Senator the Hon Mathias Cormann
Minister for Finance
Date: Sunday, 18 May 2014
EXCERPT FROM ABC 891: MATTHEW ABRAHAM: Minister you have only been in Australia since 1996?
EXCERPT FROM ABC 891: MATHIAS CORMANN: That's right, I came here first in 1994 and I migrated here formally in 1996.
EXCERPT FROM ABC 891: MATTHEW ABRAHAM: Do you think though, this I think was a criticism levelled at you when you rolled Senator Ross Lightfoot for the Senate spot that has got you where you are today, you don't know as much about the Australian mindset and culture as perhaps other politicians who have either been born here or been here a lot longer because 1996 is not a long time.
MIRANDA DEVINE: That was an ABC radio host in Adelaide asking what I think is a borderline racist question to the Finance Minister Mathias Cormann, who yes was born in Belgium. Mathias Cormann is on the line now. Thanks for joining us Minister.
MATHIAS CORMANN: Good evening Miranda. And good evening to your listeners.
MIRANDA DEVINE: Now I thought that was a pretty low question from the ABC in Adelaide. It just sort of implies that you're not fit to help fashion a Budget for Australians because you weren't born here. What was your reaction?
MATHIAS CORMANN: I was pretty relaxed I have got to say. At that point I had done about 18 interviews within 24 hours after the Budget explaining the judgments that we have made and why we have made them. A number of those interviews were rather robust and that was one of those interviews. The truth is I am a migrant to Australia. Like many others that have come to Australia over the years and over the decades I'm trying to do my best every day to help make our country a better place, to contribute and certainly I will just keep focusing on that.
MIRANDA DEVINE: Yeah look I think it is one of the things that makes Australia great is that hybrid vigour you can call it from being a nation of migrants. Now your government has been copping a lot of stick for your first Budget. It has been called the toughest in 18 years and today of course we had thousands of people across the country marching against the Budget. We had people arrested in Sydney, calling the Prime Minister a liar who is trying to divide society. Polls show the Budget is very unpopular, so how are you going to sell it?
MATHIAS CORMANN: Well it was never going to be easy. We inherited a Budget in very bad shape. Not only did Labor deliver $191 billion worth of deficits in their first five Budgets, as well as leave us with $123 billion of projected deficits in their last Budget, they also left us with an unsustainable spending growth trajectory beyond their final Budget. If we hadn't taken corrective action, that would have taken us to government spending as a share of GDP of 26.5 per cent within the decade, which is up from 23.1 per cent in the last year of the Howard Government. Now the reason that is a problem is that if we wanted to balance our Budget we would then need to massively increase taxes, which in turn would weaken the economy, cost jobs and generally reduce opportunity for people across Australia. We can't do that. We need to ensure that we can live within our means without government spending ramping up that massively so we always had to make some difficult decisions and we are doing our best to explain why it is that we are doing what we are doing and why in our judgment this is required to put ourselves back onto a stronger foundation for the future.
MIRANDA DEVINE: Do you think that people really understand why we need to tighten our belts? I mean they had a fairly good idea that spending was out of control especially when Rudd was in office and I guess people also know that Julia Gillard locked in a whole lot of spending down the line without any way of funding it. But do you think people understand that? Or are they sort of addicted to the hand out mentality?
MATHIAS CORMANN: Just to put this into context. What the Government is doing now is a bit like a household putting all of their groceries, all of their cost of living expenses on their credit card, letting their credit card run up, then get a second credit card to pay the interest on the first credit card with the expectation that their children down the track will pay all of that back. Obviously that would massively reduce the standard of living for their children and grandchildren and that is effectively what the Government has been doing. If we continue to fund our consumption, our living standards today through borrowing and through debt, what we are forcing future generations to do is to pay the cost for our living standards today and to pay for that with interest. Obviously that then has very detrimental consequences for our children and grandchildren down the track and we can't just let that run. Beyond the forward estimates that Labor left behind, the massive increases in spending were just extraordinary. Labor never pointed out how they were going to be funded. If we hadn't done anything, government debt was going to head for $667 billion within the decade and continuing to grow beyond that, and that was assuming that there would be no tax cut at any point in time to take into account the effects of bracket creep within that period.
MIRANDA DEVINE: Yes someone was saying for someone on $70,000, bracket creep is going to cost them $1,500 at the end of the next three years.
MATHIAS CORMANN: So this is the point. If Labor's spending growth trajectory had continued, for the next decade not having any tax cuts at all to correct for bracket creep, Government debt would head for $667 billion. Now as a result of the judgements that we've made, we've been able to reduce that down to $389 billion, while also catering for tax cuts in the future to take into account bracket creep.
MIRANDA DEVINE: For all the complaints, it's not really an austerity Budget, is it? You're still spending a lot, it's still high at $400 billion this year, and set to grow to 2017-18 at 2 to 3 per cent a year even after slowing down this year and taxes are still high. You've been criticised by a lot of economists for not going tough enough. Is that fair criticism?
MATHIAS CORMANN: Well it is a responsible Budget and it's the Budget that Australia needs right now. It does have in it a lot of structural reforms and structural savings, which start low and slow and build over time and build significantly over time. The purpose is to put our spending growth trajectory on a more sustainable footing for the future. Now beyond that, we have asked every Australian to contribute in the short term to get us into a stronger starting position. $36 billion of savings over the forward estimates, but that continues to build beyond the forward estimates. The key point here is that even with the remaining Government spending we have improved the quality of the spend. Instead of directing everything into consumption we have shifted a proportion of the spending into investment. So for example, the changes that we've made in health consistent with the commitments we made before the last election, we kept the same funding envelope for health but all of the savings and all of the efficiencies that we've identified and the revenue that comes from the price signals with the co-payments for GP visits and the like, all of that will be directed into a capital fund, which does help us improve our balance sheet, which does help generate returns, with those returns then invested in medical research. So all of the judgements that we've made around investments in productivity enhancing infrastructure, yes there are Government outlays, but they're capital outlays and it will help us build a stronger, more prosperous economy. Once all of that infrastructure investment has been rolled out, it will according to Treasury modelling permanently add one per cent to our GDP. A stronger and higher GDP means stronger and higher revenue for Government in the future without having to increase taxes. Of course over time, we want to continue to reduce the tax burden so that the economy can grown more strongly and we can generate more revenue for Government without some of the taxes that Labor has put in place in recent years.
MIRANDA DEVINE: Now how are you going to get this all through the Senate, since Clive Palmer seems determined to be obstructive?
MATHIAS CORMANN: Let's see. We will put our plan and the legislation to implement our plan to the Parliament, including the Senate. We'll continue to make the case to the Australian people. We will continue to put the case to all of the parties and all of the individuals that are represented in the Senate. Miranda, I've been in the Senate now for seven years and I have seen on many occasions people jump up and down in the immediate aftermath of a Budget. Then when the vote actually happens in the Senate, all of a sudden change their mind on reflection. So I wouldn't assume that everything that is said on day one or two after a Budget is what ultimately happens when it is all said and done.
MIRANDA DEVINE: Yeah, alright and is there any appetite, just finally, in the Government for a double dissolution election if the Senate becomes impossible?
MATHIAS CORMANN: We have an appetite to provide good Government for Australia. We were elected and appointed to Government about eight months ago today in fact. We have a job to do. Our focus is on doing the job to build a stronger, more prosperous economy and to repair the Budget and do all of the other things that we said we wanted to do. Obviously at some point in time, in the normal course of events, there will be an election. The Prime Minister said earlier today, in the middle of 2016. That is when people across Australia will have the opportunity to pass judgement on our performance.
MIRANDA DEVINE: Alright, well thanks so much for joining us Mathias Cormann and good luck with it.
MATHIAS CORMANN: Always good to talk to you and I'll be back.
MIRANDA DEVINE: Thank you.