Senator the Hon Mathias Cormann
Minister for Finance
Date: Thursday, 1 May 2014
SARAH FERGUSON: So how many of the recommendations will the Government actually adopt? I spoke to Finance Minister Mathias Cormann a short time ago.
Mathias Cormann welcome to 7:30.
MATHIAS CORMANN: Good to be here.
SARAH FERGUSON: Now just before the election, the Prime Minister promised no cuts to health, no changes to pensions or education, does that mean that you are bound to ignore most of these recommendations?
MATHIAS CORMANN: Well the Commission of Audit Report released today shows that the spending growth trajectory that we’ve inherited from Labor is unsustainable and needs to be addressed.
SARAH FERGUSON: That actually wasn’t my question. I’m just going to jump in there because my question was given the promises before the election, are you bound to ignore them?
MATHIAS CORMANN: We will stick to the promises we made before the last election. What we’ve said for some time now is that we will implement the recommendations made by the Commission of Audit, those that we accept, in a way that is consistent with the commitments that we made before the last election. Now the point here is, the Commission of Audit identified that the spending growth trajectory that we’ve inherited is unsustainable and needs to be addressed. They’ve made recommendations for structural reforms and structural savings. The Government in the Budget will implement structural reforms and structural savings which will build over time and put us back onto a path to a believable surplus.
SARAH FERGUSON: Okay let’s have a look at some of those recommendations. Some of them are very radical recommendations, some of them are going to go straight in the ‘too hard basket’, aren’t they?
MATHIAS CORMANN: Well as invariably is the case with these sorts of reports, there will be recommendations which we can accept immediately and act on, there will be some recommendations that will require some further detailed work before we can make final judgements and there will be some things we will not be able to do. We haven’t today provided a response to each of the recommendations, the Commission of Audit Report is a report to Government, not a report from Government…interrupted
SARAH FERGUSON: Nonetheless, you are here in our studios so let’s talk about some of the detail. A $15 Medicare co-payment forcing people, forcing people off Medicare over certain incomes, including the family home in the pension assets test. Which of these do you have the courage to tackle in your first term?
MATHIAS CORMANN: Well I’ve just said to you, we haven’t today provided a response to each of the recommendations. We will provide our response to the Commission of Audit Report in the Budget on the 13th of May and I will leave to the Treasurer, Joe Hockey, on the 13th of May to deliver the Budget. I’m not in a position here today to give you our individual measures that are going to be part of the Budget.
SARAH FERGUSON: Nonetheless, you’ve come in to talk about the Commission of Audit so which of those particular measures are you ruling out in this first term? A Medicare co-payment of $15 for example?
MATHIAS CORMANN: Well as I’ve just said to you, I’m not going to be commenting on specific recommendations here today. The Government will be pursuing structural reforms and structural saves but we will not be accepting every single one of the recommendations that are in that report.
SARAH FERGUSON: So which ones are you inclined to accept right now?
MATHIAS CORMANN: Well we will be making that very clear in the Budget on the second Tuesday in May.
SARAH FERGUSON: Alright, let’s talk about the welfare changes proposed because some of those are amongst the most swingeing and if carried out would have the biggest effect on some of the lowest income members of our community. Before the election, when the Labor Government had tried to reign in increases to welfare spending, you called that an attack on families, so I assume you must see the Audit Commission in the same away, as an attack on families in that area?
MATHIAS CORMANN: Well under the previous Labor Government there was waste and mismanagement as far as the eye could see. There were increases in spending as far as the eye could see. Labor kept talking about constraining spending growth to 2 percent in real terms year on year and they never did…interrupted
SARAH FERGUSON: We’re talking specifically Minister Cormann, I’m just going to interrupt you for a moment, because our audience does have an expectation that they will hear something from you, not the rehearsed lines that are part of press conferences, you made a very clear attack on Labor when they tried to reign in this welfare spending. Do you think that the recommendations of the Audit Commission in the welfare area are too strong, too high and likely to cause too much pain?
MATHIAS CORMANN: The Commission of Audit was given the job to look right across Government to make recommendations which would help ensure that government spending is as efficient and as well targeted as possible and the conclusions that the Government has reached will be reflected in the Budget.
SARAH FERGUSON: There is an ideological theme throughout this report and it is particularly strong in the health area. They are forcing people over a certain income, people being forced off Medicare and forced with penalties to take out expanded health insurance. Are you on the same page as the Commission of Audit in relation to that ideological move to, as it were, Americanise our health service?
MATHIAS CORMANN: Well I’ll let the Commission of Audit members speak for themselves. As far as the Government is concerned, our commitment is to repair the budget mess that we have inherited.
SARAH FERGUSON: Does that mean a fundamental change to Medicare, that there are people who will no longer have access to Medicare?
MATHIAS CORMANN: Well there will be structural changes in the Budget…interrupted
SARAH FERGUSON: What does that mean in relation to Medicare?
MATHIAS CORMANN: You will have to wait until Budget night.
SARAH FERGUSON: At least give me an indication of the way that you are thinking in that area?
MATHIAS CORMANN: So right now, government spending is heading for 26.5 percent as a share of GDP and that is not sustainable. We are looking right across Government…interrupted
SARAH FERGUSON: We are talking about Medicare here.
MATHIAS CORMANN: And as far as health is concerned, our commitments in the lead up to the last election were very clear. We will stick to those commitments. But, within the funding envelope, which we will keep, there is capacity to ensure that spending on health is as efficient and as well targeted as possible, that we receive maximum value for taxpayer’s dollars and that is what we are committed to do.
SARAH FERGUSON: You talk about an envelope of spending, but here we are actually talking about pushing the envelope and changing the fundamental nature of Medicare. Is that in your mind?
MATHIAS CORMANN: Well what we are talking about is making sure that we have a world-class health system into the future. That the funding for our world-class health system remains sustainable into the future. We are talking about making sure that responsibility for funding that world-class health system into the future is spread fairly, evenly and equitably and of course, again, the Government has considered all of these things very carefully. We won’t be agreeing with every single one of the recommendations that the Commission of Audit has made and our approach to these things will be reflected in the Budget.
SARAH FERGUSON: Let’s talk about the Paid Parental Leave then for a moment because Tony Shepherd was very explicit about that. Not just in the report but in his own Press Conference today. He made it clear that he believed that the amount available should be cut to $57,000 and that the savings should be ploughed in to making more childcare available. Is that something that you accept?
MATHIAS CORMANN: We have taken our proposed Paid Parental Leave Scheme to two elections now. It is an important economic and social reform. It is an important work force participation measure. We have announced, the Prime Minister has announced, some adjustment to it reducing the cap from $150,000 to $100,000…interrupted
SARAH FERGUSON: I see that you have acknowledged that very minor change. What Tony Shepherd is suggesting is a cut down to $57,000 and a good use of that money, by ploughing it, as he has it, ploughing that back into childcare. Do you agree with that on principle?
MATHIAS CORMANN: What I agree with is that childcare and a fair-dinkum Paid Parental Leave Scheme are both important parts of a workforce participation strategy. Of course we do have a Productivity Commission Review into our childcare policy framework and our childcare arrangements, but as far as the Paid Parental Leave Scheme is concerned, we took it to the last election, the Prime Minister announced a slight adjustment, reducing the cap from $150,000 to $100,000, that is the basis on which we will be proceeding.
SARAH FERGUSON: A minimal cut. Tony Shepherd also talked today about the debt levy. He doesn’t like it. He says it could have an impact on business and consumer confidence. Do you trust his judgement on that?
MATHIAS CORMANN: The Commission of Audit is an independent Commission. At the end of the day…interrupted
SARAH FERGUSON: Did he get it wrong?
MATHIAS CORMANN: He is entitled to his views. The Government is elected to make judgements in the national interest. We don’t make these judgements for fun or because it gives us any pleasure... interrupted
SARAH FERGUSON: I don’t think anyone thinks that this was done for fun.
MATHIAS CORMANN: ...but because we are focused on how best to strengthen the economy. Now we have inherited a significant fiscal challenge. We have inherited $123 billion worth of projected deficits and a spending trajectory that continues to deteriorate over the forward estimates.
SARAH FERGUSON: Which you were aware of before the election. Which begs the question why now a broken promise on tax?
MATHIAS CORMANN: I don’t necessarily accept that characterisation, but the extent of the deterioration beyond the forward estimates is massive. Now the structural savings that we are implementing through the Budget, that we are pursuing through the Budget, will start low and build over time. There is a need for an immediate transitional short-term effort. So if you want to spread the effort fairly and equitably across the whole community, inevitably you do have to consider potential measures through the tax system. Not because we like it, but because there is no other option in that context.
SARAH FERGUSON: A broken promise is a broken promise Mr Cormann.
MATHIAS CORMANN: We are committed to repair the Budget…interrupted
SARAH FERGUSON: Is a broken promise not a broken promise? It is a very simple question. You promised one thing and you are doing something else.
MATHIAS CORMANN: We will keep our promises and we will explain ourselves to the Australian people over the next two weeks and beyond, at the Budget and beyond. Of course, ultimately it will be up to the Australian people to make a judgement on whether they believe that our judgements were fair and whether our judgements strengthen Australia or whether they take another view.
SARAH FERGUSON: I look forward to the explanation on the broken promise. Thank you very much indeed for joining 7:30.
MATHIAS CORMANN: Thank you. I’ll be back.