Transcripts → 2014


Transcript - Lateline with Steve Cannane

Senator the Hon Mathias Cormann
Minister for Finance


Date: Tuesday, 19 August 2014

China, Budget

STEVE CANNANE: And now to tonight's guest, Finance Minister Senator Mathias Cormann. Next week Parliament resumes and so too does the battle to push the Government’s savings measures through the Senate. The Government is planning to bring forward debate on its Bills to increase the fuel excise and to raise the PBS co-payment. Senator Cormann, thanks for joining us.

MATHIAS CORMANN: Good to be here.

STEVE CANNANE: If we could deal first with Clive Palmer’s comments about the Chinese. A new round of negotiations on a free trade deal between Australia and China is due to begin next month. Could these comments harm those negotiations?

MATHIAS CORMANN: Clearly the views that Mr Palmer expressed are not the views of the Australian Government. They are not the views of the Australian Parliament. They are not the views, we don’t believe, of the Australian people. We clearly greatly value our strong and growing relationship with China. China is our biggest trading partner with two-way trade approaching $150 billion a year. We want to strengthen and deepen that relationship further and we are very hopeful that by the end of this year we will be able to conclude a historic Free Trade Agreement with China.

STEVE CANNANE: How will these comments look in China though?

MATHIAS CORMANN: I will let Mr Palmer talk for himself. I think that the Chinese Government, the Chinese people well understand the views of the Australian Government and of the Australian people as a whole and, you know, clearly this is a very important relationship and one that we will continue to try and strengthen further.

STEVE CANNANE: PUP Senator Jacqui Lambie today made even more inflammatory comments. She warned of a possible invasion, saying: “the Chinese want to enslave our grandchildren”. Are we getting an insight here into the crossbenchers who you’re having to negotiate with?

MATHIAS CORMANN: Obviously we don't agree with her, but I’m not going to give a running commentary on every single comment that is made by every single Member of Parliament. The views of the Australian Government are clear. The relationship with China is a strong and growing relationship and one that we will seek to continue to strengthen further into the future.

STEVE CANNANE: Alright, let’s move onto the Budget. Now, the Coalition says Labor created a budget emergency. Now you're in Government, you're struggling to sell the budget to the Australian people. You’re struggling to sell it to the crossbenchers. You're struggling to get those billions of dollars worth of savings through the Senate. Do you now have your own Budget emergency?

MATHIAS CORMANN: Well, it was always going to be a marathon not a sprint. The Labor Party left behind a debt and deficit disaster and, more concerningly, they left behind an unsustainable spending growth trajectory. So in the Budget we had to make some tough decisions and we were always very conscious of the fact that it would take some time to get some of those measures accepted. We are working through an orderly, methodical process as inevitably is the case for Governments which don't have a majority in the Senate. We are engaging with crossbench Senators, explaining what we're doing and why and, if and as necessary, we might have to make an amendment here, an amendment there in order to get all of our measures through. But we are determined to repair the Budget mess that we have inherited from Labor.

STEVE CANNANE: That process though is looking very difficult for you at the moment. The Australian laid it out in a graphic where they showed the GP co-payment, the rise in the PBS co-payment, the abolition of the Schoolkids Bonus, the income support bonus, the low income contribution are all unlikely to pass the Senate. Then you add PUP's negative comments today about higher education reforms. It doesn't sound like your plan to repair the Budget is in great shape?

MATHIAS CORMANN: I've learnt in the Senate never to assume that initial reactions and commentary in the absence of legislation actually before the Parliament, to take that as the final word that is said on things. The Labor Party and Bill Shorten initially said that they wouldn't support our Budget Repair Levy and then they quietly voted in favour of it. I was told for weeks and it was a clear assertion that our FOFA reforms, our improvements to our financial advice laws, would be disallowed by the Senate. It wasn't a maybe or could be or perhaps, it was a firm assertion by journalists across Australia for weeks that they would be disallowed. And of course they weren't. The truth is that a lot of these measures will continue to be the subject of conversations. And, you know, for example, the policy to introduce a price signal for access to medical services doesn't come into effect until 1 July 2015. The legislation is not even before the Parliament yet. So how do people know what the final position is going to be that is ultimately going to be adopted? We will continue to go through this process patiently, methodically and we're determined to repair the Budget and to get all of our Budget measures through.

STEVE CANNANE: Tony Abbott has said that he believes minor adjustments may have to be made but John Daley from the Grattan Institute has estimated that you have $38.6 billion of Budget savings at risk. Couldn't that mean major surgery rather than minor adjustments?

MATHIAS CORMANN: Firstly, an important point to make is that most of the Budget has already gone through the Parliament. I mean, the appropriation bills went through. Significant savings measures, the biggest savings measure in the Budget was our saving in relation to foreign aid, $7.6 billion, has gone through. The Budget Repair Levy has gone through. A number of other savings have gone through. Now it is true that Labor is opposing about $40 billion of savings that are currently before the Parliament, including $5 billion in savings that Labor initiated and banked in the Budget under Julia Gillard and Kevin Rudd. The truth is that Labor under Julia Gillard and Kevin Rudd made a mess of the Budget but under Bill Shorten the Labor Party is even more reckless. They're just playing politics, putting short term political interests ahead of the national interest. When you've got the Labor Party under Bill Shorten opposing their own savings measures in the Parliament now, you know that they're not being serious about the national interest.

STEVE CANNANE: Okay, so if you have an obstructionist Opposition and you have an unpredictable crossbench, do you have a plan B? If these tens of billions of dollars of savings don't pass the Senate, would the Government consider, for instance, a mini-budget between now and the next Budget?

MATHIAS CORMANN: That is a very hypothetical question. You've got to remember it is early days. The new Senate only started on 1 July, We've only had two weeks of the new Senate so far. And in that first fortnight we repealed the carbon tax as we promised. We got our improvements to our future financial advice laws through the Parliament. We got a series of other reforms through the Parliament. The Mining Tax Repeal Bill is a work in progress but, I mean, the truth is that we were never going to deal with all of the Budget measures on day one. We were always going to deal with them sequentially in a prioritised way as we need to deal with them in order to ensure that they take effect...interrupted

STEVE CANNANE: So you're ruling out a mini budget?

MATHIAS CORMANN: There's absolutely no need for a mini budget. We delivered a Budget about three months ago. We are going through the usual, normal process in the Senate as every other Government before us had to do when they didn't have the numbers in the Senate. Later this year, in the usual way, there will be a half yearly update on the Budget in the Mid Year Economic and Fiscal Outlook and we'll just continue to work in a determined fashion on repairing the Budget mess that Labor left behind.

STEVE CANNANE: Why is your Budget unpopular? Is it a poor Budget or is it been poorly sold?

MATHIAS CORMANN: Some things aren't easy to sell. And that was always going to be thus. After people for years have been promised that we can borrow all this money only to give it away, when people have been told for years to expect significant increases in government payments and then all of a sudden the Government comes along and says well, that is actually bad for us. If we continue to borrow from our children and grandchildren, we're actually reducing future opportunity. We're reducing their living standards. We're imposing sacrifices on them that are not fair. When you explain that to people, people don't necessarily always like to hear that.

STEVE CANNANE: Well, let's talk about something, then, that should be easy to sell: the issue of the indexation of fuel excise, a policy supported by many economists, many environmentalists, many public policy experts. How does the Government turn a policy that would cost the average family 40 cents a week into a lightning rod of how out of touch the Government is?

MATHIAS CORMANN: Well, it is a very important structural reform as you've said. We've been very clear that back in 2001, when the decision was made to remove indexation of the fuel excise, the proportionate value of the fuel excise on the average fuel price at the average pump was about 42 per cent. It's now down to 25 per cent. We've said that, in the context of repreparing the Budget and in the context of significant additional investments in productivity enhancing road infrastructure, that it is appropriate for us to ensure that the value of the excise keeps pace with inflation...interrupted

STEVE CANNANE: So if it's a good policy and it only costs every average family 40 cents a week, how come you can't sell it? Why has it been the subject of gaffes?

MATHIAS CORMANN: I'm not going to be a commentator on our own performance. I will leave that to others to comment on. We are engaged in very serious business here. We're engaged in the business of repairing the Budget mess that our predecessors left behind. An important measure in that context is our proposal to reintroduce indexation of the fuel excise. And you've got to remember, we are confronted with a Senate where Labor and the Greens consistently are putting politics ahead of the national interest. We are in the ludicrous situation now where the Greens political party in Australia is supporting a proposition that the taxes on fuel should continue to go down in real terms on a regular basis. The Greens in Australia are now trying to suggest to us that their favourite and their preferred policy position is a regular reduction in the real value of the excise on fuel. Now, you know what, I don't believe that that is ultimately sustainable for them and we will continue to engage with them to see this sensible reform passed...interrupted

STEVE CANNANE: Many people argue it's a form of a carbon tax? 

MATHIAS CORMANN: No, it isn't. 

STEVE CANNANE: Are your own efforts to sell the Budget being hampered by the fact that Arthur Sinodinos, who would normally be a key salesman as Assistant Treasurer, has been sidelined by the ICAC inquiry?

Well we are obviously disappointed that Arthur is not in the position at present. I've been acting in the Assistant Treasurer role since about March and I'm doing the best I can every day. Joe Hockey and I, we work as a team. Joe Hockey incidentally is doing an outstanding job as Treasurer. I work very closely with him and I've seen him put his heart and soul into repairing the Budget and putting Australia on a stronger economic foundation for the future. I don't think that anyone, none of us are robots, I’m not a robot, Joe Hockey is not a robot; we are human beings. Every now and then we don’t get things quite right and the important thing is to just move on and refocus on what actually is important and what matters.

STEVE CANNANE: Okay. Last night on Q&A we heard Heather Ridout, Reserve Bank board member, former head of the Industry Group, describing one of the Budget measures, the cut to the dole for young people, as being far too harsh and ideological. Have measures like this skewed the debate and made Government Ministers look like ideologues rather than the adult Government that you promised to be?

Well, it is not ideological. The proposition that young people, somebody who is young, healthy, able and well should not be moving from school straight onto the dole is not a radical ideological position. Our basic proposition...interrupted 

STEVE CANNANE: Heather Ridout thinks it is?

She is entitled to her views, I disagree with her. The proposition that a young person should either be earning or learning, earning or learning, if they are healthy, able, capable and well is a very appropriate proposition that we are totally committed to. It is always important with these things to have appropriate safeguards in place and we do. If you're a young person with mental health issues, if you’re a young person with family commitments or the like, there are appropriate safeguards in place. But the proposition that somehow our system should facilitate a young person going straight from school onto the dole is a wrong proposition and we’ve got to break that culture.

STEVE CANNANE: What if the jobs aren't there? Not every environment has enough jobs to go around for all the people who are looking for them?

This goes to the proposition that if I can’t find a job where I live, should I be required to move where there could be a job rather than to stay where I live and stay on the dole. Well, our answer to that is yes, if you can go somewhere else in Australia and find a job rather than to go on the dole, you should seriously consider that. There's a whole range of things that we're doing at the same time. We are focused on repairing the Budget and we're also focused on building a stronger, more prosperous economy where everyone can get ahead. That's why we're scrapping the carbon tax, the mining tax, reducing red tape because we do want to have more opportunity for young people to get ahead.

Tonight in your speech at the Sydney Institute you said a loss of confidence in Australia's ability to get its house in order would deter investment. Are you, like the Trade Minister, suggesting there's an issue of sovereign risk if this budget does not pass?

What I'm saying is that right now, as a result of the bad decisions of the previous government, as a result of the debt and deficit disaster, we are now in a weaker position than we should be, than we could be and than we can be again if we were confronted with a future crisis, if we were confronted with future global economic headwinds. The reason we were able to deal so well with the global economic headwinds in the context of the Global Financial Crisis is because in 2007 the Government left behind a strong economy, a strong Budget, a $20 billion surplus, no government debt, $50 billion of cash in the bank. That is the reason...interrupted 

STEVE CANNANE: So are you saying sovereign risk down the track? Are you saying sovereign risk now?

What is very important is that we really have a reality check about where we are as a result of the debt and deficit disaster that Labor left behind. And more concerningly, as a result of the spending growth and debt growth trajectory that Labor has left behind...interrupted 

But we're not, for example, seeing any risk to our AAA credit rating?

If we don't take corrective action now, the longer we stay on an unsustainable trajectory the higher the risk that we will end up in a bad destination, the higher the risk that we will end up in a destination where we are not in a position to appropriately deal with the challenges that might come our way or appropriately seize the opportunities that might come our way in the context of strong growth in the Asia Pacific.

But what about now? Is confidence being eroded now?

MATHIAS CORMANN: When we came into Government in September the economy was growing below trend, we had rising unemployment, we inherited rising unemployment and low consumer confidence. Since the Budget, consumer confidence is now actually higher than what it has been...interrupted 

STEVE CANNANE: And unemployment is higher?

MATHIAS CORMANN: We need to continue to implement our agenda for stronger economic growth to ensure that we can strengthen employment opportunities across Australia.

STEVE CANNANE: Senator Cormann, we have run out of time. Thanks very much for coming on.

MATHIAS CORMANN: Always good to be here.