Senator the Hon Mathias Cormann
Minister for Finance
Date: Tuesday, 8 July 2014
WALEED ALY: Seven years in the making, the deal is done Japanese Prime Minister Shinzo Abe and Australia’s Prime Minister Tony Abbott have today signed a Free Trade Agreement. It’s a welcome development no doubt from our first guest Finance Minister Mathias Cormann who somewhere in the building but joins me on the phone. Mathias Cormann, thank you very much for joining us.
MATHIAS CORMANN: Good evening.
WALEED ALY: Let’s look at the beef exports part of this, because that’s raised a lot of attention. 18 years it will take for us to see tariffs halved and even then they will be nearly 20 per cent on our frozen beef, 23.5 per cent on chilled beef. It’s not quite free trade is it?
MATHIAS CORMANN: What was announced today and what has been signed today is a historic agreement, which the previous government failed to deliver. It will deliver significant benefits in particular to agricultural producers and it will deliver benefits to both our countries and will help us grow a stronger, more prosperous economy, which will be able to generate more jobs. It’s very good news.
WALEED ALY: Yes, I understand that is your categorisation. But the specific thing I have asked you about there is that it doesn’t seem that great a benefit. Indeed some within the beef industry are unhappy about it.
MATHIAS CORMANN: It is a great benefit because it is much better than where we were. It is quite an unprecedented deal that Australia has been able to sign with our friends in the Japanese Government and it will deliver significant benefits to agricultural producers and exporters in the coming years.
WALEED ALY: Let’s while I have got you use your expertise as the Finance Minister and Assistant Treasurer as well for the moment, the Government’s Budget, you are in a difficult position given Clive Palmer’s bombshell yesterday that he was going to support removing the mining tax but wants to keep all the expenditure that is associated with it. Is there a point at which you’re going to have to fall back in love with taxation?
MATHIAS CORMANN: Our position is very clear, the mining tax is a failed tax which is bad for our economy and is actually also bad for our Budget. Not only did it not raise the revenue that the previous government predicted it would raise, it is actually now costing us money because the five per cent of the original forecast that was raised has by and large been refunded and it has cost the tax office alone more than $50 million to administer so far. The previous government having made assumptions about $4 billion in revenue in year one and rising beyond from there already spent all the money that they thought it would raise and more, which is one of the reasons why we ended up with the debt and deficit disaster that the previous government left behind.
WALEED ALY: Well you’re going to have to keep spending it now though is the problem.
MATHIAS CORMANN: You’re making assumptions on where this process is going to end up. We delivered a Budget just under two months ago. We are progressing that Budget and the various measures through the Parliament in an orderly and methodical fashion. So far all of the Budget measures that have been put to the Senate have passed the Senate despite speculation in the lead up to those votes that that might not happen. We will continue to engage with all Senators represented in the Senate in a courteous, professional and constructive manner. We will continue to make the case on why we are doing what needs to be done. Incidentally, as well as passing all of the Budget measures that have been put to the Senate so far, we are also about to achieve the repeal of the carbon tax, which of course is something else that Labor has tried to frustrate for the past 10 months.
WALEED ALY: Actually, I want to pick you up on the carbon tax because the condition, the deal that apparently has been struck between the Coalition and Palmer United Party has been a guarantee that savings from the carbon tax will be passed on to consumers. I haven’t been able to track down any legislation. We have asked various offices for some draft Bills, we haven’t seen it yet. I cannot conceive of what that would look like in legislation. How is it possible to guarantee that savings from a carbon tax will be passed on to the consumer in a legislative form?
MATHIAS CORMANN: Firstly the important point to make is that all of the relevant regulators of electricity prices have already indicated that reductions in the cost of generating electricity will be passed on or in fact are being passed on in electricity prices. A number of the key private generators have made similar public statements. We have in the past made very clear that we would provide the resources and the muscle to the ACCC to ensure that reductions in the cost of generating electricity as a result of scrapping the carbon tax are passed on to consumers and to business users of electricity...interrupted
WALEED ALY: Does that mean extra funding for the ACCC?
MATHIAS CORMANN: The ACCC is appropriately resourced in order to ensure that reductions in the cost of generating electricity as a result of us scrapping the carbon tax are passed on. But beyond that, we have had some discussions in recent days and we have reached an agreement with the Palmer United Party. The Palmer United Party, when we reach that stage in the debate will be moving amendments that will explain how we can provide further certainty in legislation that all of the savings, which come from scrapping the carbon tax are properly passed through to the end users of electricity.
WALEED ALY: I understand that’s the aim but I don’t understand how it’s possible.
MATHIAS CORMANN: Obviously once we reach that stage of the process, you will be able to scrutinise all of the ways and means that we have developed and that we have agreed to with the Senators from the Palmer United Party.
WALEED ALY: I look forward to doing that. Will you join us at the time when that happens?
MATHIAS CORMANN: Sure, happy to.
WALEED ALY: Good. A text message. A question from a listener, this is from John, this is regarding the Free Trade Agreement. Why is it that the details of the Agreement were not released for public discussion prior to signing. Do you have a response for John?
MATHIAS CORMANN: The full text of the Agreement is actually available on the website of the Department of Foreign Affairs and Trade. The website also provides the detail of all of the significant benefits that this historic agreement will deliver for our producers. I would encourage any of your listeners to visit the site and check out all the detail. Obviously these sorts of negotiations of significant free trade agreements, economic partnership agreements like this one are as a matter of course conducted between governments. We are following the usual process here, except that unlike the previous government, we actually have achieved an outcome that will deliver significant benefits to agricultural producers in particular…interrupted
WALEED ALY: Well it’s been 7 years in the making, I think we can say that there has been a bipartisan contribution to that.
MATHIAS CORMANN: Except that over the six years of the previous Government, hardly any progress was made whatsoever.
WALEED ALY: Okay, you’ve made that political point. But the question that John is asking is really about why the public doesn’t get to see what it’s signing onto before we do?
MATHIAS CORMANN: The public does see what has been signed onto and the full text of the agreement is available on the website of the Department of Foreign Affairs and Trade, as I’ve just said. Having said that, as the elected Government of Australia, we make judgements on what is in our national interest. We make judgements on how best to build a stronger more prosperous economy so everyone can get ahead and that is what we have done and what the Prime Minister and Minister Robb have done on behalf of the Australian Government in this context. It is an amazing and historic agreement to the benefit of Australia for many years to come.
WALEED ALY: Eighteen minutes past six, this is the Finance Minister Mathias Cormann, my guest on RN Drive. Why no royal commission into the Commonwealth Bank, Finance Minister? Particularly given we’ve seen now thousands of Australians have lost their life savings through shoddy financial advice. There doesn’t seem to be any protection that has emerged that specifically directed at this problem. We know it’s a big problem, Macquarie are now being implicated in this, the industry itself is very frustrated at the Commonwealth Bank’s conduct and its response to this. Surely if we’ve got royal commissions into a range of other matters, this would be on par with them?
MATHIAS CORMANN: It isn’t actually. You’re quite right, we’ve had a series of inquiries in this space in recent years and a number of these inquiries have made recommendations on how the policy settings can be improved. A lot of these improvements had bipartisan support such as the requirement for advisers to act in the best interest of their clients which is now enshrined in the Corporations Act and will continue to be enshrined in the Corporations Act. Such as the ban on conflicted remuneration, which is enshrined in the Corporations Act and will continue to be so. When it comes to the issues in the Senate Economics Committee Report, what I’ve said for the last week now, is that it was a very comprehensive report and a lot of the issues that were raised were very concerning. What we are doing is working our way through the 61 recommendations and how best to respond to them. We will provide a full response in due course, but most of the issues actually relate to the performance of ASIC as the regulator and it is going to be important for us to provide a proper and considered response. Now the recommendations... interrupted
WALEED ALY: But you’ve basically ruled out a royal commission?
MATHIAS CORMANN: I’m getting to that point. So recommendation 7, which recommended a royal commission into the Commonwealth Bank effectively, related to outstanding and unresolved issues from aggrieved customers of the Commonwealth Bank. Now the most important question on my mind in relation to this is how best to ensure that customers with legitimate outstanding and unresolved issues with the Commonwealth Bank, how can they receive a speedy, efficient and effective resolution of their issues. I’m unconvinced that a royal commission, which is going to take a couple of years and a lot of money along the way, is going to be the best way of achieving a speedy, efficient and effective resolution of those issues.
WALEED ALY: I’m not sure that’s the right question. It’s not so much how they get restitution, it’s how you stop you practice happening. If this is happening in the industry, don’t you need to weed out exactly why it’s happening in the industry?
MATHIAS CORMANN: Waleed, I’m not sure whether you’ve looked at the report and I’m not sure whether you’ve actually reviewed the recommendation in relation to a royal commission into CBA. That recommendation was very specific and in the context in which that recommendation was made, my judgement is that, in the first instance, the Commonwealth Bank should do everything it can to provide proper resolution to any outstanding legitimate issues for aggrieved customers. The Open Advice Review Program that the Commonwealth Bank announced last week does offer that opportunity, it does need to be managed professionally and appropriately independently and we will monitor the way that plays out in the next few weeks and months. If we have concerns after this process has been underway for a while, we can always revisit any judgements on other processes that may or may not be appropriate at that time. But we’ve got to separate the policy issues from the specific issues that relate to victims of bad advice by the Commonwealth Bank financial planners in that period between 2003 and 2012. My judgement is that right now I would like to see that Open Advice Review Program to be given a chance to work and if it doesn’t work, let’s cross that bridge when we get there.
WALEED ALY: Final question because I know that you’re in a rush and I do need to let you go. We learnt from the High Court today, a hearing regarding asylum seekers that’s ongoing, we now know because of the High Court that 153 asylum seekers were picked up in Australia’s contiguous zone, they are now being held on a customs vessels. Has the release of that information in any way fatally undermined our border protection?
MATHIAS CORMANN: Waleed, this is a matter for the Minister for Immigration. This is well outside my area of responsibility. I will leave him to make comments on this. You do know that this is a matter that is still before the courts so in the circumstances, it wouldn’t be appropriate for me to provide specific comments in relation to the matters that you raise. But having said that though, the Government will continue to act in accordance with our international obligations, including applicable international conventions.
WALEED ALY: Okay but I’m not asking about that side of it. I am just interest in the fact that this information has come out, it has taken a High Court hearing to do it. Presumably the reason it is not out, it hasn’t been released by the Government is because it undermines our border security. I am wondering if our border security is now undermined as a result of the Court’s actions.
MATHIAS CORMANN: We are doing everything we can to protect the integrity of our borders. Minister Morrison has done an outstanding job in doing what Labor said couldn’t be done and that is to stop the boats. We made a promise in the lead up to the last election that we would stop the boats. Minister Morrison together with a team of dedicated border protection professionals has been able to achieve that outcome. I am not going to comment on the specifics in relation to matters that are currently before the High Court. I am not going to go into the detail of matters that are well and truly outside my area of portfolio responsibility.
WALEED ALY: I am not asking you to comment on what the court is discussing.
MATHIAS CORMANN: You are really.
WALEED ALY: No, no I am asking about what they have already said. Anyway thank you very much for your time. Are you going to stay up and watch the World Cup tomorrow morning, is that’s what’s going to happen?
MATHIAS CORMANN: I doubt it. The timing of these games sadly doesn’t really fit with my schedule at work.
WALEED ALY: Ah, I thought you’d be more committed than that Mathias, thank you very much for your time.
MATHIAS CORMANN: Always good to talk to you. See you.