Senator the Hon Mathias Cormann
Minister for Finance
Date: Saturday, 25 January 2014
DAVID LIPSON: G’day and welcome to the program. I’m David Lipson and welcome back to this program and we are of course looking forward to another big year in federal politics.
Well the Prime Minister, Tony Abbott arrived back home early this morning from talks in Davos where he used the international stage to push for a global crack-down on tax avoidance and also spoke about domestic policies, in particular, the need to reign in Budget spending. It seems that welfare will be one of the first areas on the operating table for a major overhaul with relief figures released by the government this week that show that currently we spend about $70 billion on welfare. That one in five Australians receives some form of income support and claims as well that there has been an increase in payments on the Disability Support Pension of 22% under the former Labor government.
Now to discuss this and other areas important to federal politics at this minute I’m joined by the Finance Minister, Senator Mathias Cormann from Perth. Happy new year and thanks for joining us again on Saturday Agenda.
MATHIAS CORMANN: Happy New Year. Good to be back.
DAVID LIPSON: First to this issue of welfare, it seems the young are going to be bearing the brunt of any potential savings when it comes to the Disability Support Pension, why is that?
MATHIAS CORMANN: The important point to make here is that we are absolutely committed to a strong safety net for people across Australian who need that support, but by the same token those people across Australia who are able to work should get back into work and we would like to help them back into the workforce. We think that is an important social and an important economic and indeed an important fiscal reform.
DAVID LIPSON: How will you help them by taking away their pension?
MATHIAS CORMANN: Obviously as I’ve said people who need support will continue to receive that support and we are committed to a strong safety net. However, there is scope for reform in this area. For example, we don’t think that people with temporary health conditions should be put onto the Disability Support Pension for the remainder of their working lives. We want to help people who are able to work back into the workforce. We think that is good for them and it is obviously good for the country.
DAVID LIPSON: Unemployment of course is rising, are there jobs for these people to actually go to?
MATHIAS CORMANN: You are right, we inherited an economy from the previous government which was growing below trend with rising unemployment, which is why we are implementing our agenda for stronger growth and more jobs, which is why we committed to scrapping the carbon tax and the mining tax, reduce red tape, improve productivity and generally improve our international competitiveness. So there are a range of things that we’re doing at the same time and increasing workforce participation by reducing the level of welfare dependency is an important part of that agenda.
DAVID LIPSON: Kevin Andrews this week ruled out going through the system the UK went through which was essentially to get everyone on the pension to re-apply. That made big savings in Britain but that’s been ruled out. Does that mean that if you are already receiving the Disability Support Pension, for example, that you’re safe, that you will continue to receive that?
MATHIAS CORMANN: Kevin Andrews has initiated a review. That review is now underway. I will let him talk about the detail of all of that. Suffice to say that I’m not going to pre-empt the findings of that review. A number of things have been ruled out like we’re not going to touch the Age Pension, but as a matter of general principle it really is the position as I’ve articulated right at the outset. We are committed to a strong safety net but we are also committed to ensure and to help people who are able to work back into the workforce.
DAVID LIPSON: Australia spent 8.6% of its national economic output last year on welfare, it sounds like a lot but according to studies of 34 industrialised nations only Iceland actually spent less than Australia so our spending is less than every other developed country bar none. Is there really a justification to reign it in further?
MATHIAS CORMANN: You have to look at the trajectory we are on and this is one of the fast growing areas of expenditure. This is in part about repairing the Budget mess that we’ve inherited from the previous government with $123 billion worth of deficits and government debt heading for $667 billion. But it goes well beyond that. We are committed to break the cycle of welfare dependency, we are actually committed to help people back into the workforce, which is not just good for government, not just good for the country but is actually good for them to.
DAVID LIPSON: You will of course be accused of cruel hit against the country’s most disadvantaged people. How do you justify it when, for example the $20 million that has been announced this week, will be handed out for pre-marriage counselling?
MATHIAS CORMANN: Firstly, we reject that assertion of a hit against the most vulnerable. As I’ve said right at the outset, we are committed to a strong safety net, but we want to make sure we get the balance right. In relation to relationship counselling, we made commitments in the lead-up to the last election to provide support to stable relationships. We’re trialling a system where the government will provide a $200 subsidy initially to about 100,000 couples at a cost of $20 million. That is a trial which will start on 1 July 2014. Once that trial has taken place we will assess how it has worked and whether it provided value for money and we will take things from there.
DAVID LIPSON: Yeah, it’s not a huge amount of money by any stretch of the imagination in federal government terms, $20 million. But I thought that the Liberal party was the party of sort of government staying out of peoples’ lives. Why get involved in this area?
MATHIAS CORMANN: This is an issue that we put forward in the lead-up to the last election. Indeed it is a commitment that we made in the lead-up to the last election to provide support to stable relationships and to trial this particular approach. So let’s see how it works and if it works we will roll it out further.
DAVID LIPSON: Moving onto the asylum seeker issue, there have been no boats in 5 weeks. Is that, if that continues, going to mean savings in the Budgets in years to come?
MATHIAS CORMANN: You’re right that as a result of our policies and the hard work of our border protection agencies, Navy, Customs and others, the boats are stopping. That was one of our key commitments in the lead-up to the last election having inherited an absolute mess at our borders from the previous government. Now, of course, if there are fewer boats, if the boats are stopping, that will lead to savings for our Budget. Already last week Minister Morrison announced the closure of four on-shore detention centres across Australia at a saving of about $88.8 million a year. Obviously we’re looking forward to building on those savings as our policy continues to be successful.
DAVID LIPSON: How much do you expect could be saved if this continues?
MATHIAS CORMANN: We’ll provide an update on those numbers in the usual way at Budget time, but as an initial down payment we’ve been able to achieve about $90 million worth of savings a year by closing four on-shore detention centres already. We are very committed, we are absolutely determined to stop the boats and obviously by definition, if there are fewer or no arrivals that is going to be much more beneficial for our Budget than under Labor when we had more than 50,000 illegal arrivals over their period in government.
DAVID LIPSON: Will it come though at the expense of relations with Indonesia? We see that they have indeed soured considerably over the past month or two. Indonesian warships we hear have been deployed to the maritime border with radars trained south. We’ve heard rhetoric over the last few days reported from senior Indonesian Defence figures saying that, for example, a clash could be imminent. How seriously do you take that sort of language?
MATHIAS CORMANN: Our relationship with Indonesia is a very important relationship. Indeed it’s a very important relationship for both our countries and Australia will continue to do everything we can to help strengthen that relationship. We have welcomed the increased focus by Indonesia on their border protection activities. We think it is a very positive development which will help curb the activities of people smugglers.
DAVID LIPSON: Is there an increased chance of a clash at sea now that Indonesia has deployed these warships?
MATHIAS CORMANN: I’m not going to speculate on these things. You are well and truly going beyond my area of portfolio responsibility. Again, my statement is pretty clear, the relationship with Indonesia is a very important relationship …interrupted
DAVID LIPSON: Returning then to your area, or closer to your area, do you expect this to impact on trade with Indonesia which of course is a country that the government was hoping to really increase the back and forth when it comes to trade?
MATHIAS CORMANN: Andrew Robb as the Minister for Trade is working very hard to re-invigorate the trade relationship with Indonesia, which of course suffered immeasurably under the previous government when they stopped, overnight, the live cattle export trade to Indonesia and put their food security at risk. We are very confident that the relationship with Indonesia across all areas of the relationship will strengthen in the months and years ahead and we will do everything in our power to assist in that process.
DAVID LIPSON: You must admit that it has weakened in the last few months for it to be able to strengthen?
MATHIAS CORMANN: In the last few months, it is a matter of public record, that we’ve had a few challenges to deal with in our relationship, but we will continue to work our way through that and we’ll continue to do everything we can to strengthen what is a very important relationship for Australia.
DAVID LIPSON: On another matter, the first report from the Commission of Audit has been delayed by a couple of weeks. Why has that happened?
MATHIAS CORMANN: The Commission has asked the government for an extension and we granted that extension. It is important to know that the deadline that we imposed on the Commission was always a very tight deadline. When the Commission put that request to us we said that’s fine. It is very important for us that the Commission gets its report to us right and if that needs another two weeks that’s fine by us.
DAVID LIPSON: Has the government seen any draft report and perhaps given any further recommendations in order for that to happen?
MATHIAS CORMANN: I can’t talk for everyone across government. I’ve just come back from two weeks leave. I personally have not seen a draft report. I don’t think that anyone in government has seen a draft report incidentally. Indeed I don’t know whether there is a draft report. The Commission is doing its work independently of course as we speak. Again, the objective is for the reports from the Commission of Audit to feed into our Budget process and the Budget is not due until the second week of May, so receiving the Commission of Audit report in the middle of February will work just fine.
DAVID LIPSON: It does of course push it out beyond the Griffith by-election. There have been suggestions that it may have something to do with that. What is your response to those suggestions?
MATHIAS CORMANN: That is just Bill Shorten’s conspiracy theories. There is always an election somewhere in Australia. There’ll be a couple of elections in March and there’ll be more elections later in the year. Look, the government continues to work carefully and methodically through a whole series of challenges that we’ve inherited from the previous government, including a Budget in a mess. We’re committed to repairing the Budget. The Commission of Audit work is a very important part of that. We are not going to be distracted by Bill Shorten’s conspiracy theories.
DAVID LIPSON: Finance Minister, Senator Mathias Cormann, great to have you back on the program. Thanks for joining us this morning.
MATHIAS CORMANN: Always good to be here.