Senator the Hon Mathias Cormann
Minister for Finance
Date: Thursday, 13 February 2014
INTRODUCTION: The International Monetary Fund has set out its views on the Australian economy with a warning that the Abbott government will struggle to meet spending commitments and turn the Budget back towards surplus. The IMF report also says the Australian dollar is still too high and will impede growth during the transition from the resources boom. For a Government view on the economic task ahead Marius Benson is speaking to the Finance Minister, Mathias Cormann.
MARIUS BENSON: Mathias Cormann, good morning.
MATHIAS CORMANN: Good morning Marius.
MARIUS BENSON: The IMF’s economists spent ten days in Australia in November last year. They looked around, they made their assessment and they looked at the prospects of government spending and they say Australia is leading all the rest of the 17 developed economies. Australia’s commitment to increased spending is greater than any. You are a government committed to small government and curbing spending, do you take that IMF warning seriously?
MATHIAS CORMANN: The IMF is absolutely right. We have inherited a Budget in very bad shape. We’ve inherited $123 billion worth of projected deficits and government debt heading for $667 billion over the decade without corrective action. Joe Hockey, the Treasurer, and I are working very hard to put a Budget together which will start to turn that situation around.
MARIUS BENSON: But the IMF is not talking about what you inherited, it is talking about what you have in prospect in terms of commitments to spending. To increase spending in the area of disability, in education, in defence, in the paid parental leave; it is those commitments. Are you concerned as the IMF is about the level that future spending commitment?
MATHIAS CORMANN: What we have in prospect on spending to a very large degree is the trajectory that we have inherited from the previous government. The most recent Budget is obviously a Budget that goes over a four year estimates period and we are working our way through all of that to add to the $42 billion worth of savings that we took to the last election. We’ve made a range of commitments in the lead up to the last election which were fully funded. In fact they were more than funded. Our savings were well in excess of the spending commitments we took to the last election.
MARIUS BENSON: Can I ask you; fully funding disability insurance, Gonski education scheme?
MATHIAS CORMANN: The commitments we took to the last election were fully funded. In fact we ….interrupted
MARIUS BENSON: What about the ones you’ve made since the last election in education?
MATHIAS CORMANN: If you want to go back to the education issue, it is true that Bill Shorten before the election with Kevin Rudd ripped $1.2 billion away from schools in Western Australia, the Northern Territory and Queensland. That clearly wasn’t sustainable. So we had to make a decision to fix one of the many Labor messes that we inherited. Suffice to say, moving to the next Budget, the Treasurer and I are very focussed on turning the situation around that we’ve inherited and we are very conscious of the challenge in front of us.
MARIUS BENSON: The IMF says you have to cut. You need Budget cuts or you need to increase taxes. On the latter one, will you increase taxes beyond the increases you’ve already outlined for an increase in company tax to pay for paid parental leave?
MATHIAS CORMANN: Look Marius, I’m not going to deliver the Budget on your show this morning. We are clearly right now working through all of the issues as we prepare the Budget which will be delivered on the 13th of May.
MARIUS BENSON: The Treasurer, Joe Hockey, has been talking to the Wall Street Journal and he’s been reported talking about potentially cutting out $130 billion in assets, I’m sorry, in selling $130 billion in government assets starting with Medibank Private. Is $130 billion in sales a realistic figure?
MATHIAS CORMANN: What the Treasurer has been doing over the last few weeks is very important work with the State and Territories. There is an opportunity for both the Federal government and State and Territory governments to recycle capital by selling infrastructure which appropriately can be sold and then re-invest the capital that gets released from that into productivity enhancing infrastructure of the future, which will help us grow the economy more strongly and create jobs.
MARIUS BENSON: And to get a sense of scale is $130 billion in sales roughly the area you’re dealing with, you’re anticipating?
MATHIAS CORMANN: That is the potential and right now the Treasurer is having conversations with his State counterparts to see how we can best achieve that.
MARIUS BENSON: $130 billion is the potential.
MATHIAS CORMANN: The potential, yes.
MARIUS BENSON: And Medibank Private specifically is one of the areas you are looking at selling. The AMA, the Doctors’ Association is warning today, you sell that you’ll push up premiums.
MATHIAS CORMANN: The AMA is wrong. They made that claim last year. In fact they made that claim back in 2006. No lesser organisation than the ABC Fact Check has dismissed that particular claim. As I said before Christmas, the ownership of Medibank Private has no relevance whatsoever when it comes to the level of premiums. Medibank Private right now operates as a commercial business in a highly competitive market with 34 health funds which is highly regulated. Whether Medibank Private is in public or private ownership will not have any impact on premiums whatsoever. If it is sold it will still be operating in a highly competitive, highly regulated market where premiums will not be impacted by that decision.
MARIUS BENSON: Just quickly Minister, Alan Joyce was in Canberra last night lobbying for assistance to Qantas. He says we are not the car industry; we’re not looking for a handout. Will Qantas get more assistance from the Government?
MATHIAS CORMANN: The first point is that businesses have to put their own house in order in the first instance. The job of government is to set the right conditions, the right environment by bringing taxes down and reducing regulation. Having said that we are very conscious of the particular challenge that Qantas faces in the context of restrictions imposed upon them in the Qantas Sale Act. We are having conversations with them and we’re carefully considering the propositions they’ve put to us.
MARIUS BENSON: So Qantas might be quite happy with the outcome?
MATHIAS CORMANN: I’m not going to pre-empt the considerations of Government but we are talking to them.
MARIUS BENSON: Mathias Cormann, thank you very much.
MATHIAS CORMANN: Good to talk to you.