Senator the Hon Mathias Cormann
Minister for Finance
Date: Saturday, 1 November 2014
DAVID LIPSON: G’day, welcome to the program. I’m David Lipson. It’s been a big week for the Government. It’s struck a deal with Clive Palmer to pass its climate policy, direct action, through the Senate but found a way to circumvent the Senate to get more revenue from the fuel tax and it decided to put strategic interests ahead of economic ones and decided not support a China investment bank. Now to discuss all of this, Finance Minister Mathias Cormann, joins me now from Perth. Thanks for joining us today. Before we get to those issues, a fortnight ago in that chair you said Bill Shorten was an economic girlie man. There was a pretty strong reaction to that. Any regrets or lessons learnt since then?
MATHIAS CORMANN: No, no regrets. I used some humour, playing on my accent to make a serious point. That serious point is that Bill Shorten doesn’t have what it takes to repair the Budget. Here he was promising to bring the Budget back to surplus more quickly than the Coalition, yet he was a senior member of the government that created the mess we’re dealing with now in the first place. He’s opposing most of our savings measures. He can’t even get Labor to support their own savings measures, which they initiated themselves in Government. He hasn’t told us how he proposes to get into surplus more quickly. He hasn’t told us where he is going to cut more deeply or increase taxes because as you know, given that he is opposing most of our savings measures and Labor’s own savings measures for that matter, he is actually starting from way behind. So, look I used some humour, playing on my accent to make a serious point and I think I got my point across.
DAVID LIPSON: Hmmm, you certainly did. Well speaking of humour, I want to know if there is some tongue in cheek in this tweet you sent our earlier in this week on the fuel excise increases, you said quote “I did not announce new tax. I announced revised implementation arrangements for a Budget measure.”
MATHIAS CORMANN: Well, there was Bill Shorten again hyperventilating, saying we had announced a new tax. A tweet comes with a 140 characters limitation. But the point being here is that the fuel excise indexation measure was announced in the Budget more than five months ago. What I announced this week were revised implementation arrangements. Now that might sound technical and it might sound semantic, but it is the truth. We said back in May that we felt we needed to reintroduce regular indexation of the fuel excise, because since indexation of the fuel excise has been abolished in 2001, inflation has eroded the real value of that excise. It used to be 42 per cent of the average price at the pump, the fuel price at the pump, it is now down to 25 per cent. If indexation remains frozen, the real value of the excise on fuel will continue to fall. So we announced back in May that we would make that change and what I announced this week was how we would be able to implement that change.
DAVID LIPSON: But you are implementing it through an increase to the excise which is a tax and the NRMA this week has pointed that that increased fee that people at the pump will pay then has a GST over the top of it. And they’re claiming that this is a tax on a tax. What’s your response to that?
MATHIAS CORMANN: What we’re doing is using the mechanism under the legislation to give effect exactly to what was in the Budget measure. Essentially, as of 10 November the excise will go from 38.143 cents to 38.6 cents and then in February there will be another indexation point. That is exactly where it would have been in November if indexation had occurred as of 1 August the way it was described in the Budget measure. Now the interaction between various taxes is the same as ... interrupted
DAVID LIPSON: Sure, but it is a tax on a tax isn’t it?
MATHIAS CORMANN: The interaction between excise and the GST is the same where ever the excise applies. And I just remind you and your viewers again, this is the exact same methodology that Labor used for the excise on ‘alchopops’. Labor increased the excise on ‘alchopops’ and customs duty on ‘alchopops’ by 70 per cent in 2008 and the methodology they used was excise and customs duty tariff proposals. That is what we’ve done this week as well.
DAVID LIPSON: Now you did manage to get around the Senate to make this happen and it’s going to start happening on 10 November, but you did try to get it through the Senate. As I understand it you reached out to the Greens a few months ago. What was it exactly that you offered Christine Milne to try to get this passed through the Senate?
MATHIAS CORMANN: I wouldn’t normally talk about private conversations, but I see that she has made certain comments. So I can confirm fairly explicitly, our view was that clearly, reintroducing regular indexation of the excise on fuel would be consistent with a long-standing Greens policy position, because we couldn’t envisage that the Greens actually are telling us that they are in favour of regular cuts in the real value of the excise on fuel. So I did approach the Greens and I did meet with Christine Milne and I did indicate to her that the Government may be prepared to delink the excise indexation from the formal link to additional road funding. Because we have got the liberty to deal with the investment in road infrastructure as we see fit separately anyway. I also indicated to her that through the asset recycling initiative there may be scope to ensure that some of that investment would go into productivity enhancing public transport infrastructure, including light rail if that was consistent with what the States wanted... interrupted.
DAVID LIPSON: But she claims you never made that offer about public transport.
MATHIAS CORMANN: Well she’s wrong. Her response to me was, that the reason she was not prepared to entertain that conversation was because they were against privatisation, because she said that the asset recycling initiative was underpinned by privatisation and that was the basis why she was not prepared to entertain the conversation any further. The truth is it took me weeks to even get in to see Christine Milne. For a very long time, her and her office did not return phone calls. It always appeared to me that she was just ticking a box and that she wasn’t actually genuinely interested in engaging in a conversation.
DAVID LIPSON: I want to look at the China bank, there is and has been argued a strategic case against Australia supporting this China investment bank that would be run from Beijing and in the end Tony Abbott has announced that Australia won’t support it in its current form, the negotiations remain open. Now the US and Japan advised us against supporting it. Are you able to outline though, because we know there was and is continuing a debate about whether we should support it, what is the economic case in favour of Australia supporting a China bank?
MATHIAS CORMANN: Firstly, I’ve got to just correct your introduction. The Government hasn’t made a final decision in relation to these matters, so to the extent that you suggest that ...interrupted
DAVID LIPSON: No, I did say that negotiations were still continuing.
MATHIAS CORMANN: From the Government’s point of view this is an ongoing consideration. We have got a very important relationship with a whole series of countries around the world, in particular with the United States and China and we will continue to weigh up Australia’s national interest.
DAVID LIPSON: Under what conditions would Australia support a China bank?
MATHIAS CORMANN: I’m not going to speculate on how the conversations are continuing. But what we have said very clearly, publicly is that we’re keen to ensure that the governance arrangements are in the right shape before we would consider participating.
DAVID LIPSON: Okay, I want to look at direct action and it did pass the Senate this week despite the doubters saying it never would. Now this was thanks to Clive Palmer. The question is though, whether the Government will be able to reach that five per cent target and a lot of that may come down to the capacity that the Government now has to penalise polluters if they go rogue and increase their emissions well above what they have been emitting. When will we know what those penalties are?
MATHIAS CORMANN: Firstly, again I would just re-confirm for you that the Government is very confident we will meet the five per cent emissions reduction target. I don’t agree with your assertion that this will come down to penalties. I just remind you that Australia, unlike many other countries around the world that have made ambitious claims in the past, has consistently met and exceed its Kyoto targets. We met and exceeded our Kyoto targets in the period 2008 and 2012 without a carbon tax in place. Now in relation to direct action, direct action is all about providing positive incentives to business across Australia, to come forward with the best possible ideas to reduce emissions across Australia in the most cost effective way possible. There are all sorts of people making all sorts of assumptions about how successful that will be, well I would say, the Government would say, don’t underestimate the ingenuity and the creativity and the innovation that can come from businesses across Australia when presented with genuine positive incentives. As a result of the legislation that went through the Senate on Thursday night, that opportunity will now be available for people.
DAVID LIPSON: But just briefly and just on those penalties, I mean do you know when you will be able to reveal when those penalties would be clear, because without a sort of figure, it is a pretty small stick to try to you know, whack the companies or at least stop them from increasing those emissions.
MATHIAS CORMANN: There is no suggestion that we want to whack companies. You talk about figures, we have not budgeted for any revenue from the safeguard mechanisms that are in our direct action plan initiative, our Carbon Farming Initiative legislation. What we’ve said we would do, we’ve got a provision for a safeguard mechanism and that is due to be finalised in time for an implementation from1 July 2016. We’ve said that we would consult widely with business and other stakeholders on the specifics when it comes to those safeguard mechanisms. But overwhelmingly, the emphasis and the underpinning objective for the direct action plan is to provide positive incentives to encourage businesses across Australia to do the right thing, to provide for emissions reductions in an economically responsible way.
DAVID LIPSON: Okay just finally, a submissions from counsel assisting the Royal Commission into unions says that Julia Gillard should be cleared of criminal activity, but that she did benefit from slush fund money. I know this is not in your portfolio but do you have a comment on this, there were members of the Coalition that went pretty hard against Julia Gillard during these allegations when she was Prime Minister.
MATHIAS CORMANN: We’ve had a consistent policy all the way through the conduct of the Royal Commission and that is that we don’t provide a running commentary on matters that are before the Royal Commission, dealt with by the Royal Commission. I understand from the media that there might be a draft that is being put forward in the context of the Royal Commission but I’m not going to provide a running commentary on that.
DAVID LIPSON: Okay, Finance Minister Mathias Cormann, thanks for your time, as always.
MATHIAS CORMANN: Always good to talk to you.