Senator the Hon Mathias Cormann
Minister for Finance
Date: Tuesday, 16 December 2014
JANINE PERRETT: That much anticipated MYEFO report was handed down yesterday, business as usual a good thing, but here to analyse it, the hardest working and most effective member of the Government’s economic team, some would say, Finance Minister Mathias Cormann in his home town of Perth. Welcome back to the show.
MATHIAS CORMANN: Good to be back.
JANINE PERRETT: I am going to try and start on a positive note. MYEFO, there was so much anticipation that it was going to be terrible and the media were primed up. Now you actually got some ticks from unexpected quarters. I mean even Ross Gittins in the Sydney Morning Herald, said what I said last night, not as bad as it could be. There were ticks for how it was handled in a sober, relevant way. You must have been happy with the response to what could have been quite touchy?
MATHIAS CORMANN: The most important point out of MYEFO is that it shows that we are on track when it comes to repairing our Budget. Yes, of course, we started with a challenging situation back in September last year. Of course global economic head winds have added to the challenge. Of course some of the events in the Senate have added to the challenge. But fundamentally, if you look at the progress that has been made, we have been focusing on getting spending and spending growth under control and any additional spending decisions that we have had to make since May in the context, for example, of a heightened threat environment in relation to our national security and the like, we have more than offset by additional savings. Yes there has been a deterioration in the Budget bottom line, but it is essentially as a result of developments not under our direct control.
JANINE PERRETT: Just going to the general view as you are saying, you say that the Budget is on track, of course the figures still show there is a bit more pain before gain, but what the commentators noticed is the different tone. For example, some have picked up on the fact that the Treasurer seems to be focusing on growth over the obsession with the surplus for example. Has there been a subtle shift, even in the rhetoric?
MATHIAS CORMANN: Ever since well before the last election and all the way since then, we have always said we are focused on implementing our plan to build a stronger, more prosperous economy. Repairing the Budget is one of the planks that will help us achieve strengthening economic growth and strengthening job creation into the future. There are many other important parts of this. The important observation in relation to 2014, as we embark towards 2015, is that economic growth in Australia in 2014 has been surprisingly strong given some of the global economic head winds. It is stronger than what it was the previous year. Job growth has run at about three times the rate as the previous years, still not high enough in order to ensure that the effect of population growth is properly absorbed, but we are heading in the right direction and decisions like removing the carbon tax which has contributed to lower energy prices, the fact we have interest rates at historically low levels, the fact that the Australian Dollar is starting to come off, the fact that we have been able to sign up three new free trade agreements, the fact that we are rolling out our record infrastructure investment program, these are all things that will contribute to stronger growth, which over time will generate stronger revenue for Government and will help with the Budget repair effort.
JANINE PERRETT: They’re all of your positives, but the one big negative is still the uncertainty over the Budget and we know that that is a lot to do with the log jam in the Senate and recalcitrant Senators and opposition. But given that you have got that problem, there was a front page story in the Sydney Sun Herald this weekend, they polled all of the major banks in Australia, big and small, who said the uncertainty over the Budget is hitting confidence, that hits our bottom line, now even though it is outside your control, it is affecting you, what can you do on it if you continue to face this roadblock in the Senate?
MATHIAS CORMANN: We have got to focus on the positives. The truth is that we have passed more than $50 billion in savings since September last year, savings both in the Mid-Year Economic and Fiscal Outlook last year and in the Budget earlier this year. Some of the more structural reforms, which don’t take affect for some time, are yet to be passed. If you look at the cost of delays and negotiations in the Senate, about $10.6 billion, $6.6billion of that relates to the deal to repeal the mining tax. Now that has locked in $10billion of savings over the forward estimates, $50 billion of savings over the decade and the cost over the forward estimates from that deal is more than offset in the period beyond the forward estimates. The short answer Janine, is that we have just got to keep at it and we have just got to continue to make the argument as to why Budget repair is important if we want to protect living standards and build opportunity for the future.
JANINE PERRETT: That is what I was going to ask, even Joe Hockey has admitted it is about getting the message out there. This wasn’t a poll of voters, and these were your main banks in Australia. Does it disturb you that they blame this Budget uncertainty for so much? Obviously their message isn’t ideal is it?
MATHIAS CORMANN: I disagree with them. There is no Budget uncertainty. The Budget that we delivered in May is our plan to repair the Budget mess that we inherited. It is our plan to build a stronger, more prosperous economy. It is our plan to take Australia forward. 75 per cent of all of the measures in the Budget have passed through the Parliament. A significant proportion of the savings, have passed through the Parliament. Nine out of ten revenue measures in the Budget have passed through the Parliament, with one of those nine out of ten measures to be implemented administratively in February. We are actually on track. Yes there is much more work to be done, but we have made a good start.
JANINE PERRETT: Are you disappointed in business leaders? We have had the Prime Minister say on a number of occasions, actually plead with them, saying ‘can you help us in this, to get the message out’ about the precarious situation of the Budget, of the deficit and what we are facing in the future. The key problem though, is that business is just not spending, they said they would when you came to power, they are sitting on a lot of cash, a bit of investment in the economy wouldn’t go astray would it? Putting their money where their mouth is?
MATHIAS CORMANN: Janine, a couple of things there. First in terms of the first part of your question, I am not a commentator on what business should or shouldn’t do in terms of their own commentary. I will leave it up to then. My focus is on doing my job, which is to work closely with Joe Hockey our Treasurer, on implementing our plan for a stronger economy and to repair the Budget. In terms of business decisions on where to invest, how to invest, when to invest, what to invest in, that is very much their area of responsibility. These are decisions for them to make. We are working to set the right conditions where business leaders will have the confidence to increase investment in Australia and to help us strengthen economic growth and create more jobs.
JANINE PERRETT: You mentioned low interest rates. Do you think there is too much reliance on the RBA to cut rates further with all this speculation, to do that work for them, that everybody wants something and thinks the RBA better cut, we are not going to do anything, it is up to them to help stimulate the economy.
MATHIAS CORMANN: The RBA will make its judgments independently based on its analysis of economic conditions in Australia and around the world. I am sure that the RBA will continue to make those decisions in exactly the right way, independently as they must. From our point of view, from the Government’s point of view, we are focusing on making sure that we make the necessary decisions to ensure that Australia is the most competitive internationally that we can be. That we bring down the cost of doing business. That we boost opportunity for businesses to invest, to create jobs, to create opportunity for all Australians to get ahead.
JANINE PERRETT: Given everything you said earlier about how the economy wasn’t that bad this year and things, as Joe Hockey are saying, should get better, in that sense then, the RBA has made it clear that they will only cut if things get desperate. In some ways, it is not a vote of confidence in the economy, it is at odds with what you are saying about the state of the economy, there is speculation that we will need another cut to get the economy going again.
MATHIAS CORMANN: Janine again, the Reserve Bank will make its own decisions. But if you look at the Australian economy right now, there is no doubt that over the past year we have faced global economic headwinds and no doubt, some of these global economic headwinds will continue into the new year. But the fundamentals in Australia are strong. The Government is working to further improve on those fundamentals, by bringing down the cost of doing business. That is why we got rid of these bad taxes, like the carbon tax and the mining tax. That is why we are cutting red tape costs for business, so far by about $2 billion. That is why we have been rolling out $1 trillion in environmental approvals to get more projects of the ground. That is why we are doing all of the things that we are doing to strengthen opportunities across the Australian economy domestically.
JANINE PERRETT: Yet the Treasurer, as I said, said he thought 2015 would be better. Most people are surprised by that comment, given, let’s take away even the international factors that we can’t know about, but looking at Australia at the moment, what gives you this confidence? What is it that is going to better? The mining boom isn’t suddenly going to come back next year is it?
MATHIAS CORMANN: Obviously energy prices are now lower than what they would have been on the back of getting rid of the carbon tax. Red tape costs for business are lower. The free trade agreements, Andrew Robb today announced …interrupted
JANINE PERRETT: But that is going to take a while to get through, the free trade agreements, the benefits aren’t they?
MATHIAS CORMANN: Not quite, obviously Korea has already come into effect and Andrew Robb today put out a statement that the free trade agreement with Japan is about to come into effect. The free trade agreement with China will deliver significant opportunities, in particular for agricultural producers right across Australia. All of these things add up Janine and when you add the record investment in job creating, productivity enhancing infrastructure across Australia to that, you really start ending up with a very comprehensive plan to build a stronger, more prosperous economy. We are very confident that it will start paying dividends for the Australian community in 2015.
JANINE PERRETT: Aren’t you learning what all of your predecessors learned, that no matter what you do, how fabulous economic managers you may be, you are, Australia is hostage to international forces and the fact is that as you have learnt with this latest MYEFO, they can come along and hit you, there is nothing to say. I mean the Eurozone is looking very precarious at the moment. Greece has come out of nowhere, there is a lot of question marks internationally next year that could blindside you too, couldn’t there?
MATHIAS CORMANN: Janine, you are exactly right. The Australian economy is exposed to external risk. There are no two ways about it. That is why, for a very long time, we have argued that we need to get our Budget back under control, because we need to ensure that we are in the most resilient position possible in the face of any challenge coming our way. But on the flipside, we need to be in the strongest possible position to take advantage of the opportunities coming our way, because still over the next decade and well beyond that most of the economic growth in the world will be generated in the Asia Pacific. Most of the economic growth in the world will be generated in our part of the world. We need to ensure that Australia is in the most competitive, the strongest possible position to take advantage of those opportunities, while making sure that we are as resilient as possible in the face of any additional global economic headwinds that may come our way.
JANINE PERRETT: Before we run out of time I do want to ask you about your personal campaign to get rid of Qangos, as they’re known those Government bodies, 175 I have seen one figure on it. Is this about saving money or just efficiency, red tape, I mean nobody must be arguing to save a qango surely?
MATHIAS CORMANN: It is a combination of all of the above. As a Government it is our responsibility to taxpayers to ensure that the administration and the operation of Government is as efficient and as effective as possible. What we announced in MYEFO the other day was the third phase of our smaller government reform agenda. All up the first three phases so far have delivered around $539 million in savings. But the benefit of those reforms goes well beyond mere savings to the Budget bottom line. They are also designed to ensure that we improve lines of accountability, that we improve service delivery to the community, that we get rid of duplication, overlap and waste across the public sector and across the broader government sector. We will continue with those efforts in the future.
JANINE PERRETT: Final question, given as I said the Treasurer’s admitted that you need to get out there, you’ve said it and sell the message, you have been a man down. You have been doing two jobs, Assistant Treasurer, are you going to get some help in the new year? Do you think you’ll get either Senator Sinodinos back or someone else? Or you know do you think you can keep going with a man down?
MATHIAS CORMANN: Janine, I’ve got a very simple rule. I do whatever job the Prime Minister asks me to do. I do it to the best of my ability every single day and I will continue to do so until there is a change. My future in relation to this job and any other job in government is entirely in the hands of the Prime Minister.
JANINE PERRETT: Okay, so I won’t ask you about Treasurer’s or anything else. I’m going to leave you on a positive note and wish you a very merry Christmas.
MATHIAS CORMANN: A very merry Christmas to you as well.
JANINE PERRETT: You have worked very hard this year. We will see you in the new year.
MATHIAS CORMANN: Thank you.
JANINE PERRETT: That was Mathias Cormann in Perth.