Senator the Hon Mathias Cormann
Minister for Finance
DAVID LIPSON: G’day, welcome to the program I am David Lipson. 175 government agencies are on are on the chopping block ahead of Monday’s mid-year Budget update. The Treasurer has confirmed the Government’s attempt to pay off debt has actually gone backwards this year with a deepening deficit and a delay in the return to surplus. Well joining me now is the Finance Minister Senator Mathias Cormann. Thanks for your time today, as always.
MATHIAS CORMANN: Good to be back.
DAVID LIPSON: What Government agencies will be axed?
MATHIAS CORMANN: The formal announcement will be made on Monday as part of the Mid-Year Economic and Fiscal Outlook. But The Australian today published a pretty comprehensive list. This is the third phase of our Smaller Government reform agenda. We had an initial effort in the Mid-Year Economic and Fiscal Outlook last year and in the Budget earlier this year. It is really all about making sure that the administration and the operations of Government are as efficient and as effective and as streamlined as possible. That we spend taxpayers’ money wisely and we ensure that there is no avoidable double up and duplication.
DAVID LIPSON: So it says that the axings will save the Government some $500 million over four years, that’s The Australian news report. How will these services be provided to the Government now?
MATHIAS CORMANN: [Broadcast interrupted] ...a lot of these bodies are responsible for similar areas of responsibility. There is a lot of overlap, a lot of duplication. What we have set out to do is to ensure that wherever possible, functions are streamlined, either into Government departments, or where it is appropriate, provided by the private sector. That is what we are continuing to work through. The goal is to ensure that the Government is as big as it needs to be, but as small as it can be. We believe that we inherited a bloated public service from our predecessors and part of our effort to repair the Budget is to ensure that the administration and the operations of Government are as efficient and as effective as possible so that they deliver the best possible services to people across Australia, at the lowest possible cost.
DAVID LIPSON: So do you believe that jobs will go as a result of this?
MATHIAS CORMANN: If you reduce the number of government bodies there will be an impact on jobs across the public service. What we will see is that as a result of our reform effort so far is that the size of the public service will be back down to the same level as what it was in 2007-08. We think that is appropriate. We think that in the current environment where we have inherited a situation with $123 billion in projected deficits, Government debt heading for $667 billion within the decade and growing beyond that, that it is incumbent upon us to get all of that under control.
DAVID LIPSON: So is that a broken promise? Because before the election, the Government did say that there would be no forced redundancies in the public service, that all the jobs that go would be through natural attrition.
MATHIAS CORMANN: We said before the election that we would repair the Budget. That we would ensure that any waste and duplication and unnecessary overlap across the public service would be eliminated. We said very clearly before the last election that we would ensure that the administration and operation of Government is as efficient and effective as possible and indeed we said before the election that we would set up the National Commission of Audit which of course we did. Many of the things we are doing now are implementing recommendations that came out of that National Commission of Audit.
DAVID LIPSON: Sure. But you did also say no forced redundancies and it appears that these redundancies will be forced so is that breaching a smaller promise to keep a bigger promise?
MATHIAS CORMANN: Let’s not get ahead of ourselves in terms of how these staff reductions will be managed. Our preference is always to go through a process of voluntary redundancies. You have got to remember that we inherited a situation, undisclosed by the previous government, where the previous government imposed efficiency dividends in the dying days of their government to try and make their numbers look slightly less bad, which were going to lead to 14,500 reductions in public service staff. That was as a result of undisclosed decisions of the previous Labor Government. Now we did not know that before the last election but we are working now in a responsible, orderly and methodical fashion to ensure that we get the Budget back under control. The environment continues to become more and more challenging, the global economic conditions are challenging, what is happening with commodity prices is challenging. In Labor’s last Budget, commodity prices and iron ore prices were between $120-130 a tonne, they are now down to $63 a tonne. 20 per cent of our export income comes from iron ore. These things are all having significant implications for our Budget bottom line and we have got to continue to make responsible decisions in the context of the environment that we find ourselves in.
DAVID LIPSON: I will get to those issues more broadly. Just before I get off the agencies though, is this being done to balance out additional expenditure like for example our commitment in Iraq or is this actually making new savings in the Budget?
MATHIAS CORMANN: The overwhelming objective here is to ensure that we streamline the operation of the public service, that we clarify lines of accountability, that we ensure that service delivery to people across Australia gets improved and that we provide the services of Government in the most efficient and effective way possible. When it comes to additional expenditure such as on our national security in the context of a heightened threat environment, or such as in relation to our efforts in Iraq, then what you will see in the Mid-Year Economic and Fiscal Outlook is that any such new spending decisions on spending on higher priorities right at the moment has been more than offset by additional savings in areas that are comparatively lower priorities in the current context.
DAVID LIPSON: You pointed to a bunch of the external factors that will have an impact on Monday in the mid-year Budget update. Is it a broken promise though to miss the surplus as planned?
MATHIAS CORMANN: No. We have always said very clearly before the election that we would get back to surplus as soon as possible and that situation hasn’t changed. The fundamental task remains as it was. We are committed to repairing the Budget as soon as we can, in order to strengthen our economy and strengthen jobs growth and create more opportunity for people to get ahead. We did inherit a very challenging situation, the global economic headwinds added to that challenge. The important thing to say here is that, given the global economic headwinds, the Australian economy has actually performed very well in 2014, on the back of lower energy prices, on the back of scrapping the carbon tax, investment being encouraged by getting rid of the mining tax, signing three free trade agreements with China, Japan, South Korea. So we remain focussed on the task, but we’re going to be responsible with the pathway that we are following. We are committed to a responsible pathway to get back to surplus as soon as possible.
DAVID LIPSON: Joe Hockey yesterday admitted to a mistake when it came to the marketing of the May Budget. Do you agree with him? And does that mean that we can expect to see more Government advertising in the coming months?
MATHIAS CORMANN: People across Australia in recent months have been on the receiving end of a lot of dishonest and misleading information and a lot of scare campaigns in particular from the Labor Party. So it is incumbent on us as a Government to ensure that people across Australia are well informed about the challenge that we’re facing, on where we’re heading and why and what it is that we’re doing to get us into a stronger position for the future. As I might have said on your program before, the Government is not doing any of this for fun. We’re doing it because we want to protect our living standards, because we want to build a stronger, more prosperous economy, because we want to create better opportunities for our children and grandchildren. We will continue to press ahead, but we will always look at better ways to ensure that we get our message across.
DAVID LIPSON: Sure, but how do you justify spending taxpayers dollars to convince Australians that they have to make sacrifices to help balance the Government’s books?
MATHIAS CORMANN: Our focus in on building a stronger, more prosperous economy where everyone can get ahead. Our focus is on building a better future. Obviously there are some difficult but necessary decisions that come along with that in the short term. It is very important that people across Australia understand exactly what we’re doing and why. We’re all in this together. This is about continuing the path to a better future, given the challenging situation that we found ourselves in as a combination of bad decisions over the period of the previous government and serious global economic challenges.
DAVID LIPSON: I just want to point to some of the issues that are happening internally in Government. A lot of coverage of the reported battles if you like between some senior members of the Government and the Prime Minister’s Chief of Staff, Peta Credlin. The Prime Minister himself weighed into this yesterday, and he said that a lot of the criticism of this was based on sexism because she’s a woman. Do you agree with that?
MATHIAS CORMANN: Look, I’m not a commentator. I’m not going to get into all of the ins and outs of this. My office and I, we work very closely with the Prime Minister’s office. It’s an outstanding office. They perform exceptionally well. They have a critically important job at the heart of the Government. From my point of view, we have a job to do. We need to focus on the job at hand, which is to build a stronger, more prosperous Australia and a safe and secure Australia. From my point of view, that is my focus and the Prime Minister’s office’s focus.
DAVID LIPSON: You haven’t seen any evidence of sexism overtly?
MATHIAS CORMANN: I’m not a commentator. I’m here doing a job for Australia and doing the best I can. Everyone in the Prime Minister’s Office is doing the best they can. All of us need to continue to do the best we can for Australia, every single day heading in the right direction.
DAVID LIPSON: I suppose I’m asking you to commentate because you yourself shrugged off your critics after, on this program, you accused Bill Shorten of being an economic girlie man and you were sort of whacked around by those who claimed that you were being sexist. So I suppose you know a little more than more most what this can be like.
MATHIAS CORMANN: I wasn’t being sexist at all. I used a bit of humour to make a very serious point. That is that Bill Shorten was part of the team that created the Budget mess that we find ourselves in. That Bill Shorten stands in the way of repairing the Budget mess that he was responsible for helping to create. That he is opposing most of our savings in the Parliament. That he is even opposing Labor’s own savings, which they banked and initiated in their last Budget. That he is now telling us that he is going to bring the Budget back to surplus more quickly than the Coalition, without pointing to any cuts or tax increases that he would actually pursue in order to get there. So, Bill Shorten is not up to the job of leading Australia. He is not up to the job of repairing the Budget. That was the point that I made, playing on my accent, using a bit of humour.
DAVID LIPSON: Look, just one final very quick point I want to ask you about, and this was from a press release that you released yesterday, where you said in their last Budget, the 2013-14 Budget, Labor left us with a total of $123 billion in project deficits across the general Government sector. Now that figure is actually from last year’s MYEFO, last year’s Mid-Year Budget update, not Labor’s last Budget, was that a misprint?
MATHIAS CORMANN: It is not a misprint at all. It is Labor’s last Budget. It is a matter of historical record that Labor’s last Budget is the 2013-14 Budget. Everybody knows that what they put into their Budget in May was a work of fiction, because just in the eleven weeks between the May Budget and the Pre-Election Economic and Fiscal Outlook, the Budget position deteriorated by $33 billion. When we came into Government, we set out to ensure that the revenue assumptions were more realistic, that various other assumptions were more realistic. We solved various legacy issues where Labor left behind problems without actually allocating funding to deal with them. Because the objective with our first MYEFO, which was the half yearly Budget update of Labor’s last Budget was to get the true state of the Budget. What we showed was that ... interrupted
DAVID LIPSON: Does that mean that PEFO is meaningless in the future?
MATHIAS CORMANN: What it says is, that Labor left behind a whole series of undisclosed problems and you might remember, when we downgraded revenue assumptions, Labor said that we were taking a deliberately pessimistic view in order to make their numbers look artificially worse. As it turns out we should have been more aggressive in downgrading Labor’s revenue assumptions and in fact we ended up being too optimistic. Now the truth is, that our job last year was to ensure that we presented to the Australian people the true state of Labor’s last Budget and that showed $123 billion in projected deficits, debt going to $667 billion and growing beyond that and more than $1 billion a month being spent on the interest to service the debt that Labor left behind. $1 billion a month just on the interest.
DAVID LIPSON: Senator Mathias Cormann, we’re out of time. Great to have you on the program today and throughout 2014. We look forward to 2015.
MATHIAS CORMANN: Always good to be here.