Senator the Hon Mathias Cormann
Minister for Finance
SANDY ALIOSI: Well there was good news on the Australian economy yesterday with growth figures showing that the economy exceeded all expectations with an annual rate of 3.5 per cent. And that was well above the forecast rate of 2.75 and even beyond the trend growth figure the government has been aiming for. To look at the news and what it means for managing the economy, Marius Benson is speaking to the Finance Minister Mathias Cormann.
MARIUS BENSON: Mathias Cormann, good morning.
MATHIAS CORMANN: Good morning Marius.
MARIUS BENSON: It is a fact of the economy that we only find out how well we are doing in hindsight, we only get the figures in retrospect and there was a lot of surprise expressed at the annual growth figure that came out yesterday. How surprised were you?
MATHIAS CORMANN: We are very pleased to see that we have a strong result in the March quarter, but this is still early days. There is still a lot of work to be done to ensure that that stronger growth is sustained into the future. That is of course why we are working to scrap the carbon tax and the mining tax, reduce red tape and ensure that we have got a predicable regulatory framework in place into the future.
MARIUS BENSON: But this was achieved with the carbon tax, with the mining tax and courtesy largely of the resources sector which are hardest hit by those taxes.
MATHIAS CORMANN: We have been starting to roll out a series of policies after the last election and of course the business community is now expecting that we will proceed with scrapping the carbon tax and the mining tax and we have already started out reducing red tape in order to achieve savings for business of about $1 billion a year. So look, this is one quarter. It is strong quarter. We are very pleased to see that there appear to be early signs that economic growth is strengthening. But having said that, much of the growth here has been coming from increased mining exports and of course the mining tax, Labor's mining tax which has been a complete failure, hasn't been raising any money. So it is very important for us to get rid of this tax which is costly to administer, costly to comply with and which has not raised any money.
MARIUS BENSON: It doesn't do any harm by the look of these figures.
MATHIAS CORMANN: We could do even better if we didn't have a tax which was costly to comply with for business and creates unnecessary uncertainty and risk.
MARIUS BENSON: You point to the fact that it is resources that have driven these figures, is this just the dumb luck of the lucky country, that we are riding on the back of resources now?
MATHIAS CORMANN: There is no dumb luck about it. The mining sector has made significant, the resource sector has made significant capital investments in recent years and of course what is happening here is that that investment, that significant investment, is starting to pay dividends by way of increased exports. That is a good thing. That is exactly what should be happening. However,
we are concerned of course that business investment continues to be sluggish and that in particular when it comes to the non-mining sector, there is a need to do better.
MARIUS BENSON: These figures are in excess of expectations, do they give you room when you are negotiating the Budget with the upper house, with the Senate, to take a more relaxed approach to the tougher measures in the Budget that are being opposed by some Senators now?
MATHIAS CORMANN: No, not at all. This is not the time to take the foot off the pedal. The Budget that we delivered a few weeks ago is the Budget that Australia needs. We've got a Budget situation with a debt and deficit disaster enshrined in it courtesy of the previous Government that needs to be addressed. The spending growth trajectory that we inherited from the previous Government was unsustainable. Of course we want to build a stronger more prosperous economy, where everyone has the opportunity to get ahead. But if we want to protect our living standards and build opportunity and prosperity for the future, we need to get our spending growth under control, which courtesy of the previous government right now is unsustainable.
MARIUS BENSON: You have been critical of the previous government and you have been blaming Labor to date for any bad news on the economy, can you give them a share of the credit for the good news that came out yesterday and in fact a share of the credit for the 23rd year of consecutive growth, which is virtually unmatched in the history of market economies?
MATHIAS CORMANN: Well we've always said that the successive reforms of the Hawke/Keating and Howard Governments laid the foundations for much of the economic growth that we've had the benefit of experiencing…interrupted
MARIUS BENSON: That was 20 years ago. 23 years of growth.
MATHIAS CORMANN: And this is the point. The previous Government had a disastrous record when it came to come up with taxes targeting an important industry like the mining industry, which didn't raise any revenue after having created uncertainty, which is reducing our international competitiveness. What happened under the previous Government, the cost of doing business kept going up and up and up, our international competitiveness kept going down, our productivity growth went to a standstill, so there wasn't much that was done when Wayne Swan was the Treasurer that actually helped build a stronger economy. So what we need to do, what we need to continue to do, is turn the situation around that we've inherited from the previous Government.
MARIUS BENSON: Just a quick question on equity because wealth is increasing but in the wage case decision yesterday brought down by the President of the Fair Work Commission Ian Ross said that earnings are generally increased over the past decade, but there is inequality increasing. Are you concerned about the increasing disparity in wealth between the wealthiest and poorest Australians?
MATHIAS CORMANN: I don't agree with that proposition. All throughout the period of the Howard Government, we had very strong growth in real wages. That had slowed down under the period of the previous Government, but of course if you've got strong growth based on productivity improvements, general improvements in productivity, then there is the best possible opportunity to ensure that increases in national wealth are spread around fairly and equitably.
MARIUS BENSON: Mathias Cormann thank you very much.
MATHIAS CORMANN: Always good to talk to you.