Senator the Hon Mathias Cormann
Minister for Finance
Date: Tuesday, 4 February 2014
MATHIAS CORMANN: I am pleased to announce the appointment of Peter Costello as the new Chair of the Future Fund Board. Peter Costello is a great Australian. He has served Australia with distinction over nearly 12 years as Federal Treasurer. Of course it was Peter Costello who set up the Future Fund, investing budget surpluses after he had paid off $96 billion of Labor debt that he inherited. The Future Fund was set up to help Australia manage the challenges of an aging population, in particular by helping to fund public sector superannuation liabilities. Peter Costello has the skills and the experiences to make a great contribution as he leads the Future Fund through the challenges and opportunities ahead - in particular at a time when Australia again faces a significant budget challenge. Again, we have inherited an economy growing below trend, rising unemployment and a Budget in very bad shape from the previous government. $123 billion worth of accumulative deficits over the forward estimates, $667 billion worth of government debt over the decade if we didn’t take any corrective action. So it is very important in these times that we have strong leadership in important government organisations such as the Future Fund and we are very pleased to make that announcement today.
Happy for any questions.
JOURNALIST: Minister, is the decision by Cabinet the other week not to assist SPC Ardmona part of the budget strategy...
MATHIAS CORMANN: No questions on the Future Fund?
JOURNALIST: I put my question in the context of your opening spiel.
MATHIAS CORMANN: Sorry what was your question?
JOURNALIST: The question was – was the decision not to support SPC Ardmona based on the tough budget position?
MATHIAS CORMANN: Well firstly, the question that was before the Cabinet was the request for a grant from the taxpayer to an individual business, which is owned by Coca-Cola Amatil. Coca-Cola Amatil, which has a strong balance sheet, which has the cash reserves to make the whole investment into the restructure they say is necessary. Unlike Coca-Cola Amatil, the federal government does not have the cash reserves to make such an investment. We would have to borrow $25 million. We are borrowing $47 billion worth of funding this year to fund the ordinary services of government. We have inherited a budget that is $47 billion in the red this year, $123 billion over the forward estimates with government debt heading for $667 billion. Coca-Cola Amatil has the balance sheet to do what it thinks it needs to do and in the circumstances, with all of the facts before us, we made a judgement that it wasn’t appropriate to provide a grant from the taxpayer, $25 million from the taxpayer, to an individual business which had the capacity and wherewithal to look after its own needs.
JOURNALIST: Was the Enterprise Bargaining Agreement between SPC and its workers a key factor that you took into account?
MATHIAS CORMANN: We had all of the facts before us. We had a very good discussion. We made a decision. We had all of the facts before us. We had very good information and indeed, the company itself told us that as part of their strategy moving forward, part of their strategy was to improve their productivity and to deal with some of the legacy workplace relations related challenges that they were facing. We support that. We strongly support Coca-Cola Amatil and SPC Ardmona to do the sort of work that needs to be done in order to make sure that SPC Ardmona has a strong and prosperous future. From the Government’s point of view, our job is to ensure that we have the strongest possible economy. We are here to set the conditions to ensure that there is a climate in which companies like SPC Ardmona can prosper.
If Bill Shorten and the Labor Party were genuinely interested in helping the workers at SPC Ardmona, they would support our legislation to scrap the carbon tax which Bill Shorten and The Greens are currently blocking before the Senate. What we need to do is bring down the cost of doing business in Australia. What we need to do is improve our international competitiveness.
JOURNALIST: SPC put out a statement denying that their wage deal put to you is overly generous, there have been several people from the Government, including Tony Abbott who have criticised the wages agreement at SPC. So does the Government accept that it’s been wrong to attack the EBA?
MATHIAS CORMANN: I’m not going to get into a conversation, the Government is not going to get into a conversation about the weeds in the internal arrangements with SPC Ardmona. Suffice to say that we had a request before us for a $25 million grant from the taxpayer. We had all of the facts in front of us, as we were assessing the merits of that request. Clearly, the company itself put to us the fact that they were conscious about some of the issues that they were grappling with in this area. All of the statements that were made by Ministers who spoke publicly about the SPC Ardmona decision since it was made presented the facts.
JOURNALIST: Okay but Tony Abbott said last week that one of the issues with SPC is the Wet allowance. Now SPC’s statement just now says that there was zero paid in Wet allowance in 2013. So was the Government making a decision on false information?
MATHIAS CORMANN: The Government did not make a decision based on false information. We had all of the information in front of us, including the information about the Enterprise Bargaining Agreement. But let’s just take a step back. SPC Ardmona is a business wholly owned by Coca-Cola Amatil. Coca-Cola Amatil, in the first six months of this financial year, made more than $200 million worth of profit. They’re a $9 billion market cap company. They’ve got the cash reserves and the wherewithal to deal with the challenges at SPC Ardmona as they see fit. In all of the circumstances that were before the Government, we made the clear decision that it wasn’t appropriate to provide a $25 million grant from the taxpayer to an individual business, which had the capacity to look after its own needs.
JOURNALIST: Sharman Stone’s accused the Prime Minister of lying over the reasons why this has been rejected, how do you respond to what Sharman Stone has had to say today?
MATHIAS CORMANN: The Prime Minister and other Ministers who spoke on behalf of the government in relation to the SPC Ardmona decision presented the facts.
JOURNALIST: She has accused them of lying.
MATHIAS CORMANN: Sharman Stone is a passionate local member who is standing up for her community and making the argument as best she can from her point of view. All I can say is the Government had before it all of the facts. The Prime Minister and other Minsters who spoke about the decision we made, presented the facts as they were before us.
JOURNALIST: But has Dr. Stone gone too far by accusing you of lying?
MATHIAS CORMANN: Look that is a question for Sharman Stone. I respect her right as a local member to passionately advocate for her community. Suffice to say, the Prime Minister and other Ministers are sticking to the facts as they were before us and they are presenting the decision as it was made.
JOURNALIST: This is the problem though; you keep mentioning that you have the facts before you but you haven’t actually answered David Crowe’s question, because one of those facts seems to be completely bogus according to SPC Ardmona, so was the decision based on facts as you describe them that included the Wet Allowance.
MATHIAS CORMANN: I am not going to go into the weeds of cabinet discussions and you wouldn’t expect me to. We have explained the decision very clearly. The request that was before us was a request from an individual business for a $25 million grant from the taxpayer. That business is wholly-owned by Coca-Cola Amatil, which has a strong balance sheet and the cash reserves to make that investment wholly on its own, if that is what it chooses to do. Indeed we encourage them to do just that.
JOURNALIST: What about the facts when it comes to the potential costs of SPC Ardmona shutting shop. Was that one of the facts that were presented to the Cabinet? The cost to taxpayers?
MATHIAS CORMANN: Ultimately, the decisions that Coca-Cola Amatil make, that SPC Ardmona make, as a business owned by Coca-Cola Amatil are a matter for them. All we can do is make decisions as the Government. We have made a decision. We have announced that decision. We have explained that decision. Now it is a matter for Coca-Cola Amatil to decide what they are going to do.
JOURNALIST: What about the social costs involved? What are the social costs if that factory closed? That’s the question that Andrew has just asked, did the government weigh that factor into account, that the company, as a result of not getting a federal government grant might close it down and the social costs that will be borne by the taxpayer paying for unemployment benefits.
MATHIAS CORMANN: We have weighed up all the relevant facts. Are you suggesting that any company across Australia as they consider an investment in a commercial enterprise and comes to the view that they can’t quite reach the internal hurdle rate of return, that the taxpayer somehow should come in and bridge the gap? That is the implication of your question.
JOURNALIST: The implication of my question is did the government consider all of these things and the factory might close as a consequence?
MATHIAS CORMANN: The Government considered all of the relevant facts. The request that was before us was that a private company, wholly owned by Coca-Cola Amatil, which has the cash reserves, the balance sheet and the wherewithal to make the necessary investment on its own, that they were asking for a grant from the taxpayer at a time when the Commonwealth, quite frankly, doesn’t have the balance sheet and doesn’t have the cash reserves.
JOURNALIST: If the social cost of closing SPC Ardmona was more than $25 million then wouldn’t it be rational of a government to give that money over?
MATHIAS CORMANN: Andrew I don’t accept the premise of your question. I don’t accept that it’s the responsibility of the government to second guess what decisions individual private businesses will make just because the taxpayer is not prepared to provide a grant to support a commercial investment. At the end of the day it’s a matter for Coca-Cola Amatil to decide.
JOURNALIST: As the Finance Minister are you happy that the government is going to hand over $16 million to Cadbury, whose multinational owner made over a billion dollars in profit last year?
MATHIAS CORMANN: Well it is a very different set of circumstances. In the lead up to the last election we made a commitment to support some tourism infrastructure, which happens to be associated with Cadbury. That was an election commitment. It’s a very different circumstance from…
JOURNALIST: But it’s still a factory...
MATHIAS CORMANN: It’s a very different circumstance from an individual business asking the taxpayer to support a commercial investment in a particular commercial enterprise. I think we’ve pretty well...
JOURNALIST: But you make the point that Cadbury was a pre-election commitment, what’s the difference though between SPC’s co-investment compared to the one announced yesterday by Jamie Briggs down in Tasmania for Houn Aquaculture to give that company $3.5 million of Federal taxpayer’s money for processing and smoking fish?
MATHIAS CORMANN: Well let’s just be very clear, we were not being asked to make a co-investment. We were being asked to make a grant from the taxpayer to an individual business so that they would be able to invest in a $200 million restructure of their business. We were not being asked to make an investment. If you make an investment you actually get a share in the business and you end up getting a return from your investment. We were being asked to make a grant on behalf of the taxpayer to an individual business, which has got the balance sheet, the cash reserves and the wherewithal to look after their own needs. As the Prime Minister said on the day when he made the announcement, we are very confident that David Gonski and the board of Coca-Cola Amatil will look very carefully at what they’ve got on the table and they will not let these workers down. We are very confident.
JOURNALIST: But why give money to a Tasmanian fish shop under what seems to be similar circumstances for SPC?
MATHIAS CORMANN: Well I don’t accept that they are similar circumstances.
JOURNALIST: How are they different? How are the circumstances different and don’t say please that oh it’s co-investment, you and I know that it’s not co-investment they are both grants aren’t they the same? It’s not a co-investment in either case, correct?
MATHIAS CORMANN: I’ll let Minister Briggs deal with the grant that he announced yesterday.
JOURNALIST: Are you disassociating yourself from his decision?
MATHIAS CORMANN: Peter, relax. No not at all. What I’m saying here today and what the Prime Minister and other Ministers have made very clear over the past week, Cabinet dealt with the request from SPC Ardmona, a wholly owned subsidiary of Coca-Cola Amatil. It doesn’t seem to get across everyone but Coca-Cola Amatil, made a profit of more than $200 million in the first 6 months of the financial year, is a company with a $9 billion market capitalisation, a company which has got the financial reserves and resources to make the whole investment. Incidentally, Coca-Cola Amatil paid $750 million to buy SPC Ardmona, they’ve said to us that they are ready to invest another $161 million, we encourage that. We support that. We urge them to do it.
In the circumstances, having considered all of the facts, having considered the arguments and the merits of what was before us we made a judgement that it wasn’t appropriate for the taxpayer to provide a $25 million grant in that circumstance.
JOURNALIST: What got Huon aquaculture over the line?
MATHIAS CORMANN: Look I’ll refer you to Minister Briggs in relation to that.
JOURNALIST: Did the Cabinet discuss drought assistance today, and are you open to the argument that farmers need financial help?
MATHIAS CORMANN: I’m not going to go into the detail of what was and what wasn’t discussed at Cabinet. Suffice to say, we’re very conscious of the challenges faced by farmers in particular in Western Queensland and in Northern New South Wales. The Minister for Agriculture Barnaby Joyce is of course having conversations with relevant farmers and farming groups in relation to these matters.
There are policies and programs in place from the Federal Government to provide support in those circumstances. So at this stage it would be premature for me to go any further than that. Suffice to say that we are very conscious of the challenges faced by farmers in Western Queensland and Northern New South Wales in particular.
JOURNALIST: With regard to the appointment of Peter Costello as chairman, how many names were on the shortlist?
MATHIAS CORMANN: Well Peter Costello was appointed as a director on the Future Fund Board of Guardians by the former Government, in fact by then Prime Minister Rudd and then Finance Minister Tanner. He has been on that board now since 2009. After Mr Gonski advised the government that he would resign from the position we made a decision that Mr Costello has, given his background as a long serving treasurer for Australia, given his background as having been on the board since 2009 that he was the most appropriate appointment. Initially in an acting capacity and today the Cabinet has decided to confirm him in that position. So the short answer is he was the person that the cabinet decided to appoint as somebody who was an existing director on the board.
JOURNALIST: So he was the only man on the shortlist?
MATHIAS CORMANN: Well he was the person the Cabinet decided to appoint.
JOURNALIST: He was the only name?
MATHIAS CORMANN: …There is no shortlist beyond Peter Costello. There nothing tricky about this. Peter Costello, given his background, given his unique experiences, given his capacity to contribute and provide strong leadership to the Future Fund, given that he has been on that Board now since 2009, was judged by us to be the most appropriate appointment for that position.
JOURNALIST: Is he likely to make any changes to the Future Fund?
MATHIAS CORMANN: Well look you have to ask him that question.
JOURNALIST: Well would you want to, are there any suggestions you’d have to him?
MATHIAS CORMANN: Well Peter Costello as the new chairman of the Future Fund, the Treasurer and myself will be having conversations in the next few days in relation to these matters. I’m not going to provide a running commentary on those things at a doorstop thank you.
JOURNALIST: You’ve got a fairly ambitious infrastructure program. Do you think the Future Fund should be spending more money investing in infrastructure as opposed to investing somewhere else?
MATHIAS CORMANN: The Future Fund importantly and quite appropriately makes these decisions independently as it sees fit and we will leave the Future Fund to continue to make these sorts of decisions at an arms-length basis from the Government.
JOURNALIST: Minister can you explain the decision to ask former Prime Ministers to front up to the Royal Commission into the home insulation program?
MATHIAS CORMANN: Look it’s a matter of public record. We initiated the Royal Commission into the home insulation program. The home insulation program initiated by the previous government caused deaths and serious injuries. We made a commitment to the families and indeed in the lead up to the last election that we would have this Royal Commission. That Royal Commission is now underway. We’re not going to provide a running commentary. We will leave the Royal Commission to do its job as it sees fit and it’ll sort itself out in the long run.
JOURNALIST: Do you think it’s appropriate that they be asked to put forward Cabinet documents that might be the subject of secrecy?
MATHIAS CORMANN: Well again, I will leave the Royal Commission to make these sorts of judgements on how they intend to do their job. Our commitment was to get to the bottom of what happened in relation to the home insulation program. Why did people die? Why did people get seriously injured? So that we can make sure that these sorts of events never ever happen again. That was a commitment we took to the last election and we look forward to receiving the report and the recommendations from the Royal Commission after it has concluded its job.
JOURNALIST: Labor says that if they are forced to give Cabinet documents from the previous government to the Royal Commission it could be in breach of the Westminster principles of government is the Coalition worried about that?
MATHIAS CORMANN: Well again, I’m sure that the Royal Commission will do its job in an appropriate way consistent with all the laws of the land in the way these sorts of things are usually handled.
JOURNALIST: The age of entitlement now that it’s over, does that mean in the budget we can expect large scale cuts to so called middle class welfare programs?
MATHIAS CORMANN: What you should expect in the budget is the Government’s next instalment as we implement our commitment to repair the budget. As I said earlier, we inherited a budget in very bad shape. A $47 billion deficit this year, $123 billion worth of deficits over the forward estimates, government debt heading for $667 billion dollars over the decade if we don’t take corrective action. That is clearly unsustainable. Clearly we are currently working our way through all of these issues and how best to ensure that we can put Australia back on to a credible and believable pathway back to surplus.