Senator the Hon Mathias Cormann
Minister for Finance
Date: Wednesday, 14 May 2014
JOHN MCGLUE: It happened last night and you had some time to digest it but whatever you think about the Federal Budget, the rights and wrongs of it, we do know the impact will be around for many years to come. The critics are saying that it attacks the very foundations of Australian society, especially with the end of free health care but others are saying it is a Budget that the country needs to fix up the structural problems that Australia has with its finances. You can make up your own mind now, joining me on Drive is the Federal Finance Minister and WA Liberal Senator, Mathias Cormann. Welcome to the programme.
MATHIAS CORMANN: Good afternoon John and good afternoon to your listeners.
JOHN MCGLUE: So many of the headline issues, Mathias Cormann, have been canvassed over the past 24 hours, there are a couple I think that are pretty critical to people who will be listening to the programme right now I would like to canvass those with you. High among the raft of changes has been the financial assistance to mums who stay at home or who would like to stay at home. Big changes to the benefits there which makes it harder for some people to make the choice to go to work or stay at home and be a stay at home mother. Why did you make those changes?
MATHIAS CORMANN: The spending growth trajectory that we have inherited in coming in to government was unsustainable into the future so we did need to make decisions to address that and make sure that over the medium to long term the Government can get back into a situation where we live within our means. If we as a Government continue to borrow to fund our lifestyle today, to fund consumption today then what we are doing, we are asking our children and grandchildren to pay the price for that, to pay the cost for that with interest and that would be reducing their opportunities into the future as we would be burdening them, essentially with funding our standard of living today. We don't think that is appropriate. So in relation to family payments, what we have done is to better target those payments to those most in need given the fiscal circumstances we are in and that will help us improve the sustainability of family payments and the Budget as a whole.
JOHN MCGLUE: Okay. Targeting mums though, many people in the community haven't been touched directly, but why the stay at home mums. Why did you single them out?
MATHIAS CORMANN: We haven't singled anybody out. The Budget situation was such that what we are saying to the Australian people is that we need everyone to help, we need everyone to contribute to put our country back on to a stronger trajectory. That is why, among other things, we proposed this temporary Budget Repair Levy, which is effectively a 2 per cent increase in the top marginal tax rate, because that was the only way we could ensure that higher income earners who do not receive any payments from Government could make their additional contribution through this transitional period. What we have done is looked across the board and we have made judgements that we think are necessary, that we think are in the national interest, that we think will put us on a stronger foundation for the future so that is why we have done what we have done and why we have made the decisions that we did.
JOHN MCGLUE: Minister one of the other groups that have been targeted is older Australians, though not all older Australians. There have been some significant changes to the rules around the aged pension which will mean many pensioners will lose a material amount of money in the years ahead. But you have left another group of older Australians alone, and you haven't even touched the superannuation regime, its austerity for one set of older Australians but not for others, what was your thinking here?
MATHIAS CORMANN: Firstly, the changes that we are proposing to the pension arrangements are consistent with what we said at the last election. They won't take effect this term of government. What we are saying is that in order to put the pension on a sustainable footing into the future we need to adjust indexation arrangements, so that is not imposing a cut, just saying that we will grow the pension with inflation rather than some of those higher indices. What we are saying is that those changes will only take effect on 1 July 2017 onwards so people will have an opportunity to pass judgement at that point in time. Now we did make a promise before the last election not to make any detrimental changes, unexpected detrimental changes to superannuation during this term of Parliament, we are keeping that commitment. However, that doesn't mean we haven't asked those older Australians who are too wealthy or who are earning too much money to qualify for the pension, it doesn't mean we haven't asked those Australians to also contribute. We have abolished the Seniors Supplement which was essentially a government handout introduced by Labor, like the Schools Kids Bonus, where literally the Government would be handing out cash, about $870 for a single and $660 each for a couple. Literally hand out money to people who either had income that was too high or assets that were too high so they didn't qualify for the pension. The judgments that we have made in this Budget is that in our situation right now, we cannot afford to borrow money to give it away just in straight handouts. The other change we have made in relation to older Australians who do not qualify for the pension, is we have said that when it comes to the eligibility for the Commonwealth Seniors Health Card, while superannuation income is tax free and will continue to be tax free, we do believe that appropriately that income should be taken into account when assessing eligibility for the Commonwealth Seniors Health Card, as it is taken into account when assessing eligibility for the Aged Pension. We really have gone out of our way to spread the effort, to put our Budget back on track as fairly and as widely as possible so that everyone makes their contribution to help get us back on track.
JOHN MCGLUE: It is twelve past four on Drive, you are with John McGlue, 720 ABC Perth. My guest is the Federal Finance Minister and senior WA Liberal Senator Mathias Cormann talking about the Budget. We have asked you for your questions, suggestions for Mathias Cormann. And here is one for you Senator, from Connor. He asks 'what do you think the legal nexus is between citizens and the politicians they vote for? Can I sue Tony Abbott and Joe Hockey for breaking their election contract? And if not, why not?'
MATHIAS CORMANN: We believe the Budget we delivered last night was an honest Budget, was a fair Budget, was a Budget that kept faith with the commitments that we made before the last election and that does what we said we would do. Start to build a stronger economy and repair the Budget. Now obviously at the end of the day every three years, people across Australia and including across the great State of Western Australia, will have the opportunity to pass judgment on whether they think that is right. Whether they think that the judgments that we made were in the national interest, whether they think the judgments we made were fair and strengthened our country or whether they think that other judgments should have been made. And so this is, at the end of the day, all we can do as a Government, reviewing all of the information, reviewing all of the options, make judgments on the basis of what we think is right and then every three years, we put ourselves forward to the Australian people and we ask them to decide whether they are happy for us to continue on our track because they think we have performed well or whether they think there is a need for change.
JOHN MCGLUE: Minister, the GST it looks like there is a game on here. A high level game of chicken where it is all pretty clear to everyone in Australia now, the GST will be expanded and the rate will increase at some point. But it is all about who is going to go first and suggest it. And you're WA Liberal colleague Colin Barnett is, well he is pretty dirty with your Government over the GST distributions. He had this to say today, have a listen:
COLIN BARNETT: Any change to the rate or the coverage of the GST in terms of exemptions will only change if there is also a change to the distribution, and that change to the distribution can be phased in over time. It doesn't need to happen overnight. And again, can I repeat, Western Australia is a prosperous State but there is a limit to that and we are willing to contribute 25 per cent of our GST to the other States and we are not going to contribute 55 per cent if our GST to the other States.
MATHIAS CORMANN: Well Colin Barnett is a great Premier. He is doing a great job. I understand the point he is making. But let me just make a couple points from a Federal Government point of view. We made a very clear commitment in the lead up to the last election that we would not make any changes to the GST in this term of parliament and we won't. We will be keeping that commitment. We have said that we would initiate a White Paper Tax Review process and we will also be keeping that commitment. And in that context, there will be an opportunity for a conversation about what our tax policy setting should be over the medium to long term and I am sure that the great State of Western Australia along with the rest of Australia will make their suggestions on how the system could be improved. Now in relation to the share of the GST for WA, I don't actually believe that my good friend Colin Barnett is having a go at us, because as a result of the decisions that we have made, WA is actually getting slightly more than they otherwise would have. In fact, the GST revenue for WA reflected in the Budget last night was announced earlier this year as a result of Commonwealth Grants Commission decisions. And when that decision was imminent, The Western Australian newspaper actually stated at the time that the revenue would be $500 million higher than what the Western Australian Government predicated the revenue would be in their Budget in August last year. And the reason for that principally is because of some decision that the Treasurer Joe Hockey made around the treatment of royalties on iron ore fines and the decisions WA has made in relation to those, when it comes to the GST sharing arrangements. So, the revenue share from the GST that is reflected in the Budget yesterday, was announced earlier this year and in fact if you look at our estimates of WA's share it is slightly higher than what was in WA's Budget last week.
JOHN MCGLUE: Minister, a final question and it is to do with how much of this plan is actually going to turn into reality. Your political opponents have been pretty quick out of the blocks with their criticisms and the threats, it is fair to say, implicit and explicit, about blocking some of the initiatives you have announced in the Senate, but you don't have the numbers. You are a political realist, which of your measures do you think are most at risk when they run the gauntlet of the Senate, the new Senate?
MATHIAS CORMANN: Well John, the Budget that we have delivered last night is the Budget that we believe Australia needs. It is based on the judgments we made in the national interest. Now what we are setting out to do today and over the next few days and weeks and months is have the conversation with people across Australia on why it is we made the judgments we made and why we think those judgments need to be made by the Parliament. Now I have been in the Senate now for seven years and I have seen all sorts of people make all sorts of statements in the immediate aftermath of the Budget and on reflection, when the public debate has played out, they have changed their mind. Now we will work closely with all of the reasonable people that are represented in the Senate and we will make our case on why our proposals are the right way to go. And let's see where we end up.
JOHN MCGLUE: Minister, thank you for your time today.
MATHIAS CORMANN: Always good to talk to you.