Senator the Hon Mathias Cormann
Minister for Finance
Date: Wednesday, 11 June 2014
LEON BYNER: Let's say good morning to the Federal Finance Minister Mathias Cormann. Mathias, thank you for joining us today.
MATHIAS CORMANN: Good morning Leon. Good to be back.
LEON BYNER: Tell the people of South Australia why you are here.
MATHIAS CORMANN: Well I was principally here to visit the ASC yesterday, which of course is building three Air Warfare Destroyers for the Australian Government and also is doing a very good job on the submarine maintenance program. So that was the principle reason, but I am also having a series of meetings with various business people, facilitated by some of my colleagues like Matt Williams, the Member for Hindmarsh.
LEON BYNER: What are the business people telling you?
MATHIAS CORMANN: Well there is a level of concern still about the state of the economy and opportunity into the future. Of course what I am here to talk about is our plans to build a stronger more prosperous, more resilient economy where everyone has the opportunity to get ahead and be successful and our plans to repair the Budget mess that we have inherited from our predecessors.
LEON BYNER: You talk about the Budget but I think we can both agree that the Budget has not been well received in general. Is it a problem with the Budget in itself or the fact that you have not been able to sell it as well as you might have tried?
MATHIAS CORMANN: From our point of view, things are really consistent with expectations. There was no easy way to implement the sort of decisions that were required to put Australia back onto a more sustainable track. The truth is that the spending growth trajectory that we inherited from our predecessors was unsustainable. It was unaffordable. And if we didn't take corrective action now, we knew that it was going to be harder to make the necessary decisions in the future. Are people going to be happy about the fact that we are suggesting that we can't increase benefit payments from government at the same rate as they were being increased before? No. But that was expected.
LEON BYNER: Okay. So the Senate though, have, even your own side, have said they have got issues with for example the Paid Parental Leave scheme, there is the problem with the $7 co-payment. Now, you don't want an election anymore than anybody else does because we just had one last September. So what will the point at which you guys will want to take your bat and ball? I mean, you'll try to negotiate this but you're not going to get everything you want are you?
MATHIAS CORMANN: We have delivered the Budget that Australia needs and we will continue to make that argument, continue to make that case towards all people represented in the Senate. That is part of the usual democratic process. Just because we don't get 100 per cent of our plan through in our first attempt, doesn't mean we won't keep trying, putting back before the Senate the policies that Australia needs in order to protect our living standards for today and to build opportunity and prosperity into the future.
LEON BYNER: Okay. We have got Mathias Cormann in the studio and he is here to answer your questions and let's first of all talk to Greg. Greg, you're talking with Minister Cormann.
GREG: Good morning Minister.
MATHIAS CORMANN: Good morning Greg.
GREG: I have just got one question. This $7 Medicare levy, okay we are up in arms over it, but can you do me a favour, can you have a look at dropping it for children under 18? That's all. Children shouldn't be asked, they should be able to have medical attention, the people who smoke, drink, pensioners, that is fine, but children should be able to go in for free, please.
MATHIAS CORMANN: Thank you very much Greg, I appreciate your feedback. What we have sought to do is to ensure that there is an appropriate safety net in relation to children. So what we have said is that in relation to children under the age of 16 that the $7 co-payment would only apply for the first ten visits. So that is $70 a year. We do think that a price signal is important if we want to keep our world class health care system sustainable...interrupted
LEON BYNER: When you say a price signal, could I ask you what are you trying to do? You're saying a price signal, what to go to the doctor less? What price signal are you talking about?
MATHIAS CORMANN: At the end of the day, there is a question, obviously there are two parts of what makes health care expenditure grow more rapidly. One is the cost of the service per service and the second part of it is the level of utilisation. And you do want to ensure that when it comes to discretionary health care expenditure that we ensure that spending is as efficient as possible.
LEON BYNER: I need to get this clear. The co-payment is going to go into, or part of it, and then $2 goes to the doctor, but the rest goes to this research fund. You're saying price signal. Are you now saying that some people might be going to the doctor too much?
MATHIAS CORMANN: There is certainly a need to ensure that people, I mean, obviously, we want people to go to the doctor when they need to go to the doctor, and we think that a $7 co-payment is affordable. But if there is no price signal whatsoever, you don't have to ask yourself the same questions as when you have to contribute to the cost of that service at least with a small amount.
LEON BYNER: So if you've got a family of say two kids, a mum and dad and the children are under 16, it would actually be 40 payments before they hit the safety net?
MATHIAS CORMANN: If you are a pensioner today and you have to access medications, even under the PBS you have to pay a co-payment for each one of your medications up to 60 plus scripts. Medical services have a value, medical services have a cost. And clearly, we do believe that it is appropriate in order to ensure that our children and grandchildren can continue to have timely access in an affordable way to high quality medical services that we need to make this sort of change.
LEON BYNER: So what you're saying is this $7 co-payment is partly to dissuade people from overusing GPs?
MATHIAS CORMANN: It is partly to ensure that people use GPs when they need GPs and of course the revenue that it raises will help us improve the quality, the efficiency and the cost effectiveness of medical care into the future.
LEON BYNER: Alright, let's talk to Kris of Golden Grove. Kris, you are talking to Mathias Cormann.
KRIS: Good morning Leon, good morning Senator Cormann.
MATHIAS CORMANN: Good morning Kris.
KRIS: First of all can I just say that I have asked the Treasurer of South Australia to please speak to Bill Shorten and get rid of the carbon tax because we have a transport company and we are going to pay a lot of money starting on the 1st of July. So that is my first point.
MATHIAS CORMANN: Thank you for that. I agree with you.
KRIS: Please, please help business and help all the transport companies in Australia to get rid of this tax. The second point is you said you were at the Australian Submarine Corporation. Now we know someone who works there and he says that they have been told to go slow. Now if you give a contract to any company that is worth billions of dollars of taxpayers' money, why don't you put in a manager to oversee it? We can't go slow in our business, we have to work harder to pay our taxes, so why doesn't the Government actually put in a manager to make sure that the taxpayer dollars are being spent wisely?
MATHIAS CORMANN: Well Kris if anyone has told anyone at the ASC to go slow, I would be very very disappointed with that. Because I believe the Australian shipbuilding industry in particular when it comes to submarines and major navy ships like the Air Warfare Destroyer is really at a crossroads. We need to ensure that we can provide and supply these sorts of major projects in a way that is internationally competitive in order to ensure that we can continue to pursue significant opportunities with significant numbers of jobs attached to them into the future. So the worst thing that anyone could do associated with this project is to suggest that it would be okay to go slow. I would be surprised if that was said incidentally because I think everyone at the ASC right now is focused on making sure that they are in the best possible position to take advantage of opportunities in the future.
LEON BYNER: We are talking with Finance Minister with Mathias Cormann. Now we will be back shortly with more callers on 8223 0000. I want to talk about the price of energy in South Australia. Mathias and I have already had a discussion during the commercial break about this because it is much higher than it should be and no matter what a government does for an economy, or what it believes it does for an economy, your base costs have got to be realistic and I would argue right now that they are not. Don't go away.
LEON BYNER: 21 past nine. My name is Leon and I have got Mathias Cormann who is the Federal Finance Minister in the studio answering your questions. Let's talk to Peter in Elizabeth. Peter, good morning.
PETER: Good morning Leon, how you going?
LEON BYNER: Good.
PETER: Mathias, with this co-payment, that seems to be one of the biggest problems you haven't explained properly. The $7 co-payment that has to do with blood tests, x-rays, specialists and the thing is that the $2 is going to the doctor and the $5 is going to research. So what part of that is coming off the debt you keep telling us we are in? And secondly, I go to a doctor and
he tells me I have got a sore arm or sore back, to come back and have ten acupuncture treatments. Now to me, I think that doctors are part of the blame because they are overprescribing.
MATHIAS CORMANN: So a couple of points, firstly, the $5 goes into the Medical Research Future Fund and helps build up $20 billion in capital over six years and that actually does reduce government net debt by $20 billion. And what we are doing moving forward is using the earnings from that fund, not the capital, but just the earnings from that fund to invest in additional medical research. That will start with about $20 million in additional funding for research in 2015-16 and will increase up to $1 billion in additional medical research funding in 2022-23 which doubles the current investment in medical research, which will help us achieve cures and better treatments and more cost effective treatments hopefully over time. But importantly it does so from a sustainable basis. We will not have to take money out of recurrent tax revenue but we can do it on the back of a capital fund that is generating interest and at the same time increasing that capital does help us reduce our government net debt position.
LEON BYNER: Let's talk to Mark. Mark, good morning. You're talking to Mathias Cormann.
MARK: Morning Leon, morning Minister. My question is why are we handing a contract for our airwarfare destroyers to a foreign company when our government seems so hell bent on giving our jobs away, wouldn't you think that we have a bit of social conscience that we would do that. Yes we might pay a bit more, but we're keeping our people in work. I'd like to know, in all fairness and in all reasonability, why you're doing it.
MATHIAS CORMANN: Well we haven't done that. The ASC here in South Australia is building the three Air Warfare Destroyers right now. When we came into Government in September last year, we did inherit a few problems with that project. It was running significantly behind schedule, in fact right now the overall project is about 21 months behind schedule and it is also more than $300 million above budget. So what we've said is that we need to ensure that the project is put back on track and it's very important that we do so because we want to ensure that there is a strong future for the shipbuilding industry here in Australia, in particular here in South Australia. If we don't sort the issues out with the project as we've inherited it, then that would not be very good for shipbuilding into the future.
LEON BYNER: Mathias here's one from Peter who says, Peter from Ethelton. Can you ask the Minister of the Budget measures that the Government wants to implement, the $7 Medicare co-payment going to medical research and $2 to the doctor, the reindexing of the fuel excise going to the building of roads, the 2 per cent tax to major companies that isn't going to be passed on, going to PPL instead. What is actually going to be used to pay down this debt crisis?
MATHIAS CORMANN: Firstly, what we've done is put a stop to the unsustainable spending growth trajectory that we've inherited from the previous Government. When we came into Government, we were on track for government spending to increase from $409 billion this year, to $690 billion by 2023-24 and that would've been 26.5 per cent as a share of GDP. We have significantly reduced that. Instead of heading for $667 billion of debt, we've brought that down to $389 billion of debt and we will continue to work on bringing that down further within the decade. Over the forward estimates we've achieved savings of about $36 billion and a lot of the changes we've initiated are structural savings, structural reforms which start low and slow and build over time. The key here is that we had to put ourselves on a more sustainable trajectory, we had to put ourselves onto a believable path to surplus and in the Budget we have done that.
LEON BYNER: Mathias, cost of electricity and gas in South Australia is absurd. The whole of the country is enduring a price crisis with energy. We have to do something about the rules. Now a bloke that you know well, Danny Price from Frontier Economics said on this program recently that the power industry has a very privileged position, where by regulation they make a profit. No other business has that advantage. Can we please do something to bring sanity back into the electricity business?
MATHIAS CORMANN: Well the most immediate thing that we can do at a Federal level to bring down the cost of electricity, and the cost of gas for that matter, is to scrap the carbon tax. The carbon tax is hurting families, it's hurting business, it's hurting the economy, it's costing jobs without doing anything for the environment. I take your point in relation to the broader regulatory arrangements, in particular, dare I say, as part of the national electricity market, there are certainly some reforms that could be pursued.
LEON BYNER: Well are we doing that?
MATHIAS CORMANN: A lot of these responsibilities, and I'm not trying to pass the buck here, but a lot of the responsibility for these arrangements do lie at a State level.
LEON BYNER: But they were handing over to the Feds?
MATHIAS CORMANN: Well you're really testing me know because I'm obviously not the Minister for Energy and Resources.
LEON BYNER: I know you're not, but nevertheless though you're the Finance bloke. The thing is, everyone listening today, whether they are a pensioner, whether they're a business person or whatever, is enduring very high base costs and that is a big issue.
MATHIAS CORMANN: And the most immediate thing that we can do is to scrap the carbon tax once and for all. In the lead up to the last election the Labor Party was trying to make people believe that they had already scrapped it, but of course that wasn't true. Right now they are voting in the Senate to keep it.
LEON BYNER: Alright now I want to ask you. What can you do for South Australia? We have a disproportionately high number of people on welfare benefits and realistically we've got to provide work that encourages the pie to grow bigger. The economic pie, so that more people can gateway into prosperity. What are the Federal Government going to do to make that happen for South Australia?
MATHIAS CORMANN: We do want South Australia to grow and prosper and of course the most important thing is enterprise, business and individuals across South Australia really have to do the heavy lifting in order to ensure that we reach our full potential here in this State. But having said that, from a Federal Government point of view, we obviously want to help create the environment where that can happen. I would have thought that State and Federal Governments should, for example work very hard to ensure that the Olympic Dam project for example, can get off the ground. We should be making sure that the cost of doing business in South Australia is competitive so that projects like that and other projects in the resources sector here in South Australia can be competitive to attract investment.
LEON BYNER: Is there anything the Federal Government can do to enhance the likelihood that Olympic Dam will go from the shelf back onto the pipeline?
MATHIAS CORMANN: Ultimately these are commercial decisions for a company like BHP, but it certainly didn't help when the previous government, out of nowhere, introduced a Resources Super Profits Tax, which became the MRRT, which significantly undermined confidence and certainty in terms of the regulatory environment. So what we're doing as a Government, we are scrapping all of these bad taxes that are undermining our international competitiveness, the carbon tax and the mining tax, we are reducing red tape costs for business by about $1 billion a year, we are also, which is very important, we are ensuring that there is certainty, stability and predictability in our regulatory arrangements so that companies like BHP can invest significant capital and being certain about how that is going to be treated. Final point Leon, we are also looking at making significant investments in productivity enhancing infrastructure and there's a project of about $1 billion in South Australia, the South Road Project that we are investing through that program and of course you've got the Assistant Infrastructure Minister here in South Australia, Jamie Briggs, who is doing an outstanding job in rolling that out around the country.
LEON BYNER: Okay, in terms of South Australia, how do you view us economically as the Finance Minister?
MATHIAS CORMANN: I think there is lots of opportunity here in South Australia. Obviously there is a proud manufacturing base and parts of that are going through a transition at the moment and certainly the Federal and State Government have to work together to assist communities to work through that transition. But I think there is a lot of untapped potential, in particular in the resources industry here in South Australia and I think all of us in business, in the community, in State and Federal Government, need to work together to make sure that we can reach our full potential there.
LEON BYNER: Alright Mathias, thanks for coming. That's the Finance Minister Mathias Cormann.