Transcript - The Conversation – Michelle Grattan

Senator the Hon Mathias Cormann
Minister for Finance






Budget 2014-15

MICHELLE GRATTAN: Mathias Cormann, obviously the argument about a breach of trust is raging. Can you clarify is the Government’s position that it has not broken its election promises or that the Budget emergency required it to break them?

MATHIAS CORMANN: The Government last night delivered a very honest Budget, a fair Budget and we believe a Budget that kept faith with the commitments we made to the Australian people before the last election. The most fundamental commitment of all was that we would repair the Budget mess that we have inherited from our predecessors and that we would again build a stronger, more prosperous, more resilient economy where everyone has the opportunity to get ahead. 

MICHELLE GRATTAN: Do you think it is likely that one of the bigger measures will fall foul of the Senate or are you really hopeful of getting everything that matters?

MATHIAS CORMANN: Well over the last seven or eight months as we have worked hard at putting this Budget together, as we have assessed the information in front of us about where we are and where we would be heading without corrective action, assessed all of the options and made judgments that we believe are in the national interest, we have made decisions that we think are right. We now of course are in the process of explaining to people why we’ve made the judgments that we have made and we are going to work with everyone in the Senate to persuade them. The plan that we have put on the table is the plan that Australia needs right now.

MICHELLE GRATTAN: The odd wine with Clive Palmer perhaps?

MATHIAS CORMANN: You know, whatever it takes as somebody would have said in the past.

MICHELLE GRATTAN: It’s been widely said that the Government is pushing back on health and education spending onto the States to get them to argue for the GST to be raised or broadened. Do you think they’ll eventually come to that view?

MATHIAS CORMANN: Well firstly, we will not initiate any changes to the GST full stop, end of story. But what we are expecting the States to do, the same as we have had to do, is to ensure that their spending is as efficient and as well targeted as possible. The spending growth trajectory at a Federal level, that the previous government locked into the period beyond the forward estimates, so it wasn’t immediately apparent to people as they went to last election, that was unaffordable. It was excessive and it was not realistic. What we have done in this Budget is put the funding growth trajectory on a more realistic, on a more affordable and a more sustainable footing. The proposition that we are cutting spending is not right. We will continue to increase our funding for health and education, but we are increasing it at a lower rate of growth, because the growth rate that Labor had locked into the period beyond the forward estimates was not realistic.

MICHELLE GRATTAN : Just on the GST though, politicians have been, are really afraid in a sense to talk about it, surely they will have to finally openly admit to the public that there are strong arguments for looking to change this tax and reap the benefits that that would bring more widely.

MATHIAS CORMANN: Well the first thing that every level of government should do is to ensure that we spend tax payers dollars that we raise right now as wisely as possible, as efficiently as possible. At a State level, the same as at the Federal level, we need to ensure that we have our house in order. Now when it comes to our tax system into the future, we have already said that we would have a White Paper Tax Review process that we will get underway very soon. You know the State will have opportunity to put every proposition forward that they think is appropriate. But having said all of this, the States and Territories do the same as the Federal government is doing right now and that is, look very carefully at our spending growth trajectory to make sure it is realistic and more sustainable into the future.

MICHELLE GRATTAN: But in these health and education areas, surely putting such pressures on the States is making it tougher for two fraternal governments in particular in New South Wales and Victoria, which have elections coming up, to fight those campaigns. In Victoria, the Coalition is on an absolute knife edge.

MATHIAS CORMANN: Well this is not about politics, this is about what is good policy...interrupted

MICHELLE GRATTAN: It is if you are having an election.

MATHIAS CORMANN: Schools and hospitals are the responsibility of the States. It is States and Territories that run schools and hospitals. The Federal government does make a contribution and that contribution will continue to grow. But it will not grow at the unsustainable and unrealistic rate that Labor promised, but never properly funded. The thing we have to understand here is that the spending growth trajectory under Labor was taking us to a situation where by 2023-24 spending as a share of GDP was going to be 26.5 per cent, compared to 23.1 per cent in the last year of the Howard Government. Now all of that spending has to be raised in revenue. All of that spending has to be raised in revenue. That is just not realistic that we would be able to get up to that sort of level when it comes to tax as a share of GDP and still be competitive in a global economy at the same time.  

MICHELLE GRATTAN: But the States would no doubt say that what you’re doing is dealing with your problem by putting it onto them.

MATHIAS CORMANN: They might say that, but that is not right. What we are doing is we are asking everyone to contribute. We are asking everybody to do their bit. We are asking individuals, we are asking families, we are asking higher income earners, we are asking local government, State governments, we are asking business, we are asking everybody to help build a stronger economy, help us repair the Budget, because that is what we must do if we want to be in a stronger and more resilient position to face any challenge that may come our way in the future.

MICHELLE GRATTAN: So you will and your colleagues will be having talks with the States about the details of this?

MATHIAS CORMANN: There is obviously an ongoing conversation always between the Federal Government and the States and I am sure that in the days and weeks and months ahead there will be conversations about the implications for the States out of the Federal Budget, for sure.

MICHELLE GRATTAN: Now some of the harsher measures that you are imposing yourselves don’t take effect until the next term. Do you think that will make it harder for you in the 2016 campaign? Do you still think they will be election issues then or will they be done and dusted and people would have accepted them?

MATHIAS CORMANN: This is why I am saying that this is a very honest Budget, because we have transparently put on the table for everyone to see what we think is required in order to put Australia back onto a more sustainable footing. Obviously in 2016, the next Federal Election, people will have the opportunity to pass judgment on whether they think that we got this right and whether they think that the Budget we put forward and the plan that we put forward was fair. Now you are quite right, quite a number of these structural reforms and structural savings that we have initiated in this Budget will start low and slow and will build over time. Some of them will only start in the period beyond the next election, or even beyond the current forward estimates. But we are giving very clear and very honest indications to the Australian people on where we think we need to head and at the next election people will be able to decide on whether they are happy for us to continue on that path or whether they want the alternative.

MICHELLE GRATTAN: You don’t see it as a bit of the crazy-brave?

MATHIAS CORMANN: We see it as making judgments in the national interest and putting the case to the Australian people about what we altogether need to do to strengthen our country.

MICHELLE GRATTAN: Now just finally, I know the Government will have a lot more reform in the pipeline, but has this Budget achieved enough savings to mean that you won’t have to make major cuts in your second and third Budgets, the remaining Budgets in this term. Obviously there will be housekeeping, but the major cutting has been done.

MATHIAS CORMANN: Well this Budget does contain a very significant first effort. There will have to be some more work in future Budget updates and Budgets, but over the forward estimates we have implemented $36 billion worth of savings, taking the deficit that we have inherited, the projected deficits that we have inherited, down to $60 billion over the forward estimates. Obviously moving forward we do need to get the Budget back into surplus and we will do what needs to be done in order to achieve that. A lot of the structural savings and the structural reforms will build up over time. So if you look at the trajectory beyond the forward estimates now, you can really see that. We are on track to get into balance in 2018-19, on track to get into surplus right now in 2019-20 and we are on track to reduce debt, which was heading toward $667 billion down to $389 billion, even after taking future tax cuts into account to address bracket creep.

MICHELLE GRATTAN: Mathias Cormann thank you very much for talking with The Conversation.

MATHIAS CORMANN: Very good to talk to you.


Senator the Hon Mathias Cormann, Minister for Finance, Perth