Senator the Hon Mathias Cormann
Minister for Finance
Date: Monday, 19 May 2014
JONATHAN GREEN: Well one of those leading the fight for the Government is Finance Minister, Mathias Cormann. Senator, welcome.
MATHIAS CORMANN: Good evening.
JONATHAN GREEN: Let’s start with those polls, two of them today. They can’t be happy reading for the Government. According to Newspoll you’d be thrashed in an election held now. Tony Abbott’s popularity worse than Julia Gillard’s. Fairfax poll 63 per cent think the Budget was unfair. 53 per cent think it’s bad for Australia. Where is the problem here in the Budget or the sales pitch?
MATHIAS CORMANN: Well Jonathan, the first point I would make is that it is a marathon not a sprint. The Budget that the Government delivered last week is the Budget that Australia needs. Clearly, when you have to impose significant savings, when you have to impose changes to the tax system in order to address the Budget mess that we’ve inherited from our predecessors well that’s not going to be popular.
JONATHAN GREEN: It might be the Budget that Australia needs, but it doesn’t sound like it’s the Budget that Australia wants.
MATHIAS CORMANN: This is my point. When you have to make significant savings, when you have to increase on a temporary basis income tax, obviously that’s not going to popular. But what we’re doing, we’re making the decisions that are right for our country’s future. We will continue to explain the decisions we’ve made and the reasons for those decisions and over time we are hopeful that people will accept that what we’re doing is in the best interests of our country’s future.
JONATHAN GREEN: How can you explain away this sense of unfairness?
MATHIAS CORMANN: We don’t believe that it is unfair. We have worked very hard to ensure that the effort to repair the Budget mess that we’ve inherited is spread as fairly and as equitably as possible. We are asking every Australian to contribute. Obviously, to a degree, when you have to ensure that your spending and the spending growth trajectory we’re on is made to be more sustainable then that is going to have an implication for people that receive Government payments. That is unavoidable.
JONATHAN GREEN: Tony Abbott came out today asserting that the Howard Government, to quote him, took a big hit in the polls too after its first tough Budget in 1996. That isn’t true is it? Because John Howard’s first post-Budget Newspoll actually gave a lift to the Coalition primary vote. Why would the Prime Minister make that up? Or is he just confused?
MATHIAS CORMANN: After the Howard government had to do what they needed to do in the face of the Budget mess left behind for them by their Labor predecessors it certainly is true that there was a lot of controversy and a lot of public debate at the time. interrupted
JONATHAN GREEN: And a lift in the polls
MATHIAS CORMANN: To be frank I actually don’t know. Believe it or not I don’t study the polls that closely... interrupted
JONATHAN GREEN: Well I can tell you there was a 3 per cent boost in the Coalition primary vote.
MATHIAS CORMANN: I take your word for it. The point I would make though is that one poll one week after the Budget is not going to represent the ultimate judgement of the Australian people in relation to our efforts to build a stronger economy, create more jobs and repair the Budget mess that we’ve inherited. We will persist with the important task that we were elected to perform, which was to ensure that federal government spending can be sustainable again. That the Government at a federal level can live within its means again because quite frankly the spending growth trajectory that we were on was completely unaffordable, was completely unrealistic and was completely unsustainable.
JONATHAN GREEN: Isn’t the problem at the moment that your sales pitch on those points on things like spending trajectory and so on is being blurred by miscommunication with things like that comment of the Prime Minister’s on polling and likewise by what he said on Sunday about it being years before the States have to worry about cuts to agreed funding on health and education. Now the States dispute that and here’s Victorian Premier, Dr Denis Napthine.
DENIS NAPTHINE: This is not about 2017. This is about the immediate, this is about here and now. This is about first of July this year with over $200 million worth of Budget decisions made in Canberra which will effect health services, concessions and education services here in Victoria and similar effects across other States and Territories.
JONATHAN GREEN: Now Mathias Cormann in the space of 24 hours the Prime Minister has gone from saying that nothing will happen within three years to admitting today that yes there will be lost funding from July 1.
MATHIAS CORMANN: We have to put a few things in context here. Like that the attack that we were confronted with from the States initially was in relation to supposedly $80 billion worth of cuts to health and education from 2017-18 onwards. We would dispute that they're cuts but we certainly made decisions to put our funding growth trajectory on a more sustainable footing. We never said that there were no changes anywhere else over the forward estimates. I think that different people for obvious reasons are mixing different concepts. Fundamentally everyone has to contribute and help put our economy and our Budget back on track. The previous government was splashing money around left, right and centre including to the States and Territories. The States and Territories if they talk to you privately will concede that they were quite conscious of the fact that the Rudd - Gilllard governments were promising spending that was not sustainable. The States were quite happy to receive all of these unsustainable promises, it wasn’t their problem. But it’s our problem now and we have to ensure that the Federal Government can live within its means and indeed all levels of government have to focus on living within their means and the States and Territories will have to share in that effort.
JONATHAN GREEN: In the best of circumstances that’s always going to be a tough message to sell because it involves a certain amount of loss and hardship and inevitably does but it surely can’t help your cause to have this underlining issue of credibility around what’s the truth in this Budget.
MATHIAS CORMANN: Let’s be very clear when it comes to hospital and public health funding, federal funding for the States to support the running of their hospitals, it is increasing by 9 per cent per annum over the forward estimates and by 6 per cent per annum from 2017-18 onwards.
JONATHAN GREEN: But you’ve still got the National Health Reform Agreement. There’s $1.8 billion there from taken out of public hospital funding and that starts this year.
MATHIAS CORMANN: Which Labor never sustainably funded. At the end of the day there is no two ways around it. If you are in a situation where consistently government is spending more than they raise in revenue then eventually you are going to end up in a problem situation. Right now the situation that we inherited, the previous government was borrowing money to fund consumption and more than that they were borrowing money in order to pay the interest on the debt that they had accumulated so far. The equivalent of that is a household putting all of their groceries and all of their utilities onto their credit card and after a while when the interest starts to ramp up on the debt they take out a second credit card to pay the interest on their initial debt. That is not sustainable over time.
JONATHAN GREEN: But you and I know that the situation of a domestic credit card and a federal Budget is not really in anyway similar.
MATHIAS CORMANN: Well it is, it actually is. This is the thing. The situation we inherited is where the Government was borrowing money in order to fund the lifestyle of people today, to fund the living standards today through Government payments and Government subsidies, which will force future generations, our children and grandchildren, to pay the price for our consumption today and to pay for that with interest.
JONATHAN GREEN: But your response as the Federal Government to those, what you say, are unstainable expenditures in particular in education and in hospitals is to not take responsibility for them. Is to just say to the States, this is your problem.
MATHIAS CORMANN: Well actually, schools and hospitals are the States’ responsibility. There is a broader conversation to be had about making our system of Government, our Federal system of Government more efficient. There is too much double up, too much duplication. State and Territories run State and Territory hospitals. We are very focused and very committed to ensure that there are clearer lines of delineation and there are clearer lines of accountability and that the level of government that is responsible for a particular area of public service should be responsible for funding that level of public service. There are conversations to be had in the context of the Federation white paper and the tax review white paper to put that on a more sustainable footing for the long term.
JONATHAN GREEN: That big discussion about Federalism won’t happen before July, why won’t the Prime Minister meet with the Premiers immediately for that emergency COAG meeting?
MATHIAS CORMANN: Well because the fundamental change to the spending growth, the funding growth trajectory in relation to health and education doesn’t happen as the Prime Minister has said for some time.
JONATHON GREEN: But the States are worried about their $1.8 billion, they’re worried about the concessions, which are the States responsibility.
MATHIAS CORMANN: Well that is different, the concessions is a totally different issue yet again. So here we have a situation where State Governments across Australia offer concessions to various groups in the community and that is fair, that is their right to do so. But somehow the Commonwealth should be expected to pay the price for State Governments offering concessions in relation to State Government services. Well if State Governments want to offer concessions and it is their right to do, then the States should be funding the cost of those concessions, not the Commonwealth. At the end of the day, we have to get our spending back under control. If we hadn’t done anything, the spending growth trajectory that inherited from Labor was going to take us to spending as a share of GDP of 26.5 per cent by 2023-24, compared to 23.1 per cent in the last year of the Howard Government. Now in order to balance the Budget, in those circumstances, we would have to massively increase taxes in order to make up the difference, which would have a massive impact, weakening our economy, costing jobs along the way, reducing opportunity and that is not something that we want to do or should do. We want to ensure that spending by the Federal Government, by all levels of Government, fits within the revenue envelope that responsibly can be raised out of the economy and that is the job that we are doing.
JONATHON GREEN: And after all that kerfuffle, you still need to get it through the Senate. This is what Clive Palmer told the Queensland Media Club today.
CLIVE PALMER (EXCERPT): We know that Governments got 1,900 spin doctors that put this material out, of course they want to create an environment where you have to respond. That is one of the reasons they have brought in the Debt Tax and things like that. So in our party, how we are going to respond, we are going to stop Tony Abbott doing a number of things in the Senate.
JONATHON GREEN: We are quite possibly heading towards a double dissolution election, aren’t we Mathias Cormann?
MATHIAS CORMANN: I doubt it. Certainly not in the short term. We were elected in September last year to provide good Government to Australia and that is what we are setting out to do. We always understood that making the decisions and delivering the sort of Budget that we delivered last week was not going to be straight forward in terms of getting public support for some of the decisions that we have made, but we are convinced they are the right decisions for our country. We will continue to explain the decisions we have made and the reasons for them and over time we are hopeful that we will be able to persuade more and more people including in the Senate that what we are proposing to do is what is necessary to strengthen our country for the future.
JONATHON GREEN: Senator thank you for your time this evening.
MATHIAS CORMANN: Always good to talk to you.
JONATHON GREEN: Mathias Cormann, he is the Federal Minister for Finance.