Senator the Hon Mathias Cormann
Minister for Finance
Date: Tuesday, 13 May 2014
LYNDAL CURTIS: Well, families on Family Tax Benefits will be contributing a lot. The lowering of the threshold, people who get $150,000 used to get the Family Tax Benefit, they will no longer get it. That level goes down to $100,000. A whole lot of eligibility and thresholds will be tightened across a range of payments. Foreign aid is one of the big hits. The Government has effectively abandoned the commitment it had to the millennium development goals. That is a saving of nearly $8 billion. The other really interesting thing is the States and Territories are going to have to do a lot more heavy lifting, because the Commonwealth is going to say to them: 'you're going to have to pay more for schools and hospitals'. Higher income earners do get a hit, but it is a hit only for three years while they will also be paying the higher fuel tax and also be paying to see their GP, they don't have the ongoing pain that some of the other sectors get.
To talk about the Budget, we are joined now by the Finance Minister Mathias Cormann. Senator Cormann, thank you very much for joining us tonight.
MATHIAS CORMANN: Good to be here.
LYNDAL CURTIS: If I could take you back nearly a year ago, Tony Abbott delivered in the Parliament his address in reply to the Budget. He said the carbon tax would go but no one's personal income tax would go up and no one's fortnightly pension or benefit will go down. If I could take those one by one, personal income tax is going up for the wealthy, isn't it?
MATHIAS CORMANN: Very clearly at the time the promise to scrap the carbon tax and to fund income tax cuts without a carbon tax, which we are keeping, was related to the income tax cuts that were compensation for the carbon tax...interrupted
LYNDAL CURTIS: You said no one's personal tax will go up.
MATHIAS CORMANN: Very clearly, I think everybody knows, what that meant at the time, was that we would scrap the carbon tax and fund income tax cuts that provide compensation for the carbon tax without a carbon tax. And that is exactly what we have done in the legislation that is before the Parliament.
LYNDAL CURTIS: He also said that no one's fortnightly pension or benefit will go down. Now you will leave the pension changes until after the next election but people's benefits are going down aren't they?
MATHIAS CORMANN: Well you can now quote out of context all of the things that we have said in the context of scrapping the carbon tax. Because all of the things that you have just listed were things that we said we would not do and that we would continue to provide after we scrap the carbon tax, which we are. The pension increase will stay even after the carbon tax goes. The income tax cuts that were linked to the carbon tax will stay even after the carbon tax is gone. Look there is no doubt that we have made some difficult decisions in this Budget. We have done in this Budget what we said we would do before the last election. We said we would build a stronger economy and fix the Budget mess that we have inherited and we are doing that. And we are not making any excuses. We are taking full responsibility for making the decisions that need to be made in the national interest.
LYNDAL CURTIS: There are surprises, there are things that you have done in the Budget that you did not put before the people at the last election and people will be surprised by the changes.
MATHIAS CORMANN: Inevitably, when you are the Government and when you have in front of you all the information about the situation we are in, about the trajectory that we are on, the unsustainable spending growth trajectory that Labor has left behind. When you are presented with the information and the options on how to address it, inevitably you are going to make judgements that when the Budget is delivered, will be a surprise to people. We are taking full responsibility for making the decisions that we think are necessary in order to strengthen Australia, in order to fix the Budget mess that we have inherited in order to create more opportunity for all Australians in the future.
LYNDAL CURTIS: Mr. Abbott also said there would be no new tax collection without an election. That's a broken promise isn't it?
MATHIAS CORMANN: Again we can go around and around in circles. What we have done here is we have carefully assessed the situation that we have inherited. We have assessed all of the options on how best to address it. And in our judgement, in order to spread the effort to repair the Budget as fairly and as equitably as possible, there is a need for a temporary increase, effective increase in the top marginal tax rate by 2%, which is targeted at high income earners and is time limited.
LYNDAL CURTIS: You and the Treasurer have been saying before that, the most fundamental promise was the one to fix the Budget. But Tony Abbott told the election launch, the worst deficit isn't the Budget deficit, but the trust deficit. Have you breached the trust, faith with the electorate?
MATHIAS CORMANN: We don't believe so. At the end of the day, we are not commentators. We are elected to do a job and every three years the Australian people get to pass judgement on whether they trust that we have done the job to the best of our ability. Whether they trust that we have made decisions fairly and that we have made decisions which strengthen Australia. We are obviously, now that we have put our plan before the Australian people, we are looking forward to engaging with them over the next few weeks and months and indeed in the lead-up to the next election to explain what it is we have done and why we think it is in the national interest to make those judgements.
LYNDAL CURTIS: You have made effective cuts to growth in education and hospital funding, you are shrinking the growth in those payments. There is no compulsion on the States and Territories is there to make up that gap caused by the changes in indexation. This is old-fashioned cost-shifting isn't it?
MATHIAS CORMANN: Not at all. The spending growth trajectory that Labor left behind was unaffordable, it was unsustainable. Labor was making people believe that over the next decade we could increase spending to take it to 26.5 per cent as a share of GDP. That we could increase Federal Government spending from $409 billion this year to $690 billion in 2023-24. But they didn't explain to anyone where the money was coming from. There is a very simple point. The longer we run deficits, the longer we fund consumption by borrowing money, the more we force our children and grandchildren to pay the price for our consumption today with interest, reducing their opportunity. What we are doing today is that we are improving the opportunity for our children and grandchildren by making sure that today's generation takes responsibility for our own consumption.
LYNDAL CURTIS: Aren't you asking the States to make up the difference when arguably the State's Budgets are in a structurally worse position? Isn't this a way of getting the States to start the conversation about changing the GST to bring in more revenue?
MATHIAS CORMANN: What we are doing is putting the spending growth trajectory of the Commonwealth on a more sustainable footing. We have put a stop to Labor's unbelievable and unsustainable growth trajectory. What we have said all the way through is that everybody will have to contribute. Families, individuals, higher income earners, the States and the Territories, Local Government, everybody across Australia has to contribute to fix the Budget mess that the Labor Party has left behind.
LYNDAL CURTIS: One question about health. There will be co-payments for GP's and medicines and tests, to pay for medical research. What is the benefit of that if people can't afford to see GP's to get the benefit of increased medical research?
MATHIAS CORMANN: We are very confident that we have struck the right balance. Our objective was to ensure that our world class health system here in Australia continues to be sustainable into the future. We want to ensure that all Australians can have affordable access to high quality health care and we want to ensure that there is an investment in future high quality medical care through this Medical Research Future Fund, which will be the biggest research fund in the world. It is a very exciting development. It will mean that Australians will contribute to higher quality health care in the future in a very meaningful way.
LYNDAL CURTIS: And we will have to leave it there. Mathias Cormann thank you very much for your time.
MATHIAS CORMANN: Always good to talk to you.