Senator the Hon Mathias Cormann
Minister for Finance
ANDREW O'KEEFE: Now this week the Government released its Mid-Year Economic Outlook and the numbers sounded pretty grim. The budget deficit is expected to worsen by $17 billion next year to a total of around $47 billion.
MONIQUE WRIGHT: Now the Prime Minister's promise to be on track to a believable surplus in the next three years now seems doubtful. An $18 billion deficit is now expected in 2016 and even that figure will require harsh spending cuts. To discuss this, we are joined from Perth by the Finance Minister Cormann. Hi Minister, thanks for your time this morning, good to talk to you.
MATHIAS CORMANN: Good morning and good to be here.
MONIQUE WRIGHT: If we can start by assuming that we all agree that the economy has been deteriorating and we would like to find savings, can we agree on that?
MATHIAS CORMANN: Indeed, the economy that we inherited is growing below trend, unemployment is rising, consumers are cautious and business investment has plateaued. So it is very important for us to build a stronger economy so we can create more jobs and for government revenue to start lifting again.
MONIQUE WRIGHT: Okay, now you've outlined cuts to health, to education, to indigenous services and to the environment, now aren't these cuts that will affect everyone worse than increasing taxes that are fundamentally weighted to benefit low-income earners?
MATHIAS CORMANN: Well firstly we made commitments in the lead-up to the last election that we would not make any cuts to health, education and defence and we are sticking to that commitment. What we did do in the lead-up to the last election is take about $42 billion worth of sensible savings to the electorate and we are implementing those savings. Beyond that we have a Commission of Audit, which is looking right across government to make sure that the operations of government are as efficient and as cost effective as possible, because of course we want to treat taxpayers money with respect.
ANDREW O'KEEFE: Hear hear! We've been a little bit slight on detail so far so where the cuts are going to come from, one of the areas that we've been talking about the last week is the National Disability Insurance Scheme and the Treasurer has said is that you are looking to streamline that. What do we mean by streamline exactly and considering the public reaction over the Gonski funding rework, are you convinced that the public will get on board with you here?
MATHIAS CORMANN: Firstly what we have again confirmed is our commitment to deliver the National Disability Insurance Scheme. As the Prime Minister has said, this is an idea whose time has come. But what we have also said, and what we think is entirely unremarkable, is that we want to implement that scheme in the most efficient and cost effective way. Now some people have been critical of that this week, but what is the alternative? That we do it in an inefficient and wasteful way? I don't think so.
ANDREW O'KEEFE: No, but Minister I don't think anyone is arguing that. I think we're just desperate to know what that means. Streamlining, where are efficiencies to be found?
MATHIAS CORMANN: Well you've got to remember that this is a program that is only just getting underway and the Minister responsible for this area Mitch Fifield is working with all stakeholders, including an in particular State and Territory governments, to make sure that the scheme is as efficient and as cost effective as possible, while delivering the important outcomes. That is what people would expect us to do.
MONIQUE WRIGHT: Now scrapping the entire Clean Energy Future Package including the carbon tax will cost you $7.4 billion next year, but you've also decided to dump the Clean Energy Finance Corporation, now this is actually been making you money, about $460 million. Why have you decided to scrap that, something that is actually making you money?
MATHIAS CORMANN: Well that is not actually quite right, because what is not taken into account in that figure is the cost of borrowing funds. The $10 billion that the previous government committed to the Clean Energy Corporation is entirely borrowed - $10 billion worth. Of course we have to pay interest on that debt. Furthermore, the Clean Energy Finance Corporation has been going since 1 July 2013, less than six months. I think that people who are making assumptions on how the investment performance of the Clean Energy Finance Corporation would go into the future based on six months of performance are making very heroic assumptions.
ANDREW O'KEEFE: There are some very big assumptions going on right around the board here. The Treasurer has said that the economic outlook is so bad because Labor left you with so much debt. Many of the economists are saying that there is some element of truth in that, but the bigger issue is falling commodity prices, slow wage growth leading to falling tax receipts and have also pointed out that your government has added somewhere between $13 and $20 billion of new spend since the election out of that $47 billion that you've been talking about. Are you able to defend that new spend in light of what you've been saying about the carefree attitude of Labor?
MATHIAS CORMANN: Well firstly we did inherit $123 billion of deficits over the forward estimates from Labor and gross debt heading to $667 billion without any corrective action. Now the $13.7 billion in new spend that you mentioned that has taken place since the election, that was essentially fixing up Labor problems that they left behind. $8.8 billion out of that was recapitalising the Reserve Bank, which desperately needed it because the previous government raided the Reserve Bank reserve fund and left them essentially with inadequate capacity to do the job they need to do to strengthen the economy. Now, in terms of the position of the economy overall, over the last six years, at a time of global economic challenge, the previous government put way too much lead into our saddlebag. The carbon tax, the mining tax, more than 21,000 new pieces of red tape, all of the sovereign risk and uncertainty from chaotic government decision-making. We are committed moving forward to build a stronger economy by getting rid of those bad taxes and essentially creating opportunity again for businesses to be successful.
ANDREW O'KEEFE: Mathias Cormann thank you so much for joining us this morning, is it possible to get one commitment that come the May Budget next year, we will stop talking about government and look to the future and what we can all now do to correct that situation?
MATHIAS CORMANN: Well absolutely. The Mid-Year Economic and Fiscal Outlook this week was the half-year update on Labor's last Budget, but in May we will be presenting our first Budget and we will of course be entirely responsible for that.
ANDREW O'KEEFE: Thank you so much for getting up early and joining us this morning from Perth, Mathias Cormann.
MONIQUE WRIGHT: Yeah, good to talk to you.
MATHIAS CORMANN: Always good to be here.