Senator the Hon Mathias Cormann
Minister for Finance
Date: Tuesday, 4 February 2014
JOHN MCGLUE: Confirmation today of one of the worst kept secrets of Federal politics, former Treasurer Peter Costello has been appointed the Chairman of the Future Fund and one of the key people behind that decision and that appointment was Finance Minister and WA Senator Mathias Cormann. Welcome to the program Minister, good to have you.
MATHIAS CORMANN: Good afternoon. Good to be here.
JOHN MCGLUE: Pretty open secret, Peter Costello joining the board of the Future Fund as Chairman. He has now been formally appointed, what does he bring to the job?
MATHIAS CORMANN: Well Peter Costello is of course a great Australian. He has provided highly distinguished service to the nation as the longest serving Federal Treasurer for nearly 12 years and of course since 2009 he has been on the Future Fund Board of Guardians as a Director, having been appointed by the previous government, which clearly also recognised his skills in that regard.
JOHN MCGLUE: Well in just about every aspect of how government is run in Australia, the incoming Abbott administration has a lot to say about what was wrong in the past and how things should be in the future. What do you want to see happen with the Future Fund that’s different?
MATHIAS CORMANN: We want the Future Fund to continue to perform strongly, to fulfil its mandate to help the Government manage the challenges from the ageing of the population, in particular by helping us achieve the returns necessary to fund public sector superannuation and pension liabilities, which were completely unfunded. Peter Costello himself of course set up the Future Fund, investing budget surpluses that he delivered after having paid off $96 billion worth of debt, which he had inherited from the previous government.
JOHN MCGLUE: You’ve spoken about the intention of the Future Fund and what its motivations are, what about how the Future Fund invests? There is a lot of public infrastructure in Australia that is crying out for fresh money but some of the big funds, the big investment funds, big super funds have been a little shy about investing in those areas. Is that a role for the Future Fund? Would you like to see it more active in those areas?
MATHIAS CORMANN: Well these are the sorts of judgements that the Future Fund needs to make independent from Government. The Government provides the overall mandate. It's very important that the Future Fund Board and the Executive and the leadership team of the Future Fund make these decisions based on their best judgements, their best commercial judgements, based on all of the information in front of them, but importantly independent from any political considerations that governments might have from time to time.
JOHN MCGLUE: So you wouldn’t mandate a certain portion of their funds to go into, for example public infrastructure?
MATHIAS CORMANN: That would be a very bad idea. The government really needs to leave these sorts of things to the Future Fund leadership itself. If the government were to mandate a certain percentage to go into a certain asset class, what if there is no valuable investment or no sensible investment available in the market place? Then there is some surplus capital that has to find itself into an inferior investment. These sorts of arbitrary classifications I don’t think are a very good way to go. The best thing that we can do and which is why we have appointed Peter Costello, is to provide strong and effective leadership to the Future Fund as a whole. It is going to be their responsibility to assess all of the information in front of them in relation to any particular investment and in the context of the mandate that they have from the Government to do the best that they can to achieve the best possible returns.
JOHN MCGLUE: Ten past three on Drive, my guest is Mathias Cormann, WA Senator and a Minister for Finance. Minister in coming into Government you also talked a lot about Australia being open for business again and firing new investment in the productive economy. The Coalition were saying that it’s good for business, how should the community measure your success with this, what are the key performance indicators we should look for? The key metrics? How do we judge it?
MATHIAS CORMANN: Our commitment is to build a stronger economy, create more jobs and to repair the Budget. We inherited an economy that was growing below trend, rising unemployment and the Budget in very bad shape with $123 billion of cumulative deficits over the forward estimates, government debt heading for $667 billion without any corrective action. So obviously at the time of the next election, people will be able to look back and see whether we have been able to deliver stronger growth, whether we have been able to turn the situation around when it comes to employment and whether we have been able to get the budget mess that we inherited from the previous government under control. That is certainly what we are working very hard to achieve, which is why we are pressing ahead with our plans to scrap the carbon tax, scrap the mining tax, reduce red tape and generally work towards reducing the cost of doing business so we become more competitive internationally again.
JOHN MCGLUE: On another matter, your colleague Joe Hockey has reignited his call for the end of the age of entitlement, the sense that people deserve government support of one type or another. How does Mr Hockey’s call sit alongside the request by your other Cabinet colleague Barnaby Joyce for Australian farmers to get a $7 billion debt deal?
MATHIAS CORMANN: Well what Joe Hockey also said very clearly was that people in genuine need will always be supported in Australia. It’s a matter about getting the balance right. What we want is people to take responsibility for their own destiny to the best of their ability. I mean some people have sought to make comparisons between the request from SPC Ardmona and Coca-Cola Amatil for a $25 million grant and the exceptional circumstances and drought assistance that is provided to farmers from time to time. The two are not in the same category whatsoever. There is a world of difference between the request from an individual commercial business for the taxpayer to make a grant towards a commercial investment, in particular when that parent company owning the business has got all of the cash reserves necessary to make all of the investments that they see fit and you put that to one side compared to of course the challenges that farmers face from time to time in the context of droughts and in the context of the vagaries of the climate. There have been policies and programs in place under governments of both persuasions where appropriate assistance is provided to farmers in these circumstances. Unlike what was before us in relation to SPC Ardmona, that is not a matter of picking individual winners that is a matter of providing support to entire communities as a whole who just happen to go through a challenging period at any one point in time.
JOHN MCGLUE: You understand that it’s a major challenge for the Government to sell the difference between those two, who are running businesses, they could be self-employed, they are doing the very best to keep going. They manage their own debts and they face changing and adverse business circumstances and they look at the farmers and they say look it’s been tough and it’s been hard for the last 50 or 100 years a debt has been accumulated and you want some sort of a special deal. If they are getting it, why shouldn’t everybody get it?
MATHIAS CORMANN: Well John the reason I come on great programs like yours is to do our best to explain the reasons for our decisions and the reasons for the way we approach things in relation to these sorts of challenges. Again you are quite right, all other things being equal, individual businesses should stand on their own two feet. They should be able to be profitable based on their own wherewithal and their enterprise and of course good management and so on. In relation to our farmers, clearly there is a particular risk in the context of the climate, right now in Western Queensland and Northern New South Wales, there is a very challenging circumstance and for a very long time and quite appropriately a set of policies and programs have been in place to provide transitional assistance to communities as a whole when they face particularly challenging times. Obviously some thresholds are in place and they are there for all to see, but it is quite different from providing ad hoc support in relation to individual commercial investments by individual businesses. There’s a world of difference between those two circumstances.
JOHN MCGLUE: Our final question for you Minister, it comes via text from Russell, one of our listeners, who asks ‘will the Government remove diesel fuel subsidies that now exist for mining companies?’
MATHIAS CORMANN: Our position is very clear in relation to the carbon tax. We are going to scrap the carbon tax which also involves getting rid of some of the increased taxes that the previous government applied to fuel. Now as far as the diesel fuel rebate is concerned, that applies in relation to off-road transport and of course off-road by definition means that those particular industries don’t use the resource that the diesel taxes or the fuel taxes are meant to fund. So the short answer is that we don’t have any plans to change the diesel fuel rebate that currently exists.
JOHN MCGLUE: Minister, great talking with you this afternoon. Thank you so much for your time.
MATHIAS CORMANN: Thank you very much.
JOHN MCGLUE: That’s Mathias Cormann, the Minister for Finance.