Transcript - 774 ABC – Drive with Rafael Epstein

Senator the Hon Mathias Cormann
Minister for Finance






Budget 2014-15

RAFAEL EPSTEIN: The Federal Government has been whacked about the head you can say by the polls in both major newspapers, some fairly poor results. Mathias Cormann joins us, the Finance Minister, the Senator from Western Australia who joins us I think from Perth. Minister thanks for joining us. 

MATHIAS CORMANN: Good afternoon Rafael and good afternoon to your listeners.

RAFAEL EPSTEIN: Do you think the poll results are about broken promises?

MATHIAS CORMANN: Well we are not surprised about the result in the polls today. We are doing what is right for Australia. We are not focused on making popular decisions but making the decisions that strengthen Australia for the future. So we clearly still have some explaining to do about the judgments that we have made and the reasons for those judgments. From our point of view, having considered all of the information and all of the options in front of us, there really is no alternative to the decisions that we have made in the Budget delivered last week.

RAFAEL EPSTEIN: And I am happy to talk about the state of the Budget as you said, but I asked about broken promises. Do you think you have broken maybe the promises that don’t matter as much?

MATHIAS CORMANN: We’ve had this conversation last week Rafael. So we can go over that same ground again. From our point of view, we have made the judgments that needed to be made. We believe that we have made those judgments consistent with the commitments that we took to the last election. At the end of the day, all we can do as a government, as an elected government, is to do the best we can every day to strengthen Australia and in two and a half years time, at the time of the next election, people across Australia will have the opportunity to pass judgement on our performance. If they think that we haven’t performed or if they think we didn’t get those judgments right and there is a better alternative, then no doubt they will pass those judgments along those lines.

RAFAEL EPSTEIN: I want to talk about the judgment and also the obvious issues you have with State Governments but if I could pick one promise about lower taxes, you’ll tell me if I have this figure right or wrong – the Budget papers show that tax as a proportion of the economy over four years grows from 23 per cent to 24.9 per cent. So the amount of money that you are taking out of the economy in tax revenue is growing. Isn’t that contrary to the lower taxes, no tax increases promises? 

MATHIAS CORMANN: No it is not. If you look at the trajectory that Labor put in their Budget, the tax as a share of GDP trajectory in our Budget is lower than what it would have been under Labor. The simple reason is that we are scrapping a number of big taxes that were in the Budget with significant revenue attached to them, principally the carbon tax. We are also scrapping the mining tax which hasn’t raised as much as the then government said it would raise but it had big numbers against it in the Budget..interrupted

RAFAEL EPSTEIN:Sure, former government, yeah.

MATHIAS CORMANN: We are also pursuing a 1.5 per cent cut in the company tax rate from 1 July 2015. So all of it taken together, taxes as a share of GDP over the forward estimates will be lower than they would have been under Labor. There is no doubt about that.

RAFAEL EPSTEIN: Okay, so maybe if I could ask one further area about promises, I know this is outside your portfolio but raising the fees for university degrees that you pay back once you start earning $50,000. Christopher Pyne made a number of commitments, the Education Minister, both in Opposition and in Government to not raise fees.

MATHIAS CORMANN: I don’t want to get into semantics but we are not actually raising fees. What we are doing is we are deregulating fees so that universities across Australia...interrupted   

RAFAEL EPSTEIN: But that is semantics isn’t it?

MATHIAS CORMANN: Well no, it isn’t. Because you are making an assumption about what is going to happen. The truth of the matter is that some fees charged by universities are likely to go up. Other fees are likely to go down. It depends on the commercial value ultimately of a particular degree...interrupted  

RAFAEL EPSTEIN: But some of them will go up.

MATHIAS CORMANN: Well not because of the Government increasing fees.

RAFAEL EPSTEIN: No, but because of what you are doing, some fees will go up.

MATHIAS CORMANN: Well what we are doing and again we are being entirely transparent about this. We don’t have a single university in the top 20 in the world. We are getting significant competition from universities in Asia. Our universities in Australia are being hamstrung because they can’t manage their affairs as freely as others can. In Australia we actually have a pretty amazing safety net here, a pretty amazing opportunity for students across Australia where they can borrow 100 per cent of the cost of their degree from the taxpayer and only start paying it back when they earn more than $50,000 on a concessional interest rate.

RAFAEL EPSTEIN: That’s all a substantial argument but Peter Van Onselen asked Christopher Pyne, you’ve probably seen references to this one, November last year, he’s a Minister why not raise fees. Christopher Pyne, because we promised we wouldn’t. Would you like to? Christophe Pyne, look Peter I’m not even considering it. So that’s the very opposite of what’s going to happen for some of the more desirable degrees isn’t it?

MATHIAS CORMANN: We are not increasing fees.


MATHIAS CORMANN: But at the end of the day, what we are doing is ensuring that students across Australia can benefit from the best possible universities in the world to increase ultimately the commercial value of their degrees out in the marketplace. Now if you’re going to pursue a degree that enables you to earn significantly more than somebody else who pursues a lower value degree then why shouldn’t you have to pay a fairer share of that cost. There is a safety net in place as it should be, where any student can borrow 100 per cent of that cost from the taxpayer.

RAFAEL EPSTEIN: Mathias Cormann is with me, the Finance Minister, speaking to us from Perth. Minister I do need to ask you of course about the States. I just want to play a small part of the Prime Minister’s interview on Insidersyesterday, where he was being questioned about the States and he said the changes that are being objected to are all about things that happen in three years time.

TONY ABBOTT: We’re not talking about next week or next month or even next year. We’re talking about changes in three years’ time. We’ve got an enormous amount of time to sit down and work things out. But what we’re not going to do is continue unsustainable spending with borrowed money. That would be wrong.

RAFAEL EPSTEIN: So he was talking there Minister about changes in three years’ time, but there is a long list of things that the States lose from July, the dental flexible grants programme, the National Heath Reform Agreement, adult public dental services, the funds for improving public hospital services. Would you concede that the States are losing money in the next financial year?

MATHIAS CORMANN: Firstly, what the Prime Minister was saying there was absolutely right. The question we’ve been asked again and again was about this supposed $80 billion cut to health and education. We are continuing to grow health and education funding from a Federal level, but we’re doing it at a more sustainable level. Now over the forward estimates, we have achieved some efficiencies in health and hospital funding, as we should. But over the forward estimates, Federal funding...interrupted

RAFAEL EPSTEIN: They’re not efficiencies, they’re cuts.

MATHIAS CORMANN: Federal funding for hospitals over the forward estimates is increasing by 9 per cent per annum, now Labor... interrupted

RAFAEL EPSTEIN: I’m not asking about forward estimates, I’m asking about the next financial year.

MATHIAS CORMANN: From this year to next financial year and every financial year thereafter, on average, Federal funding is increasing by 9 per cent per annum. That is massive. The Labor Party was splashing money around left, right and centre including towards the States. The States, when they talk to you privately, were well aware that the spending promises made by the previous government were not sustainable. That there would be a day of reckoning eventually when a future government and that is us now today, would have to make judgements... interrupted

RAFAEL EPSTEIN: If you had said last September that you’re going to cut programs for dental health waiting lists, cut your assistance that helps hospitals in Victoria say if there’s a big flu epidemic, that would have been a very, very different proposition to saying no cuts in health wouldn’t it?

MATHIAS CORMANN: What we said in the lead up to the last election and what we’re doing, is we said we would keep the same funding envelope in place in health over the forward estimates at the time of the election and we are. We never said that we wouldn’t achieve efficiencies. In fact, I’ve said in many interviews and others among my senior colleagues have said in many interviews, that we would be seeking within that overall health funding envelope to achieve savings and efficiencies but that we would re-invest those in the health system, which is exactly what we’re doing.

RAFAEL EPSTEIN: Minister, before we get to the five o’clock news, we’ve got about 60 seconds. The cuts to the rate of increase in things like the pension are permanent. The cuts to those on higher incomes are temporary. There’s any number of figures suggesting that the poor are paying much more for the pain than the rich.

MATHIAS CORMANN: I don’t accept that proposition. We’ve got to remember that higher income earners and people earning more than $180,000 per year, year in year out, pay a lot of taxes. Somebody earning $180,000 a year will pay about $60,000 a year in tax and we are asking people on those incomes to make a special additional effort on top of that.

RAFAEL EPSTEIN: But it’s not nearly as big a part of their income as cuts to the poor is it?

MATHIAS CORMANN: At the end of the day, when you’re faced with the challenge of ensuring that you have to put your spending growth trajectory on a more sustainable trajectory then clearly it is Government payments that are going to be your focus. We can’t permanently increase taxes to a level that is not competitive internationally because we would weaken our economy and put jobs at risk. We want to create more jobs. We want to strengthen the economy so that people on higher incomes can continue to fund a sustainable pension system into the future.

RAFAEL EPSTEIN: Okay, Minister I appreciate your time. Good luck with the rest of the day in Perth. 


RAFAEL EPSTEIN: Mathias Cormann, the Finance Minister in Tony Abbott’s Government.


Senator the Hon Mathias Cormann, Minister for Finance, Perth