Senator the Hon Mathias Cormann
Minister for Finance
Date: Thursday, 11 September 2014
LYNDAL CURTIS: First today, Labor has proposed to remove the power of Treasury to set the economic parameters that underpin Budget. Instead, in the interests of transparency, the Shadow Treasurer Chris Bowen, has laid out a plan to give that work to the Parliamentary Budget Office. The one set up by Labor in its last term to analyse Budget policy the costs of policies of non-government parties. Mr Bowen accuses the Government of politicising forecasts to make the case for its claim of a Budget emergency. He accuses the Government of doing that in its first Budget update, the Mid-Year Economic and Fiscal Outlook, which the Government produced after the last election last year. Debates about economic forecasts are not new. Before the last election, the then Coalition opposition accused the then Labor government of massaging some of the Budget figures. Then the Budget figures in the Pre-Election Fiscal Outlook came out, which the then Labor government said were independent and transparent. Chris Bowen is now suggesting a change to that whole system. Well the Finance Minister Mathias Cormann has some arguments with Chris Bowen’s opinions. He joins me now from Perth. Mathias Cormann, welcome to Capital Hill.
MATHIAS CORMANN: Good to be here.
LYNDAL CURTIS: Given how politicised the debate about how Treasury forecasts has become is Chris Bowen’s idea of putting a bit more independence and transparency into the process by having them done by the Parliamentary Budget Office have any merit at all?
MATHIAS CORMANN: Chris Bowen is completely wrong. The truth is that the Government of the day is responsible for the forecasts underpinning the Budget. That is what we said when we were in opposition and that is what we say now that we are in Government. The problem with forecasting in the period of the previous government was not Treasury, it was Labor. The Treasurer Wayne Swan and the Treasurer Chris Bowen under the previous Labor government kept overestimating revenue, kept underestimating expenditure, which is why in the eleven short weeks between... interrupted
LYNDAL CURTIS: Didn’t they do that, didn’t they do that on the basis of the information they were given by Treasury? And didn’t you have problems with the way Treasury was forecasting revenue?
MATHIAS CORMANN: No, our problem was with Labor. It is the Government of the day that is responsible for the forecasts underpinning the Budget. That was what we said in opposition and that is what we’re saying now. Labor in government was judged on its performance against its Budget forward estimates and we will be judged exactly the same way at the next election. That is the way it should be. If you look at the ridiculous situation after the last Budget, in the eleven short weeks from the Budget to the economic update before the election, the Budget position deteriorated by $33 billion against Labor’s last forecasts. So what we did in the Mid-Year Economic and Fiscal Outlook and which is what Chris Bowen is now criticising us for is we provided more realistic forecasts. We provided more realistic estimates based on more realistic assumptions. He doesn’t like that, because Labor in government kept using unrealistic assumptions, kept using heroic assumptions and that is of course why their Budgets always ended up in a mess.
LYNDAL CURTIS: Treasury now produces some forecasts with confidence intervals. Is there a case for making the way Treasury forecasts and what it, the information it actually gives to Government more transparent in the Budget process?
MATHIAS CORMANN: Treasury does a very good job. Treasury has always done a very good job. Treasury like any other organisation continues to review and assess, as they should, the way that they perform and how they can improve the way they do the things they do moving forward. The fundamental point though Lyndal is, that the Government of the day is responsible for their Budget forecast. The Government of the day is responsible for their performance against the Budget. That is a fundamental truth that the Labor Party is still running away from. The Labor Party is still in denial about the fact that they left a Budget in a mess. They left a debt and deficit disaster. They left $123 billion in projected deficits and Government debt heading for $667 billion. They can run all sorts of distractions and blaming all sorts of people for that. But that is their fundamental record and that is the record that we’re trying to fix.
LYNDAL CURTIS: If I could go to a couple of other issues. The latest unemployment figures are out today. On a seasonally adjusted measure unemployment has fallen to 6.1 per cent. On a trend measure, it’s up a tick to 6.2. Is the reality now that unemployment on whatever measure you choose seem stuck over six per cent?
MATHIAS CORMANN: We’re working to build a stronger economy and create more jobs. When we came into Government just over a year ago, we inherited an economy growing below trend, rising unemployment, low consumer confidence, business investment which had plateaued and of course a spending trajectory which was unsustainable, taking us to $667 billion of Government debt. So we’ve been working over the past 12 months to turn that situation around. We’ve been able to scrap the carbon tax, scrap the mining tax, reduce red tape costs for business, start to roll out a $50 billion infrastructure investment program, all designed to build a stronger more prosperous economy and create more jobs. Our free trade agreements with Korea and Japan and so on. So it is a work in progress, we still have work to do of course and we will continue to implement our plan for a stronger more prosperous economy.
LYNDAL CURTIS: On that topic of the repeal of the mining tax, you say it’s axing some red tape for business but small business has problems with the backdating effectively, of the tax hike which has resulted from you repealing some of the spending associated with the removal of the mining tax. Why did you do that?
MATHIAS CORMANN: There was no backdating at all. The repeal of the mining tax and the repeal of the unfunded associated promises that Labor had attached to them happened exactly consistently with the policy we took to the last election and with the announcements that we’ve made consistently since we were elected in September last year. All of the dates are consistent with what we told the Parliament we would do, what we’ve told the community we would do in the lead up to the last election and ever since. The ATO, the Tax Office has provided consistent advice since our election to Government, that is the way that it would happen and that is the way it has happened.
LYNDAL CURTIS: But the abolition of the, what’s called the loss carry back provisions date from 1 July 2013 that’s before even the last election. Can you understand why small business is frustrated with the way it’s been done?
MATHIAS CORMANN: That is the way we’ve announced it in the lead up to the last election. That is the way we’ve announced it to the Parliament when we introduced the legislation. That is the way we have implemented it. That is the way that the tax office has consistently advised all relevant stakeholders that this particular measure would be implemented.
LYNDAL CURTIS: Mathias Cormann we’ll have to leave it there. Thank you very much for you time.
MATHIAS CORMANN: Always good to talk to you.