Senator the Hon Mathias Cormann
Minister for Finance
Date: Wednesday, 29 January 2014
GRAHAM RICHARDSON: I spoke just a couple of hours ago with Mathias Cormann our Finance Minister in Australia. I've got to say, there's not just a veil of secrecy over what's happening with boats and whether they're being towed back or whether these new boats we're giving them to get them back, but this also seems to me to be a real issue here about what they're going to do in the budget. There's an enormous veil of secrecy over that too.
We can't find out not just what they're going to cut but how much they want to cut. We can't find out how long it's going to be before we're back in surplus. There are a lot of unknowns. Let's see if we can clear any of them up with Mathias Cormann, here it is.
GRAHAM RICHARDSON: Mathias Cormann, welcome to the program.
MATHIAS CORMANN: Good to be back.
GRAHAM RICHARDSON: Now Minister, I listened to you intently the other day on this whole question of work-for-the-dole. My view of it is, it's a terrific idea, it's politically wonderful, out there in Australia they'll love it, but how do you actually make it happen?
MATHIAS CORMANN: Well that's obviously what we're working through now. We have made it happen before. it worked very well, but the previous government dismantled for ideological reasons what was a very successful program in the past. I mean the premise is very…
GRAHAM RICHARDSON: I mean how successful was it? I mean how many people actually did work-for-the-dole?
MATHIAS CORMANN: Well look, the numbers are a matter of public record. A lot of people were involved. A lot of people were able to use that opportunity as a bridge back into the workforce. The basic premise is that everyone that is able to work should be working, preferably obviously for a wage, or for the dole if that is what is necessary.
GRAHAM RICHARDSON: Look, I think we all agree with that, I mean I can't imagine anyone disagreeing. But the difficulty is the logistics. Now, because my memory of the last scheme was that not all that many actually worked for the dole. It's very difficult to go to a skilled worker and say, look, here's a sticker, go and pick up papers on the nature strip. It's not exactly an attractive thing to them. It can be soul destroying, it's not very good for the ego and it's certainly not real good for confidence and trying to get a job back.
MATHIAS CORMANN: Well it is obviously part of a broader approach. If you receive the dole, the basic premise is you should be making efforts to get back into the workforce. If you're unsuccessful at getting back into the workforce, obviously there are a whole range of supports available to help you back into the workforce. Work-for-the-dole is a very important part of that holistic approach. It was very successful in the Howard Government years. The previous government didn't agree with it and started to dismantle it. We want to recommit ourselves to it.
GRAHAM RICHARDSON: Yeah, right, look I just don't think this level of success that you're talking about ever existed. I think at best you could say it was a moderate success. It certainly never, ever went to the great majority of the unemployed, did it?
MATHIAS CORMANN: Well you've got to remember, in the Howard years the economy was growing strongly and the unemployment rate kept reducing. The situation we're finding ourselves in now, the situation the current Government inherited, was an economy growing below trend with two-hundred thousand more Australians unemployed than at the start of the previous government's term in office. Unemployment is rising. Obviously we need to recommit ourselves to the task of getting more people back into work.
GRAHAM RICHARDSON: Well I - no one disputes that but again, like the logistics, you have to have public servants at your level to try and liaise with public servants at state level and at local government level to have any hope of organising a scheme that can cope with let's even say two-hundred thousand, which is nothing like the total number of unemployed. Even if you wanted to get two-hundred thousand people to do it, it is a massive task, isn't it?
MATHIAS CORMANN: You're really stretching into areas that are well and truly beyond my area of portfolio responsibility. But suffice to say that in the previous period of the Howard Government, much of that work was done in partnership with not-for-profit organisations. There was a comprehensive network across Australia involving the private sector, the not-for-profits in particular which managed that in a very efficient way.
GRAHAM RICHARDSON: Yeah, again I think we'd have to disagree about how efficient it all was, how successful it all was. I think this scheme is a really difficult one to do. As I said, I think it's politically popular when it's announced but I think it tends to fade. The glory fades away and so do the numbers. But we shall see that.
MATHIAS CORMANN: Well, the numbers faded - again, the numbers did fade in the latter part of the Howard Government because the unemployment rate had a four in front of it. We're now heading past six per cent.
GRAHAM RICHARDSON: Well, you know, it's got a five in front of it, which is still historically low. Our problem is at the moment, however, that probably understates the situation because the participation rate is so low. And…
MATHIAS CORMANN: And it's trending in the wrong direction which is - that is - we want to turn this situation around.
GRAHAM RICHARDSON: Well yeah, I think we all do, I'm just wondering how you're going to do it. One of the ways, no doubt, that you're going to do it is by getting the budget back into shape. Now how long is that going to take? Have you got any idea at all, as the Finance Minister, how long it's going to take to get back to surplus?
MATHIAS CORMANN: Well, we're currently going through an orderly, methodical process. We took forty-two billion dollars' worth of savings to the last election. We put forward our plan for a stronger economy, more growth and more jobs. Of course people always focus on the spending side when they ask me these questions, and of course for good reason. We've got to continue to have a very close look at the spending side.
But an important part of this equation also, is that stronger growth leads to increased prosperity, increased opportunity, to more jobs and it also leads to increased revenue for government. One of the consequences of below trend growth under the previous government is revenue not being as strong as what it could be.
So look, we'll be providing our formal update on our road map and our plan to bring the budget back to surplus in a believable way at budget time the second Tuesday in May. That's when you'll see our plan in black and white for the next four years.
GRAHAM RICHARDSON: Yeah, I don't expect you to reveal the plan now because I'm sure with the Commission of Audit still to go, and we haven't heard what they're going to say yet and neither have you, there's much work to be done. But there should be - one would feel…
MATHIAS CORMANN: Well there are a couple of aspects to this. We did take forty-two billion dollars' worth of savings to the last election. We're currently implementing those. All but one of them were reflected in the most recent Mid-Year Economic and Fiscal Outlook. Incidentally, there is currently twenty billion dollars' worth of savings before the Senate, five billion dollars of which were initiated and banked by the previous government in their last budget. Labor is opposing all of those savings, including the savings they themselves initiated.
So it was quite interesting to listen to Bob Hawke and Paul Keating just after New Year calling for deeper cuts, when the current leadership of the Labor Party doesn't even have the mettle to support their own savings which they initiated in government.
GRAHAM RICHARDSON: Well I think currently - see, but the Labor Party will have their test just as you will in May. When you announce what you're going to do, Labor's going to have to take a view about how it sees the budget coming back to surplus, because it can't simply oppose everything you do, it'll have to have alternatives and we’ll wait and see what they are.
MATHIAS CORMANN: Well, they're opposing their own savings measures. They're opposing their own savings measures.
GRAHAM RICHARDSON: Well I know they are opposing some in the Senate at the moment, and they're opposing obviously something that you will claim a mandate for, namely the abolition of the carbon tax. By the way, how is the abolition of the carbon tax going? One would imagine you can't even look at it before July?
MATHIAS CORMANN: Well Bill Shorten and the Labor Party should of course respect the mandate that we received at the last election. If Bill Shorten and the Labor Party were genuinely interested in stronger growth and job creation they would support our proposals to scrap the carbon tax and the mining tax and to cut red tape. Because there's no doubt that without a carbon tax our economy would grow more strongly.
The work that was done by the Parliamentary Budget Office in the lead up to the last election very clearly identified a growth dividend that would come from the abolition of the carbon tax. We all know that privately Bill Shorten would like to scrap the carbon tax.
GRAHAM RICHARDSON: I know that, I know but it's a pretty small one isn't it? I mean the reality is it's not the big bogey you made it out to be for a couple of years, it certainly wasn't the main contributor to increases in electricity prices. But even if you get it off you've still got a pretty expensive scheme of your own, haven't you?
MATHIAS CORMANN: Well we will be scrapping the carbon tax this year. We will be scrapping the mining tax this year. We will be pressing ahead with our plans to reduce red tape costs for business by one billion dollars a year. All of that comes together to reduce the cost of doing business in Australia, which has been trending in the wrong direction. It will all help improve our international competitiveness and help us grow our economy more strongly.
If you add to that the re-establishment of the Australian Building and Construction Commission, which will help achieve productivity improvements across the construction industry, all of these things, the investments in productivity enhancing infrastructure, all of this is part of a comprehensive plan with all of the different parts taken together leading to stronger economic growth.
GRAHAM RICHARDSON: Yeah but see you've mentioned that several times, stronger economic growth. I mean the reality is that growth has been below trend but the predictions that almost everybody's making for it, both internationally and locally, is that growth's not going to go up next year at all, if anything it's likely to go down a bit.
MATHIAS CORMANN: Well, there is no doubt that global economic conditions have been challenging, which is why it is so important that we make every post a winner here domestically in Australia. What the previous government did in the context of a challenging global economic environment was add more lead to our saddlebag. They imposed more burdens on our economy at a time when quite frankly, we needed to reduce the cost of doing business in Australia through more appropriate policy settings.
GRAHAM RICHARDSON: Yeah, but there's a real conundrum for you here, because if you want to get consumer confidence up - and the mere election of a coalition government didn't do what many said it would. It was supposed to lift consumer confidence. It hasn't. Now, if you're going to get that up, you've got to be very careful about the cuts you make in May haven't you? Because if you cut too hard, then you've got that problem that consumer confidence stays low, people don't spend, growth doesn't happen. By the same token if you don't cut too hard, everyone says, we'll never get out of debt. We'll always be in deficit. We'll never get the surplus.
MATHIAS CORMANN: Well this is a marathon not a sprint. We'll continue to take considered steps. We'll continue to implement the plans that we took to the last election. We'll continue to focus on initiatives to improve our productivity, to improve our international competitiveness, to lower taxes, reduce red tape, to invest in productivity enhancing infrastructure and so on. All of the things that we need to do in order to give ourselves a better chance, all other things being equal, to grow a stronger economy.
GRAHAM RICHARDSON: Well, let's just book in another chat after May, after that Tuesday in May.
MATHIAS CORMANN: Sure.
GRAHAM RICHARDSON: We'll have another chat. We'll see how it's gone. Because it seems to me, you've got a very difficult task.
MATHIAS CORMANN: Looking forward to it.
GRAHAM RICHARDSON: A very difficult task.
MATHIAS CORMANN: We never said it was easy.
GRAHAM RICHARDSON: No, it certainly isn't that. And I tell you what, I'm glad I'm not the finance minister. I mean I think it and Aboriginal affairs at the moment are the two most difficult portfolios. But good look to you Mathias, we'll see you soon.
MATHIAS CORMANN: Good to talk to you.