Transcript - 5AA – Breakfast with Leon Byner

Senator the Hon Mathias Cormann
Minister for Finance






Release of the Commission of Audit report

LEON BYNER: There are 86 recommendations in what we understand is the Audit Commission. This is a group of independent chosen few who have the task of finding ways of bringing the Federal Budget into surplus. The previous Government spent up monies it not only had in trusts, but when that ran out borrowed it. Our debt levels to earnings is getting too high, we don’t have enough people paying taxes so therefore we must spend less on the remaining and make them pay more in taxes, charges and levies. Road tolls from congestion caused by bad planning, selling off the snowy mountains scheme, Australia Post and anything that is not bolted down. Abolishing 35 Agencies, merging 6. No Family Tax Benefit B. Tougher eligibility for Tax Benefit A. The trouble is Government’s get too wound up spending your money and then punish you for their efforts when they mess up. Debt can be a killer. If you borrow for income facilitating infrastructure then you can justify it. But if you borrow to pay wages or give hand-outs you are on a path to wrack-and-ruin. Ultimately somebody has to pay the piper. Selling off assets to pay debt exposes a future government to the temptation of borrowing against no assets but instead the pockets of taxpayers. The standards of Governments in this country recently have been appalling. We pay people to have babies on one hand and the other side built halls that nobody was interested in, but it provided jobs and we put in batts that caused fires. But the electorate is fed-up with the empty promises broken for a measly amount of money when grandiose schemes like Paid Parental Leave are forced on companies who will have to pass on all those costs. We are over-administered in Australia. We have too many busy-bodies looking over our shoulders. Too complex a system to do anything except voiding in the bathroom. Australia has buried itself in red-tape, protocols, policies and perpetual over-reporting. It is no wonder, industries find themselves in strait jackets and must have entire departments to handle government relations. Small and medium businesses don’t have those luxuries. It really is time we let people keep more money they earn instead of taking it away and going back on a merit hunt to see whether they deserve what you took away to get back. Belts will need to be tightened for sure. But it is time to let the Government know that the days of largesse with your money are over. I want to point out that Auditor-Generals, and we have them everywhere, exist as independent umpires, but Governments treat them with disdain. We have to find ways to tax payments when monies move. Tax havens exist because of the internet in many cases. The transactions and money are as real as buying something from the local shop. It’s time that profits were taxed when these monies come in or exit. Trillions are lost through cute schemes where overseas corporates are given incentives local businesses can’t get. Money should be treated equally. Including Disability Pensions paid overseas, I mean how stupid are we? So let’s pull out the hammock and replace it with what was supposed to be a safety net. Now Senator Mathias Cormann is the Finance Minister, Mathias a couple of interesting things that have come up today from your colleague Joe Hockey. There is a story for example in News Corp papers suggesting that families earning above $100,000 could lose their Family Tax Benefits, is this under Budget consideration?

MATHIAS CORMANN: Leon, good morning and good morning to your listeners. I am not in a position today to deliver the Budget for you on your show. What I am able to do though is to talk with you and your listeners through some of the findings of the Commission of Audit, which clearly showed that Federal Government spending and the growth trajectory in spending that we have inherited from the previous Government is unsustainable and has to be addressed.

LEON BYNER: I know that you don’t want to speculate about what’s in the Budget, but for the last few weeks the Government appears to be using the $100,000 threshold as a benchmark for changes to get the Budget back on track.

MATHIAS CORMANN: Again I am not going to be able to speculate on what is in the Budget because the Treasurer will be delivering the Budget on the second Tuesday in May. What we do know is that after we came into Government in September we were confronted with $123 billion worth of projected deficits, debt heading for $667 billion and the spending growth trajectory, according to the Commission of Audit, continuing to deteriorate beyond the forward estimates. In fact if we don’t do anything, Federal Government spending would increase from $409 billion this year to $690billion within the decade or a massive 26.5 per cent as a share of GDP. To put that into context, that compares to 23.1 per cent as a share of GDP in the last year of the Howard Government and all of that has to be funded somehow. Because the previous Government was constantly running out of money, they had to borrow it.

LEON BYNER: I need to put this to you, it is clear that your message Mathias and the Governments message is; ‘Austerity here it comes’. That’s the message, isn’t it? Loud and clear.

MATHIAS CORMANN: The message is, we do need to impose structural reforms on the Budget. We do need to ensure that the Budget is sustainable over the medium to long-term. Government cannot keep spending more than we raise in revenue, so we got to address that. Now the Commission of Audit recommends a series of structural savings measures for the Government in the Budget. We will pursue structural savings measures but the good thing about genuinely structural reforms and savings measures is that they start low and then build up over time. What of course we do need to do as well is an immediate short-term special effort to get us back in to a stronger starter position.

LEON BYNER: Okay, let me ask you this. Forget what the Audit Commission said, forget what the Budget may or may not do. I want to ask you, this is a philosophical question, to ask the Minister of the current Government. Do you think that a couple, with a combined income of $100,000 is rich, especially if they have children to look after and increasing bills to pay?


LEON BYNER: You don’t think that they’re rich, okay.


LEON BYNER: So, again you wouldn’t want to tax them as if they’re rich if you don’t think they’re rich would you?

MATHIAS CORMANN: Well I agree with you. A couple with kids earning $100,000 is not rich, they’re facing significant challenges in terms of the cost of living pressures that come with raising a family. There is no two ways about it. Having said all of that, the best thing that we can do for a young family with young kids is to ensure that we replace the old age of entitlement with a new age of opportunity, where in a stronger, more resilient, more prosperous economy, that family and their kids have a genuine opportunity to get ahead.

LEON BYNER: Your Audit Commission came up with a few concepts that even fly in the face of what John Howard wanted to do and we live in a Federation now, a Federation of States. But some of those suggestions were almost pre-Federation, where the States ought to have taxing powers. Now are you going to go anywhere near that? Would you want to?

MATHIAS CORMANN: Invariably with these sorts of reports to Government and it is a report to Government, not a report from the Government, invariably with these sorts of reports there are going to be recommendations that the Government will agree with and is able to implement quickly, there are other things that will require some more thought and some detailed work and consultation and then there are going to be some things that we will reject outright. Now anything related to our Federation, obviously there is scope to improve the efficiency of our Federation. There is too much duplication between State and Federal Governments and when there is duplication it means that taxpayers are paying more than they should have to. So do we think that there is scope for improved efficiencies in our federal system of government? Yes we do. Are we going to address all of these things in our first Budget? No we are not. But the Prime Minister has of course already announced that we will pursue further consultation on these matters through a Federation White Paper and indeed the Prime Minister today is meeting with the Premiers and Chief Ministers in Canberra for COAG where these sorts of issues are part of the discussion.

LEON BYNER: Well is it not a very mixed message when you’re virtually warning people, I mean let’s face it. There are leaks that come out all the time and these are planned…interrupted

MATHIAS CORMANN: Don’t assume that they’re all just leaks. There is also a lot of journalist and media self-initiated speculation.

LEON BYNER: Well let me tell you this. Whichever it is, you are in a position to rule things in or out and that doesn’t mean that by stealth we find out what’s in the Budget…interrupted

MATHIAS CORMANN: It doesn’t mean that.

LEON BYNER: Well let me tell you, the message here is stealth, right? So in a stealth mode, why the hell would you want to tell businesses to pay yuppy employees money for Paid Parental Leave when other elements of the economy can’t afford these luxuries and are just trying to pay the school bills and the fees and the mortgages?

MATHIAS CORMANN: Well Leon I don’t agree with that characterisation. If I can explain what it is that we are trying to do. We’re trying to build a stronger, more prosperous economy. One of the challenges that we’re facing as a nation, in a way it’s a good challenge to have, but our population is ageing because all of us now grow older than our forebearers and that’s a good thing. But what it means is that our workforce participation rates are falling. So we have to find ways to ensure that we can increase workforce participation through other means and a genuine fair-dinkum Paid Parental Leave Scheme combined with appropriately well-targeted childcare arrangements are important parts of a productivity strategy which is required to ensure that we can reach our full economic growth potential.

LEON BYNER: But you need more taxpayers to pay for these things?

MATHIAS CORMANN: Well as far as the Paid Parental Leave Scheme is concerned, that is funded through a levy that is imposed on the…interrupted

LEON BYNER: And who do you think will ultimately pay for that, because no business is going to, I mean you might say that you have to pay a levy and they’ll say yes the law says we do, so they do. But guess what, it won’t stop there, it will trickle down and everybody will pay for it.

MATHIAS CORMANN: Well there is no doubt that there is a cost to the economy, but there is also a benefit to the economy and that’s the point. If we want to maximise our economic growth potential, we do need to lift our productivity, we do need to lift the participation rates, we need to continue to grow our population and a genuine fair-dinkum Paid Parental Leave Scheme does help to address all of those economic challenges that we face as a nation.

LEON BYNER: Colleagues in your own Party are dead against this right now, so you’re bravely trying to defend Tony Abbott’s position, that’s fine, we would expect you to do that, but there is unrest in your own Party about this.

MATHIAS CORMANN: Leon there is nothing surprising that when you pursue a new significant economic social reform, there is going to be debate. Now so far as my own Party is concerned, this is a policy that we took not to one but to two elections and it has been widely canvassed in the lead-up to two elections and we will continue to do our best to explain why it is that we are doing what we’re doing.

LEON BYNER: What are you going to do to reduce the cost of having you around and your colleagues and your bureaucrats because you guys are costing us too much?

MATHIAS CORMANN: Well I can assure you that we’re very mindful that as we are looking for savings across the community, that everybody should do their fair share and that everybody has to carry a fair part of the burden when it comes to the special effort required to get us into a better Budget position.

LEON BYNER: Okay, let me just ask you this. On a scale of 1 to 10, 1 being fantastic and 10 being awful; where is our budgetary position? You’re the Finance Minister Mathias, tell me your take for the benefit of the South Australian people to know from you, on a scale of 1 to 10, how bad is our budgetary position?

MATHIAS CORMANN: Well the thing that I’m really concerned about right now about our budgetary position, more than anything else, is the trajectory that we are on. So in 2007 we had a Budget with no government net debt, a $20 billion surplus, money in the bank. We’re now heading for $667 billion worth of gross debt and we have deficits as far as the eye can see and the spending growth trajectory continues to accelerate beyond the forward estimates. The previous government locked in massive spending increases in the period beyond the Budget forward estimates which nobody so far has been able to see. So the thing that as the Finance Minister I am most concerned about is that not only that our starting position is weaker than what it was in 2007, but the trajectory that we’re on, if we don’t take any corrective action, if we don’t take remedial action, is going to take us into a very bad spot…interrupted

LEON BYNER: On a scale of 1 to 10, it’s what?

MATHIAS CORMANN: I’m not going to put a number on it like that.



Senator the Hon Mathias Cormann, Minister for Finance, Perth