Senator the Hon Mathias Cormann
Minister for Finance
Date: Saturday, 9 August 2014
DAVID LIPSON: G’day welcome to Saturday Agenda, I’m David Lipson. On the program today, a European Court has ordered Google to start censoring its search results to hide items that are out of date or excessive. Should we have the right to be forgotten online? We will be discussing that later in the program. First though to the Finance Minister, Senator Mathias Cormann. Thanks very much for joining us today. It has been a week of global turmoil. US air strikes in Iraq, Russia’s sanctions against the West, Gaza, to name a few. This is already impacting on global markets. How much of a challenge will this be for the Australian economy?
MATHIAS CORMANN: Obviously at any one point in time global economic conditions impact on Australia. There is a limit to what extent the Australian Government is directly able to influence global developments, which is why it is so important that we do the absolute best we can in relation to everything that is directly under our control, which is why it is so important we do everything here in Australia to make sure we are as productive and as competitive as possible and that we fix our Budget.
DAVID LIPSON: Yeah, I will get to the Budget. I want to stick though with international affairs for a moment. Russia, the sanctions that it has announced will bar some $400 million worth of Australian agricultural produce from going into Russia. It is not a huge amount in terms of our global trade. The Prime Minister though says that we are working towards greater sanctions on Russia. In what ways can Australia punish Russia?
MATHIAS CORMANN: Australia works with our partners around the world. We are very much in the mainstream of the international community in sending a very clear message to Russia that we are concerned about their actions in terms of encouraging separatists on the ground in Ukraine, in terms of their actions having sought to annex Crimea to Russia. So we are very disappointed that instead of taking account of international concern, that Russia has instead decided to retaliate. But as you say, as far as Australia is concerned, while we are working very closely with all the affected producers, for us, it is about 0.4 per cent of our trade. So it is not a significant amount of trade that we are currently doing with Russia. But in relation to those agricultural producers that are impacted by this most recent decision by Russia to impose sanctions on food exports and the like out of Australia and other countries, we are working with them to ensure that as far as possible we can help facilitate access to other markets.
DAVID LIPSON: What about banning uranium sales to Russia? The Foreign Minister says that everything is on the table when she was asked about that. Should we at this time be selling uranium to Russia?
MATHIAS CORMANN: We were very circumspect in terms of the decisions we were making at the time when we still had Australian personnel on the ground in close proximity to Russia. Now as the Prime Minister has said, and as Foreign Minister Bishop has said, we are considering what other action we can sensibly take in terms of further increasing the level of sanctions imposed on Russia. All these matters including the matters you have just raised will be part of proper and considered discussion within the Government before we make a decision that is well founded.
DAVID LIPSON: But it seems from what the Government has been saying over the past few days that sanctions will happen. It is just a matter of working out exactly what they are. Is that right?
MATHIAS CORMANN: The Prime Minister has indicated that we will be considering further sanctions, but as with everything that we do in Government, we do go through a proper, orderly and methodical process before we make a considered decision and you wouldn’t expect me to pre-empt those decisions here on your show this morning. But suffice to say that yes, now that Australian personnel have left the region, we think that we are in a better position to make those decisions now.
DAVID LIPSON: Okay, well let’s take a look at the unemployment numbers this week. We got a surprise shock in terms of the numbers. 6.4 per cent unemployment. Worse than the United States. What’s gone wrong?
MATHIAS CORMANN: When we came into Government in September last year, people seem to have forgotten, but we inherited an economy growing below trend and rising unemployment. Of course we are working to turn that situation around. But there is still a lot more work to do ... interrupted
DAVID LIPSON: But unemployment is still higher than what was forecast then and even in the most recent Budget that they expected it would peak at 6.25.
MATHIAS CORMANN: Indeed, it has gone higher in the month that has been reported on. We have got to see how that plays out moving forward. But if I can just point out though, to a large degree, that is because the workforce participation rate is actually higher than what it has been. In terms of the number of people in jobs, all up, full time and part time, the number has actually stayed pretty stable, it’s stayed approximately the same. In fact, since the beginning of the year about 109,000 new jobs have been created at a rate of about 15,600 a month, compared to just 5,000 a month the previous year. More people now are going back into the workforce. We have got to continue to implement our agenda to build a stronger, more prosperous economy. We’ve recently been able to repeal the carbon tax. That was an important part of our agenda. We will continue to work our way through all of our priorities that we took to the last election to ensure we are in the strongest possible position to create more jobs.
DAVID LIPSON: It’s obviously going to see more people on welfare, less people paying income tax. What will be the impact on the Budget?
MATHIAS CORMANN: If you have more people unemployed that is not good for the Budget. That is just a truism. That is a statement of fact. In terms of what the impact is going to be in actual numbers, we will be updating the Budget estimates in the usual way in the Mid Year Economic and Fiscal Outlook, the way that is always done. The important point here is that at any one point in time, there are swings and roundabouts in any Budget. There are things that go up, things that go down and on a regular basis you reconcile all of that and you provide an update, which we will do in the usual way later this year.
DAVID LIPSON: In terms of the Budget measures that were announced in May, from where things are at the moment and negotiations are still continuing, but the Budget is actually in a worse position than it would have been had nothing been done. That’s got to be concerning for you as the Finance Minister and I know that you’re hoping to get a lot of these measures through, but as things stand at the moment, its not looking great.
MATHIAS CORMANN: I don’t accept that the Budget is in a worse position than if nothing had been done. That’s just not right. I have seen these assertions reported in the newspaper but that is actually not correct. There was absolutely no doubt that we had to take action in the face of the debt and deficit disaster left behind by the previous government and more concerningly the unstainable spending growth trajectory that the previous government left behind. Now as far as the process through the Parliament is concerned, there are a few things that people don’t seem to quite appreciate. Firstly, the appropriation bills went through the Parliament, various Budget measures including the Budget Repair Levy went through the Parliament. We’ve only had two weeks of the new Senate so far and the first two weeks of the new Senate were dominated by the carbon tax repeal legislation. When we go back towards the end of August we will continue to work through our Budget measures that need legislation in an orderly and methodical fashion. But something that is just very important to point out here is that a number of the Budget measures that people talk about when they try and point to the proposition that somehow things aren’t progressing as they should, are things like our higher education reforms or our proposal to introduce a price signal in terms of access to medical services and the like. A lot of these measures don’t take effect until some time down the track. Like the co-payments measure, which doesn’t take effect until 1 July 2015. The higher education reforms don’t take effect until early 2016. So there are a couple of ... interrupted
DAVID LIPSON: Just on a couple of those measures, starting with the co-payment perhaps, should pensioners and veterans be exempt as has been suggested by some over the past few weeks.
MATHIAS CORMANN: We have presented the Budget measure that we thought was appropriate and was required in order to ensure that we can put funding for our world class health system on a sustainable footing for the future. Now in relation to pensioners and veterans and other concession card holders there are safeguards in place as part of the measure we’ve put forward. The co-payment is limited to ten visits a year. So the maximum that any pensioner would pay for access to medical services would be $70 a year. Now, obviously... interrupted
DAVID LIPSON: So does that mean they don’t need an exemption?
MATHIAS CORMANN: As I’ve said to you, we’ve put the Budget measure forward in the Budget the way we think it is appropriate and the way we think it is required in order to ensure that all Australians, including pensioners and veterans and others can continue to have access to high quality health care services that are affordable for patients and affordable for taxpayers over the medium to long term.
DAVID LIPSON: Also on university fees, the interest rate that students have to repay those fees, the Government’s proposal is for it to be lifted from the inflation rate to the Government bond rate. That will be up to 6 per cent. But it seems that there is some room for compromise there now, as there is for the $7 co-payment. Is the Government willing to budge on that one?
MATHIAS CORMANN: Again, none of these reforms have actually been presented to the Parliament yet in legislation. We’ve delivered a Budget on 13 May, that is just under three months ago now. We delivered the Budget that in our judgement Australia needs if we are to protect living standards and if we are to build opportunity and prosperity for the future. These are good and important reforms for Australia and our commitment is to put those reforms to the Parliament in the way that they were delivered in the Budget. Having said all of that, obviously we are pragmatic and we are also aware that we have to discuss and negotiate with crossbench Senators in the Senate. We will need to convince six Senators to join the Coalition in passing some of those Budget measures if we want to get them through the Parliament so let’s just see what happens. But we’re not going to pre-empt any of those discussions. We will continue to engage courteously and professionally with crossbench Senators in relation to all these matters.
DAVID LIPSON: Do you share Joe Hockey’s complaint that business needs to do more to support you in your push for Budget sustainability?
MATHIAS CORMANN: Joe Hockey is absolutely right that the task, the important task to repair the Budget, is a matter of national interest. That all of us in business, in the community, in Government, in Opposition, all of us need to take a very close interest in everything that is required to put our Budget back onto a more sustainable footing. If you look at the Labor party right now, they created the mess we are trying to deal with. They are opposing everything we are putting forward including $5 billion of their own savings measures that they initiated in government. Yet they are not putting forward any alternative plan on how to fix the Budget mess that they have left behind.
DAVID LIPSON: Senator Mathias Cormann, the Finance Minister. We will have to leave it there. Thanks for your time.
MATHIAS CORMANN: Always good to be here.