yes.
MATHIAS CORMANN: ...the Government will make the decision on what recommendations we adopt and then people across Australia will be able to form a judgement at the next election on whether on balance they think we've done a good job or a bad job.
WALEED ALY: You're hearing the voice of Finance Minister, Mathias Cormann, WA Senator of course part of the Liberal Party. I want to come to the issue of the debt ceiling if I may, Minister. We've increased the debt ceiling now, or the plan is to increase the debt ceiling from three-hundred billion to five-hundred billion, a very significant increase. Now I understand we were going to hit that ceiling in December, but Treasury has gross debt peaking at about three-hundred-and-seventy billion dollars over the next four years so nowhere near the five-hundred billion, which is significantly higher than that.
Is that an admission that your government intends to maintain deficits over the long-haul?
MATHIAS CORMANN: No, it is not. What we've inherited from Labor is a budget in very bad shape and what we've inherited from Labor is a budget that continues to deteriorate. The three-hundred-and-seventy billion dollar figure you mentioned was the figure at budget time. If you look at the pre-election economic and fiscal outlook, that figure was four-hundred billion dollars already and of course the situation that we've inherited continues to deteriorate.
There are a couple of important points I need to make here. Firstly, in May at the time of the budget, Wayne Swan knew that over the forward estimates he was going to reach and exceed, without further action, the legislated debt limit. You've got to remember he increased it several times. He set it at seventy-five billion, then he increased it to two-hundred billion, then he increased it to two-hundred-and-fifty billion. Then he increased it to three-hundred billion.
At the time of the budget in May he knew that he was going to hit the three-hundred billion dollars by the end of the calendar year. Since then, in eleven weeks between the budget and the economic statement, the pre-election economic and fiscal update, the budget position deteriorated by more than thirty billion dollars. Three billion dollars a week, just for this financial year it deteriorated by twelve million dollars. We're now looking at a situation…
WALEED ALY: But there hasn't been a corresponding - there hasn't been a corresponding deterioration since?
MATHIAS CORMANN: There has been a further deterioration. We're now looking at gross debt in excess of four-hundred billion dollars. And the advice that we have from the Office of Financial Management is that in order to provide certainty and stability to the markets there is a need for a buffer above what of course is the likely debt need. Now, our commitment absolutely is to reduce debt. Our commitment is never to reach that particular debt limit but of course what we're doing here is cleaning up Labor's mess.
WALEED ALY: Can I pick you up here though because what I think is interesting about this is that Joe Hockey, when you were in opposition, left open the possibility that you would oppose a raise in the debt ceiling. That is…
MATHIAS CORMANN: That is not right.
WALEED ALY: It's not right?
MATHIAS CORMANN: That is not right.
WALEED ALY: Because it's widely reported so you're suggesting it's not right.
MATHIAS CORMANN: Well that is not right. Let me actually say to you the exact opposite is right. In May after the budget, we called on the Treasurer at that time to legislate to increase the debt ceiling from three-hundred billion dollars given that according to his budget we were going to reach at that time three-hundred-and-seventy billion dollars of gross debt over the forward estimates.
WALEED ALY: But just to be clear you are saying that at no stage were you even countenancing the possibility of raising the debt ceiling - of refusing to raise the debt ceiling?
MATHIAS CORMANN: We did never suggest that we would refuse to increase the debt ceiling.
WALEED ALY: Okay.
MATHIAS CORMANN: And in fact, I mean, every time - every time that Labor has put forward legislation to increase the debt ceiling we voted in favour of it…
WALEED ALY: It's always been a matter of routine in Australia I understand that.
MATHIAS CORMANN: …and in May - and in May when the budget came out in May this year, we called on Wayne Swan and we criticised him for not introducing legislation with the budget to increase the debt ceiling at that time, given that he knew he would reach the legislated gross debt limit by the end of the calendar year.
WALEED ALY: Yeah, I've heard your point on that. I'm going to go back and check the record now because that is widely reported so if that's a mistake it's an important one to correct. Just one final question before I let you go. A UN official has come out on CNN, I don't know if you heard about this, and said that there is absolutely - and that's the quote - a link between climate change and the bushfires like the ones that we're seeing in New South Wales at the moment, although perhaps not that specific fire.
Barry O'Farrell has accepted that climate change makes those sorts of fires more likely. In the meantime some of your Liberal colleagues in WA are pushing for a Royal Commission into the science of climate change. This is a very unfortunate juxtaposition isn't it?
MATHIAS CORMANN: As a government we have always said that we accept that climate change is real. The question that we've put forward and of course our criticism of the previous government's record is that a carbon tax does nothing to help improve the environment. A carbon tax hurts the economy…
WALEED ALY: I understand that but your colleagues in WA are not asking that question. They want a Royal Commission into the science of climate change?
MATHIAS CORMANN: Well I have been in cabinet all day. I have not seen either the comments from the UN official you talk about nor the comments from my WA colleagues you're talking about. I can just talk to you about the position of the government.
WALEED ALY: Okay, I was…
MATHIAS CORMANN: The position of the government is that we need…
WALEED ALY: Just on that though they are looking to vote on this next month. Are you going to be having a word to them?
MATHIAS CORMANN: So the position of the government is that we support effective action on climate change. Labor's carbon tax is not effective action on climate change. Labor's carbon tax hurts the economy while doing nothing for the environment.
WALEED ALY: It's a great answer; it wasn't the question I asked though. Will you be having a word to your colleagues?
MATHIAS CORMANN: Well, this is well outside my area of responsibility.
WALEED ALY: Sure I understand.
MATHIAS CORMANN: I've been as helpful as I possibly could be Waleed, given that I've been in meetings all day and have not seen either of the comments that you've put to me.
WALEED ALY: Okay, fair enough Mathias Cormann I thank you very much for your time. Busy day for you, I appreciate it. We'll speak again soon.
MATHIAS CORMANN: Always good to talk to you.
WALEED ALY: That's Mathias Cormann the Finance Minister of the new Federal Government speaking to us there on RN Drive. Waleed Aly with you on that program here until eight o'clock.