Senator the Hon Mathias Cormann
Minister for Finance
PAUL MURRAY: Well the Abbott Government’s long awaited Commission of Audit handed down its report today. They are stressing of course that it is a report to Government, not a report by the Government but one of those old truisms about politics is that you don’t call for reports unless you know what they are likely to come up with and I think the Abbott Government is exactly aware of what this hand-picked group of people were likely to come up with. It does contain some really explosive ideas although some of these explosive ideas have been presented to governments before and certainly back at the time of the Howard Government and they weren’t touched then for political reasons and you would have to be believed that they wouldn’t be touched now although you could argue the case, and I’m sure the Government will do this that we are in a much more difficult financial position these days than we were in 1996 when it really was boom times. There were 11 budget surpluses on the trot and there had been no GFC at that stage. The person who asked for this report to be done, actually the Minister was the Finance Minister Mathias Cormann, he is a West Australian Liberal Senator of course and he joins us now.
MATHIAS CORMANN: Good afternoon Paul.
PAUL MURRAY: Mathias we have seen sweeping Audit Reports like this before in fact, one in 1996 to the Howard Government with some of the same recommendations, it was almost completely ignored. Why would we think the Abbott Government will act on the substantial issues in this one?
MATHIAS CORMANN: Well you won’t have to wait for very long to find out, because the Government’s response will be in the Budget in two weeks from now.
PAUL MURRAY: But you have clearly quarantined a whole lot of the big issues from the budget because they would break existing promises.
MATHIAS CORMANN: Paul what the Commission of Audit Report that we released today shows is that the spending growth trajectory that we inherited from Labor is unsustainable and needs to be addressed. We did make a whole series of commitments in the lead-up to the last election and we will be implementing the recommendations from the Commission of Audit Report in a way that is consistent with the commitments that we took to the last election. Now the Commission of Audit is making recommendations for structural reforms and structural saves. The Government will be pursuing structural reforms and saves in the Budget. Generally structural savings though, start low and build over time and that is of course what people will be able to see in the Budget.
PAUL MURRAY: Okay, so you are prepared to make a start on all of the substantial, or most of the substantial cut-backs that the Commission of Audit has recommended to you?
MATHIAS CORMANN: We haven’t released a response to each single recommendation today. What we have of course noted is the serious fiscal challenge ahead of us. What we have noted are the recommendations that are made for structural reform by the Commission of Audit. It is invariably the case with these sorts of reports that there will be some recommendations that we will be able to implement very quickly, others will require some more detailed work and consultation and some things we will rule out very quickly. Now what people will be able to see in the budget on the 13th of May is the Government’s initial response and we will continue to build on that over time.
PAUL MURRAY: Well the Commission says its recommendations could achieve annual spending cuts of up to $70 billion a year by 2023. We have never seen cuts like that achieved in Australia. How much of that is achievable, half?
MATHIAS CORMANN: So this is over the decade and the important point here is, and what the Commission of Audit shows is that without corrective action, Federal Government spending is on track to increase from $409 billion this year to $690 billion in 2023-24. To put that into context that would be spending of 26.5 percent as a share of GDP within the decade compared to the 23.1 percent spending as a share of GDP in the last year of the Howard Government. Now our objective is to reduce spending year on year, as a share of GDP. Our objective is to bring the Budget back into surplus as soon as possible and in this Budget to put it on to a believable pathway back to surplus. That is why we will be implementing a series of significant structural saves, but that is also why we believe that there is a need for a more immediate, short-term effort to give ourselves a stronger starting position while the more structural savings measures have time to kick in.
PAUL MURRAY: Ok. Let’s get into some specifics. Will Family Tax Benefit Payments be addressed in the Budget?
MATHIAS CORMANN: Paul I’m not in a position today to provide comment on individual measures that may...interrupted
PAUL MURRAY: I’m not asking you for specifics. I’m just saying that this is an issue in which you have some recommendations from the Commission. You have said that you will start small and grow. I am just asking you will Family Tax Benefits be addressed in the Budget?
MATHIAS CORMANN: Paul you are asking me to make announcements in relation to the Budget on your program this afternoon. I understand why you are asking me these questions, but I’m not in a position today to deliver the Budget for you. What I can say is that the Commission of Audit was asked to look right across Government and come up with recommendations on how government spending can be made to be more efficient and better targeted. The Government has considered those recommendations and we will be providing an appropriate response in the Budget in two weeks time.
PAUL MURRAY: Yes, but you have chosen to release this report today, two weeks out. You have said that broadly you are going to get into a lot of these issues in the Budget. Surely you are prepared to come at some sort of response as to what you might rule in and what you might rule out?
MATHIAS CORMANN: We absolutely think that it was very important in terms of the public conversation about the challenge for Australia, the fiscal challenge we are facing as a country and the pathway ahead. We absolutely thought it was very important that people had the information from the Commission of Audit in front of them before we release the Budget. This is why we have released this today. The Government’s detailed response will be in our Budget on the second Tuesday in May.
PAUL MURRAY: The recent debate, caused by leaks out of the Government around a Medicare co-payment has been $6 capped at 12 visits. The Commission wants $15 a visit, $5 for concession cardholders; do you have the guts to pull that on?
MATHIAS CORMANN: Again the Commission made their recommendations. It was an independent process. It was a report to the Government, not a report from the Government and the Government has been considering this report as one of the inputs into our budget process which is very much getting to the pointy end. All will be revealed in the Budget.
PAUL MURRAY: Minister, this report will be a test of your political guts basically. The Government’s I’m talking about, not yours individually. The Commission says we will go broke if we keep going the way we have been going.
MATHIAS CORMANN: There certainly is a significant challenge ahead of us. The Budget position that we have inherited was unsustainable. We face a $123 billion worth of projected deficits over the current forward estimates and what the Commission of Audit shows is that that spending trajectory we inherited from Labor continues to deteriorate every single year beyond the forward estimates. So we do have to make some tough decisions. Not because it is fun and not because it gives us any pleasure, but because in our judgement it is the right thing to do to strengthen the country and we will be doing that. Obviously, these are things that we have been mulling over very carefully to make sure we get the balance right. Our overall objective, our goal is to replace the old age of entitlement with the new age of opportunity. A new age of opportunity where stronger growth, a stronger, more prosperous, more resilient economy provides opportunities for everyone to get ahead.
PAUL MURRAY: I know the States had income tax powers up to World War II, is any Federal Government going to return them to the States again? Because the Commission is asking you to do that.
MATHIAS CORMANN: We are not going to be able to sort out every issue with the Federation in our first Budget. The Commission of Audit did make a series of recommendations and the Government has been considering them. We will be doing some further work through the Federation White Paper which the Prime Minister has already announced. That is one of the areas where we think some further work is required and that of course has already been announced.
PAUL MURRAY: The Commission wants a fairer deal on the GST, it would be shared on a per capita basis with Canberra making top-up payments to the weaker States from other revenues. As a West Australian are you attracted to that idea?
MATHIAS CORMANN: Look these are all sorts of issues that will be part of the debate over the next few months and years no doubt. We will have the Federation White Paper and the Tax White Paper which will come up with precise recommendations on that. These are not the sorts of issues that we will be addressing in our first Budget.
PAUL MURRAY: So that won’t be there. What about, and I suppose neither will be the recommendations like the Federal Government should just get out of Health and Education, however it does give you a blueprint to get stuck into the bureaucracy, the huge growth in government departments and agencies and the staffing numbers. Will you have a go at that?
MATHIAS CORMANN: The brief that we gave to the Commission of Audit was to identify opportunities to cut duplication, to cut waste and of course in the whole area of Federal-State relations there is a lot of duplication and there is a lot of opportunity for increased efficiency. You need to do that through a proper and consultative process. If there is one thing that everyone should have learned from the previous Government on how not to do things, they dropped things on everyone without having gone through a proper process. We won’t make that mistake. Before we make any big announcements, we will be having good conversations with State and Territory Governments about what might be sensible in this area.
PAUL MURRAY: Well you have a COAG meeting tomorrow, does it start there?
MATHIAS CORMANN: It is an ongoing process Paul and the Prime Minister right from September 18 when we were first appointed as a Government, has been having these conversations with Premiers and Chief Ministers across Australia.
PAUL MURRAY: Good to talk to you Mathias, thanks a lot.
MATHIAS CORMANN: Good to talk to you Paul.