Senator the Hon Mathias Cormann
Minister for Finance
Date: Wednesday, 14 May 2014
PATRICK CONDREN: Senator Mathias Cormann is the Finance Minister and Mr. Hockey's right hand man when it comes to the Budget. Senator, good morning, thanks for your time once again this morning.
MATHIAS CORMANN: Good morning Patrick and good morning to your listeners.
PATRICK CONDREN: When did you as a Government decide it was acceptable to break your pre-election promises?
MATHIAS CORMANN: We don't accept that that's what we have done. We have done what we said we would do before the last election. We have delivered a Budget last night which will build a stronger economy and which will repair the Budget mess that we inherited after the last election.
PATRICK CONDREN: Did Tony Abbott promise no new taxes?
MATHIAS CORMANN: Well we promised that we would scrap the carbon tax, that we would scrap the mining tax, that we would fund income tax cuts as compensation without a carbon tax and that we would fund the company tax cut without a mining tax. And we are doing all of that. But look, at the end of the day we made judgments that we think are in the national interest. We made judgments about how best to put the country back on track and we are asking people across Australia to make a contribution. What we have sought to do is to spread the additional effort required to put our Budget back on track as fairly and as equitably across the whole community as possible. Ultimately, in two and a half years' time, at the time of the next election, people will have the opportunity to pass judgment on whether they think we got it right or whether they think we didn't.
PATRICK CONDREN: Is it acceptable to break election promises for all the reasons you have just outlined?
MATHIAS CORMANN: Well Patrick, in our view, we have delivered an honest Budget, we have delivered a fair Budget, we have delivered a Budget that has put a stop to Labor's unsustainable spending growth trajectory. We believe that we have delivered a Budget that keeps faith with the promises that we made to the Australian people before the last election. But ultimately, that is a matter for the Australian people to judge. We put our plan out there, honestly, transparently. We are now here explaining the reasons for the judgments that we have made and people will have the opportunity to pass judgment on whether they think we got it right.
PATRICK CONDREN: So someone earning less than $100,000 per year. How will they be financially impacted by this Budget?
MATHIAS CORMANN: Well obviously what we have done through a series of changes through family payments for example is ensure that government support is targeted at those most in need. I mentioned earlier that the spending growth trajectory that we inherited form the previous government was unsustainable. Ultimately, government can't continue to spend more than we raise in revenue. We can't continue to spend money that we haven't got. The longer we have deficits, the longer we are funding our consumption today through borrowing and debt, the longer we are forcing our children and grandchildren to pay the price for our consumption today with interest. And we are by doing that reducing the opportunity...interrupted
PATRICK CONDREN: Do you know how someone earning $100,000 per year will financially impacted?
MATHIAS CORMANN: Obviously there is a range of modelling that has been done and its transparently provided in the various materials we have put out. There are whole range of changes that will have an impact on people right across the community whether they are changes to...interrupted
PATRICK CONDREN: I am just looking for a specific number.
MATHIAS CORMANN: There is no specific number in relation that blanket proposition in relation to somebody under $100,000, because everybody's circumstance is different.
PATRICK CONDREN: Sure. But from some of the numbers that I have seen this morning, do you agree it is around $2000 - $2500?
MATHIAS CORMANN: It very much depends on your individual circumstances and the impact will be different depending on how many children you have got, depending on how often you go to the doctor, depending on a whole range of circumstances. What I would say by way of general comment is that we have done everything we can to ensure that the additional effort required to put our Budget back on track, to get our country back on track, is spread as fairly and as equitably as possible across the whole community, including higher income earners making a contribution.
PATRICK CONDREN: How much will someone on over $180,000 be financially impacted?
MATHIAS CORMANN: Obviously what we have done in the Budget is introduce a temporary Budget Repair Levy and people earning more than $180,000 will be asked to pay effectively 2 per cent more in tax over the next three years.
PATRICK CONDREN: So someone on $180,000, 2 per cent extra in tax. How much will that be?
MATHIAS CORMANN: Well it depends again. It depends on a whole range of circumstances, but at the end of the day this will raise $3.1 billion to our Budget repair effort.
PATRICK CONDREN: So where I am leading with this, is why is someone who is on $180,000 being taxed temporarily, approximately $1200, when someone who is on the average wage will lose permanently $2000 to $2500?
MATHIAS CORMANN: Again you have got to remember that people on higher incomes are already doing most of the heavy lifting when it comes to income tax generation by Government and we are very conscious of that. What we are asking higher income earners to do here is to make a special additional effort to help get our country back on track. Ultimately over the medium to long term, what we need to ensure is that the Federal Government spending growth trajectory is sustainable. Under the previous Government we were on track for spending as a share of GDP of 26.5 per cent. That compares to 23.1 per cent in the last year of the Howard Government and if we kept that spending growth trajectory going, we would have had to massively increase taxes in the years ahead, which ultimately would have weakened our economy, would have reduced opportunity and would have reduced the number of jobs. What we want to do…interrupted
PATRICK CONDREN: But what the reality is people who can least afford it are going to be doing more of the heavy lifting in terms of the financial hit to their back pocket than people at the top end are doing.
MATHIAS CORMANN: What we have sought to do is to spread the effort as fairly and as equitably as possible and the objective of all of this is to create and build a stronger economy where everyone has more opportunity to get ahead…interrupted
PATRICK CONDREN: And with respect Senator you keep repeating those sorts of statements, the sorts of spin that we have seen from governments of all ilk throughout time, but what I am really interested in is trying to get to some of the specifics and you can't tell me what someone on an average wage, what their hip pocket hit will be and to compare it to someone on $180,000. I'm really sort of, and that's the view of our listeners as well that are calling in this morning. They are frustrated that they don't know, they feel that the people who can least afford it are being hit the hardest.
MATHIAS CORMANN: Clearly when we last spoke you were asking me why it was fair to get higher income earners to do more of the heavy lifting. So clearly there has been a slight shift in your approach in relation to all of these issues. What I can say to you is that as a Government, we are very conscious of the need to spread the effort as fairly and as equitably as possible. At the end of the day when you make adjustments and when you pursue structural savings and structural reforms in relation to government payments, inevitably that will have an impact on people that receive government payments. Ultimately, we can't as a Government, we can't as a country, continue to spend more money than we have…interrupted
PATRICK CONDREN: In terms of the Budget then, what is the level of government spending on average of GDP?
MATHIAS CORMANN: In 2013-14, so the last year of the previous Government, spending as a share of GDP was 25.9 per cent. Which is significantly higher than it was in the last year of the Howard Government when it was 23.1 per cent …interrupted
PATRICK CONDREN: What about you guys what are you spending?
MATHIAS CORMANN: Over the forward estimates we are going to bring this down to 24.8 per cent and by the end of the decade we are bringing it down to 24.4 per cent as a share of GDP.
PATRICK CONDREN: So it's 1 per cent less than what the Gillard/Rudd Government was spending.
MATHIAS CORMANN: It is 1.5 per cent less over the decade than the last of year of Labor and of course we want to take it further beyond that. But what we have done in this Budget is we have pursued structural savings, structural reforms which start low and start slow and which build over time. What we have also said is that this is step one, this is the first part of our effort to put our Budget back on to a sustainable track.
PATRICK CONDREN: Ok Senator we are going to take a break, but we are going to come back with some more questions, specifically from our listeners via email after the break, just stick with us. It is a quarter to nine.
PATRICK CONDREN: Hello welcome back to a post-Budget morning here on News Talk 4BC, it's eleven minutes to nine. Our guest for another few minutes is Senator and Finance Minister Mathias Cormann. Senator, again thank you for making yourself available to have a chat to us this morning.
Some people want to know about the pollie pay freeze. Can you clarify something for me? When the announcement was made last week that politicians pay would be frozen for twelve months, was that before or after the remuneration decision to not grant politicians a pay rise was made?
MATHIAS CORMANN: Well we made the decision independently of the Remuneration Tribunal, but as has become apparent after we made that decision, the Remuneration Tribunal was already going down that same track. The important point to understand here is that the previous government passed legislation through the Parliament that gave the Remuneration Tribunal complete independence when it comes to determining politicians pay. So great minds thought alike. Our view was that in the circumstances politicians should not get a pay rise and the Remuneration Tribunal independently had come to the same view, which is good.
PATRICK CONDREN: So the Remuneration Tribunal, just to clarify, said there would be no politician pay rise this year, so you weren't going to get one anyway?
MATHIAS CORMANN: That's right, but at the time when we made that decision, we were not aware of that.
PATRICK CONDREN: Okay, David wants to know whether you can confirm there will be no backdates scenarios, or will there be twice the normal payrise next year?
MATHIAS CORMANN: No, so essentially from here on in, to the extent that there are going to be changes in pay moving forward, it will be from the lower base.
PATRICK CONDREN: From the existing base then?
MATHIAS CORMANN: From the existing base. So essentially there will not be any backdating or any catch-up.
PATRICK CONDREN: Okay. Just in terms of the specifics now of some aspects of the Budget particularly as to how it impacts on the States, health and education funding are going to be cut back by the tune nationally of some billions of dollars. Would you like the States to come to you and ask for an increase in the GST take?
MATHIAS CORMANN: Well the first point I would like to make is that over the forward estimates at the time of the last election, we have kept the same funding envelope for health and we are actually doing better in education. Labor before the election took $1.2 billion away from schools in Queensland, Western Australia and the Northern Territory and we put that $1.2 billion back in just before Christmas. What we have done for the period beyond the forward estimates at the time of the last election is put the spending growth trajectory on a more sustainable footing. There will essentially be...interrupted
PATRICK CONDREN: So there's no cuts to health and education then?
MATHIAS CORMANN: No, what we're doing is we are increasing funding to health and education beyond the forward estimates at the time of the election, but we are doing it by CPI and a population growth formula.
PATRICK CONDREN: Okay, no cuts to health and education from the Commonwealth to the States?
MATHIAS CORMANN: Well what we're doing is increasing spending by less because the massive increases that Labor had locked into the Budget beyond the forward estimates were unsustainable, could not be afforded. Labor never pointed to where the money was coming from. Indeed at the time of the last election, all of that massive spending growth was hidden from people because it was in the period beyond the forward estimates. Now 17-18 is the first year of that period that has now come into our Budget period and what we have set out to do is ensure that there is still spending growth, but the spending growth is more realistic and more affordable.
PATRICK CONDREN: So would you like to see the GST raised? Is there an expectation within the Federal Government that the States will ask for a GST increase, perhaps a broadening of the base with the GST and therefore sparing you guys that political pain.
MATHIAS CORMANN: Well we have been very clear in the lead up to the last election and we stand by that commitment. We will not initiate any changes to the GST, full stop end of story. We will be having a Tax Review coming up shortly and whatever the States want to put to that review is a matter for them. What we would want the States to do in the first instance is to run their schools and their hospitals as efficiently and as cost effectively as possible. Now Patrick...interrupted
PATRICK CONDREN: But pre-election promises you've shown in this Budget aren't something that you guys live or die by?
MATHIAS CORMANN: Well Patrick I would love to keep talking, but I do actually have a whole series of other interviews lined up. Your colleagues want me to be as punctual as you wanted me to be this morning and as I was. I'm really sorry, but I've got to run as we arranged with your producer, 8:50 was when I needed to go.
PATRICK CONDREN: I do apologise, thank you for your time. I appreciate it. Thank you Senator.
MATHIAS CORMANN: Good to talk to you.