Transcript

Sky News – Australian Agenda

Senator the Hon Mathias Cormann
Minister for Finance

Transcription: 

PROOF COPY E & OE

Date: 

21/12/2014

Topic(s): 

Mid-Year Economic and Fiscal Outlook, Tax White Paper process

PETER VAN ONSELEN: As mentioned off the top of the program, we’re joined now live out of Perth by the Finance Minister, Senator Mathias Cormann. Senator thanks for being there.

MATHIAS CORMANN: Good to be here.

PETER VAN ONSELEN: It has been announced that there will be a reshuffle expected later this afternoon. The Assistant Treasurer’s position is up for grabs. In a sense you’ve been stripped of the portfolio. 

MATHIAS CORMANN: If there is a reshuffle announced later today that is entirely a matter for the Prime Minister. My rule as a Minister in the Abbott Government is very simple. I do whatever job the Prime Minister asks me to do. I do it to the best of my ability. Whatever job I hold now or in the future is entirely a matter for the Prime Minister.

PETER VAN ONSELEN: Obviously I say that in jest. You were acting in the role with Senator Sinodinos having stepped aside. He has now resigned if you like, from the Ministry, which has made way for this reshuffle. Do you welcome the opportunity to have an extra set of hands in the finance portfolio space because it’s been a hell of a load for yourself and Joe Hockey in particular over the course of the last twelve months or so. 

MATHIAS CORMANN: Obviously in the lead up to the next election or the next year, it will be important to have the best possible team on the ground. We had a very good team over the past fourteen, fifteen months and I’m sure the Prime Minister will make the necessary decisions to ensure we’ve got the best possible team in 2015 and beyond. 

PAUL KELLY: Minister, we’ve had the mid-year Budget update this week. What do you think is the message the Australian public ought to take from this update? 

MATHIAS CORMANN: The fundamental message is that we are on track with implementing our plan to repair the Budget and build a stronger, more prosperous economy. We started with a challenging situation in September last year. Global economic headwinds have added to the challenge. Events in the Senate have added to the challenge. But we are now in a much stronger position than we would have been if the Government had not made the difficult but necessary decisions to get the Budget back on track, to get spending under control. But there is still a lot of work to be done. If we are to protect living standards, if we want to build better opportunity for the future there really is no way we can avoid further economic and fiscal reform. 

PAUL KELLY: Frankly I don’t understand why you don’t attempt to galvanise the public and change public expectations and the public mindset off the back of this document. Why don’t you try and do that?

MATHIAS CORMANN: We are. We’ve said for some time that spending and the spending growth trajectory that we’ve inherited from our predecessors was unsustainable, that we have to get the Budget back into surplus. We’ve got to do so in a responsible fashion and that is exactly what we’re trying to do. 

ADAM CREIGHTON: Senator, you mentioned just earlier global economic headwinds, is it fair to say that that current Government is suffering from the same sorts of revenue problems that the previous Labor government suffered from? Of course in opposition you were very critical of the Budget outcomes and rightly so. So that’s the first question and secondly just on the Treasury’s forecasting methodology, I mean do you think there’s a mounting case to have a closer look at how the out years are projected?

MATHIAS CORMANN: Just taking your first question first, which is a very important question. Whoever is in Government there are two key structural challenges that we’re facing as an economy, as a country. One is related to the aging of the population, which has got implications for our capacity to grow the economy as strongly as we should and of course it has also got implications on the spending side. An aging of the population brings with it additional expenditure, in particular in health and social services. But the second structural challenge is our exposure to external risk, to global economic headwinds. For most of the period of the previous government, our terms of trade were at record highs, the best in 140 years. The prices that we were able to get for our commodities were at record highs. That started to come off at the tail end of the previous government. The problem with the way the previous government responded to falling revenue is that they actually decided to ramp up expenditure by more, ramp up expenditure by more on a permanent basis, structurally, including and in particular in the period beyond the forward estimates. Our response to falling revenues and our response to the economic headwinds that we’re facing is quite different. We are very focussed on making sure that we get spending under control. We are very focussed on making sure that the spending growth trajectory is affordable and sustainable into the future. If you look at the reforms in the Budget, if you look at all of the conversations since then, our main focus is on the medium to long term trajectory our focus is on structural reform, which starts low and slow and builds over time to get us back into a sustainable position ...interrupted   

PETER VAN ONSELEN: But Senator can I just jump in, because be that as it may, your rhetoric has continued to be a little bit inflated hasn’t it? On this program yourself  just over two months ago, when asked about the pathway back to surplus you said ‘what we have said is we will put the Budget back on a believable path to surplus’, and this is the important bit, ‘and get back to broad balance in the final year of the current forward estimates, that is still our commitment’, that was only two and a half months ago. But clearly you must have known then what you well and truly know with the release of MYEFO, which is that that just can’t be case.  

MATHIAS CORMANN: I’ve got to say that all the way through, we’ve been very considered with our comments in relation to these matters. Nobody expected in May when we delivered the Budget that iron ore prices for example would go as far down as they have, like in the sixties now, where as in the beginning of the year the iron or price was at $120 a tonne. We... interrupted

PETER VAN ONSELEN: But then why promise that you would ‘get back to broad balance in the final year of the current forward estimates that is still our commitment’? That was just two and a half months ago.

MATHIAS CORMANN: Peter, what I presented to you in June when I appeared on your program in June, shortly after the Budget was talk about what was in the Budget papers. That is what you would expect me to do... interrupted

PETER VAN ONSELEN: But this was 5 October. But this was in October.

MATHIAS CORMANN: Obviously, until such time as there is a Budget update, Peter, we can go around and around in circles around this, we have delivered the Mid-Year Economic and Fiscal Outlook as the official update on the state of the Budget. We’ve very openly and transparently presented in the Mid-Year Economic and Fiscal Outlook as to how the position of the Budget and the position of the economy has evolved since Budget time. What I would just say is that when I was on your last program this time last year and we delivered our first half yearly update on Labor’s last Budget and we tried to get the most realistic assumptions underpinning our revenue forecasts and the like, most commentators and the Labor Party were attacking us for being too pessimistic. 

PETER VAN ONSELEN: Sure.

MATHIAS CORMANN: As it turns out we weren’t aggressive enough in downgrading some of the revenue assumptions and revenue forecasts that we inherited from our predecessors. 

PETER VAN ONSELEN: But Senator, I guess my point though, my point is not whether or not the rhetoric results in a broken promise or not, my point is in a sense an extension of what Paul Kelly was asking about, the nature of how you sell the need for fiscal change. It’s hard to sell the need for belt-tightening and all the rest of it, when you must know on 5 October where the numbers were going ahead of the release of MYEFO as we saw at the start of this week. Yet despite that the rhetoric sort of stands by old numbers that you must know by then are going to be out. It’s hard to get the message across if you don’t just get on with it earlier.

MATHIAS CORMANN: Peter, actually you’re wrong. On 5 October we didn’t know what the state of the numbers would be in MYEFO. The reason we deliver the half yearly Budget update in the middle of December is because we are committed to ensuring that the data from the September National Accounts flows through those numbers. That data from the National Accounts doesn’t come through until quite a bit later than that. The commodity price changes continued all the way until we finally closed down the books on the half yearly Budget update, which we delivered earlier this week.  

TROY BRAMSTON: Minister, can I ask you about, again this question of Treasury’s Budget forecasts. Over the past ten years or so Treasury’s Budget forecasts have often been widely wrong and before you came into Government there have been a number of commitments. Some firmer than others about delivering a Budget back to surplus in a quick period. Now you’ve indicated in the MYEFO released on Monday that the Budget surplus would not come back before 2019-20. Can I ask you, are you prepared to make that a firm commitment that we will be back into a Budget surplus by 19-20 and if not, when do you think that will be?

MATHIAS CORMANN: Our firm commitment is to get the Budget back to surplus as soon as possible. What we’re presenting in MYEFO is essentially the picture on current indications when we will get into surplus. I can’t predict what might or might not happen over the next few years in terms of global economic conditions and the like. But what I will say, is that our commitment, unlike our predecessors is absolutely to get back into surplus as soon as possible, to make all of the necessary decisions to ensure we get our spending back under control, that we get our spending growth trajectory back on a sustainable and affordable foundation.

TROY BRAMSTON: Can I ask you then about the public perception to the Budget. We’re now six months on, the Government is well behind Labor in the polls. The Budget hasn’t been popular. Can I ask you for the response to the test that John Howard set. He said that the public will support a tough Budget if it meets two criteria. The first is that it has got to be in the public interest and the second it has got to be perceived to be fair. So by John Howard’s test your Budget has failed. Why do you think this is the case?

MATHIAS CORMANN: I don’t agree with your assertion that by John Howard’s test the Budget has failed. I would absolutely assert that our Budget is in the national interest, because if we are to protect living standards and build better opportunity for the future there is no other plan than the Budget that we’ve put forward. Despite all the noise from the Labor Party, there is no other plan. The situation that we inherited from the Labor Party was one where this generation continued to fund its living standards by borrowing from our children and grandchildren. We don’t think that’s fair. We don’t think its fair for Australians today to continue to put a significant chunk of our day to day living expenses on the national credit card to be handed over to our children and grandchildren. Because if we keep doing that, we’re forcing our children and grandchildren to pay higher taxes or accept deeper cuts in order to pay off the day to day living expenses that we’ve incurred today. We understand that we’ve had to make some difficult but necessary decisions. That's not always popular. We will continue to make the case as to why they’re necessary. We’ll continue to argue the case for reform. Over time, we are hopeful that people across Australia will accept that the decisions that we made were the right decisions. The right decisions for Australia and that they were necessary.

PAUL KELLLY: Just on that point, Minister, do you believe that the Australian public, after a year of argument from the Abbott Government does accept that in relation to its spending programs, the public have got to pay more in terms of health, in terms of education. Do you think the public’s got to the stage where it does accept that?

MATHIAS CORMANN: I think the conversation is ongoing, Paul. The test will be at the time of the next election whether people across Australia have accepted the path for reform that we have chosen. From our point of view, when you talk about health, health expenditure in recent times has consistently grown faster than the size of the economy. It is projected to consistently grow faster than the size of the economy in the years ahead. The policy challenge for Australia is to ensure that all Australians can have affordable and timely access to high quality healthcare, in a way that is also affordable and sustainable for the taxpayer. That is why we have gone down the path of exploring things like price signals and the like, which will help ensure that the limited resources available from taxpayers are deployed in the most efficient and effective way, can stretch as far as possible in the context of growing demand for those healthcare services. That is a conversation that will be ongoing and I’m hopeful that people over time will understand and accept that. 

PAUL KELLY: Well let me ask you about the Senate. I mean, obviously, you’ve got two big measures coming up in the Senate. You’ll have another go at university reform. And you’ve got the revised Medicare $5 voluntary arrangement. How confident are you these measures can get through the Senate?

MATHIAS CORMANN: The $5 voluntary arrangement won’t come to the Senate for some time. We are implementing the revised arrangements to strengthen Medicare and put Medicare on a sustainable foundation through regulatory measures. There will be an opportunity for the Senate to scrutinise and pass judgement in relation to our decision to pay a higher rebate for longer consultations than for the shorter consultations. All of the indications are that there will be broad support for that particular part of the package. Now the part of the package that you’re talking about probably will not come to the Senate until after 1 July. So there is still a lot of opportunity between now and then to continue that conversation. In relation to higher education, Christopher Pyne was able to persuade four out of the necessary six crossbenchers to support our higher education reforms. There’s obviously still a little bit more work to be done. But we’ll keep at it and we’ll put the higher educations reforms back to the Senate. We know that there is another two Senators that we will need to convince of the merit of our argument in order to get them through. 

PETER VAN ONSELEN: But to be able to convince them though Senator, without doubt, you will have to in a sense scale back the package and the package as it stands is what is within MYEFO. So another words, as a matter of simple logic, to compromise to get the higher ed reforms through, even if you’re able to win the argument, the situation that is in MYEFO will actually ultimately have to be worse than that when the deals get done. 

MATHIAS CORMANN: Without wanting to pre-empt any specific outcomes in relations to the higher education reforms, the proposition that you’re putting somehow is the Budget is a static document that never, ever changes, which is of course not true. The Budget is always a living document. If you look at the Mid-Year Economic and Fiscal Outlook that we delivered earlier this week, you will see that in it we have quantified the cost of Senate decisions. We have quantified the cost of delays and negotiations in the Senate. About $10.6 billion of the deterioration since Budget over the forward estimates is as a result of delays and negotiations in the Senate. For example the mining tax repeal package. We were able to get the mining tax repeal through. We were also able to get the repeal of all of the attached, unfunded promises through, but three of them more slowly than we would have liked. There was a $6.6 billion cost of that over the forward estimates. But we have more than offset that additional cost in the period beyond the forward estimates. Our focus will always be that where we incur additional expenditure or where there is a cost as a result of these sorts of delays to be able to make up that ground in other ways. 

ADAM CREIGHTON: Just on the question of expenses, which you just mentioned. So far the Government seems to have ruled out making any further cuts for fears of hurting the economy etc. But as we discussed earlier, the return to surplus in the year 2020 is largely dependent on some fairly rosy assumptions about the economy, such as unemployment falling to 5 per cent and so forth. If that increasingly looks like it won’t happen surely it’s a foregone conclusion that the Government will have to make further cuts and probably in the May Budget. Is that a fair inference?

MATHIAS CORMANN: Adam, I won’t be delivering the 2015-16 Budget for you here today. But there is an ongoing effort to repair the Budget. In the 2014-15 Budget 80 per cent of the Budget repair effort was on the expenditure side, 20 per cent was on the revenue side. Over the medium to long term as the structural reforms on the spending side kick in, more and more of that proportion of how much of the Budget repair effort is on the spending side will actually increase. It’s a matter of balance. It’s a matter of not overdoing it at the wrong time for want of a better word. We have very carefully considered the situation that we found ourselves in. In the lead up to the Mid-Year Economic and Fiscal Outlook our absolute commitment was, that wherever we made decisions to increase spending because of higher priority needs, such as on our national security in the context of a heightened threat environment, that we would offset any such spending on higher priorities by savings on comparatively lower priorities in the current circumstances. But beyond that, what additional savings measures may or may not be considered in the context of the Budget, that will be a matter that we can discuss after the second Tuesday in May next year. 

PETER VAN ONSELEN: Alright, we’re going to take a break here on Australian Agenda. We’re talking to the Finance Minister, Mathias Cormann. We’ll continue with the discussion when we come back. 

[BREAK]

PETER VAN ONSELEN: Welcome back, you’re watching Australian Agenda. Troy Bramston, Adam Creighton, Paul Kelly and I are speaking to the Finance Minister, Mathias Cormann. Senator can I ask you in the context of all the revenue downgrades, courtesy of commodity prices tanking and so forth. With the benefit of twenty-twenty hindsight, if you had your time again, would you have not shoved $9 billion across into the Reserve Bank in the first Budget?

MATHIAS CORMANN: No, that is wrong. When we came into Government we had to fix a whole series of legacy issues that Labor left behind. One of the very bad and irresponsible decisions that Wayne Swan made as Treasurer was that he raided the capital reserves of the Reserve Bank arguably at the worst possible time. We needed a strong Reserve Bank. We needed the Reserve Bank to have the appropriate access to capital reserves to have the freedom to make the decisions they make independently in the interests of our economy. That was a necessary decision. It was the right decision. It was a decision to fix one of the problems that we have inherited from our predecessors. 

TROY BRAMSTON: Minister, you just mentioned a legacy issue being the Reserve Bank. Can I ask you about one of the other big legacy issues, which is what did the nation do with the mining boom. There has been a number of suggestions that during the Howard Costello years that they have cost the economy $30 billion a year in the tax cuts they made over an eleven year period. There have been others, such as the Grattan Institute, which have said look, we’ve had a look at the mining boom, there’s not much that the nation has been able to carry forward as a legacy item. What’s your response firstly to the idea that the Howard Costello government cut too much tax, which is damaging our revenue base and the broader point about what legacy do we have to carry forward from the mining boom.  

MATHIAS CORMANN: The Howard government in 2007 left behind a strong economy and a strong Budget. No Government net debt. A $20 billion surplus. More than $50 billion in the Bank. The Government at the end of the Howard government period collected, collected more than $1 billion a year in net interest payments on the back of a positive net asset position. The mining boom as you call it, was in full swing over five of the six years of the Rudd-Gillard-Rudd governments. Over that period spending was ramped up way too much. First in the context of the global financial crisis. That was locked in as the new base. Then in the period beyond, including in the period beyond the published forward estimates. Spending in real terms under the ... interrupted

PETER VAN ONSELEN: But spending continues to go up. Spending goes up every year of the forward estimates from May. So it may not go up as much, but you say, sorry Senator, but as you say ...  

MATHIAS CORMANN: ...this is a very important point... interrupted

PETER VAN ONSELEN: ...if spending went up dramatically after the GFC and stayed there, it’s continuing to go up under your Government.

MATHIAS CORMANN: ...over the next four years we are keeping spending growth at 1 per cent in real terms on average per year. Under Labor, spending growth above inflation, in real terms, was at 3.6 per cent and Labor locked us into spending growth over the medium term of 3.7 per cent on average per year to 2023-24. We have reduced that down to 2.7 per cent. That is a very important point here, because Labor kept asserting that they were imposing a discipline on themselves of maintaining spending growth at 2 per cent in real terms, which is completely untrue. It never happened. They locked those numbers into their forward projections, but they never had any chance at all of ever getting there. Even worse, they kept locking Australia into further, permanent, structural spending increases over and above what we could afford. So at a time when revenue was falling instead of making sure that our spending was restrained, they actually decided to ramp up spending by more and that was one of the key legacy issues that we’re dealing with now. Just imagine all of the debate we’ve just had in order to reduce the spending growth trajectory from 3.7 per cent under Labor over the medium term to 2.7 per cent now, we’re still not down to the 2 per cent growth target that supposedly the previous government had imposed on themselves.

TROY BRAMSTON: Yeah but, Minister spending is only one side of the Budget. The other side of the Budget is the revenue side. And of course you have a very valid point to make about the Rudd-Gillard government’s increasing spending. But my question went to the Howard Costello government and reducing revenue through $30 billion of tax cuts that we’re still paying for every year in terms of the Budget, so was there mistakes in the revenue side of the Budget in addition to the spending side?

MATHIAS CORMANN: Sorry, we’re not paying for tax cuts right. That is just a completely flawed argument. The point I’m making is, that the spending growth trajectory that we inherited was taking us to 26.5 per cent of spending as a share of GDP. Now if you wanted to balance that sort of spending growth trajectory on the revenue side, you’d have to increase taxes as a share of GDP from the average over the last twenty years of 22.4 per cent, or the average in the period between the introduction of the GST and the GFC of 23.9 per cent, you would have to increase it up to in excess of 26.5 per cent as a share of GDP. That would damage our economy. That would cost jobs. It would be terrible for our international competitiveness. It would be the wrong way to go. There is no way past our focus on getting spending under control, getting spending growth under control. Trying to build a stronger, more prosperous economy where everyone has a better opportunity to get ahead, because stronger growth in itself will help to bring down that spending as a share of GDP. It will help to boost Government revenue. There are a number of things that you have to do at the same time. But this proposition that somehow we should fund a spending growth trajectory to 26.5 per cent as a share of GDP by increasing taxes to that same level is just completely irresponsible because it would seriously damage our economy. 

PAUL KELLY: Well, just on the tax question Minister, the Prime Minister has put tax reform, fair and square on the political agenda. As Finance Minister, looking at the accounts, what sort of scope do what have for tax cuts over the next few years?

MATHIAS CORMANN: It’s a very important question. Obviously you want to be able to pursue tax reform from a position of fiscal strength. That is why we’re working to repair the Budget to improve the room we have so that we can pursue tax reform with a focus on building a stronger, more prosperous economy. What is the objective of tax reform? The objective of tax reform is to ensure that we raise the necessary revenue for Government to fund the necessary services of Government in the most efficient, simplest, least distorting and fairest way possible. When I say least distorting, least distorting of our capacity to strengthen economic growth. There is a conversation to be had. There are some issues to be assessed and ultimately.... interrupted 

PAUL KELLY: Minister, look, look, we’ve got a lot of conversations to be had. Isn’t the reality here when you look at the mid-year update there is very little scope for tax reform?

MATHIAS CORMANN: I disagree. Tax reform is about making sure that we raise the necessary revenue of Government in a more efficient way. One of the conclusions out of the Henry tax review for example, that was never properly aired because the previous Government just went straight for the massive hit on the mining industry with the mining tax. But one of the important findings out of the Henry tax review was at that time we had 125 taxes across Australia, ten of which raised 90 per cent of the revenue, 115 of which raised ten per cent of the revenue. There are a lot of inefficient taxes that should be considered as to whether there are better ways to raise that revenue. 

PAUL KELLY: Sure, but I just want to come back to the point about tax cuts. I mean, what is the scope for reducing the tax burden for genuine tax cuts given the budgetary situation.

MATHIAS CORMANN: What we have done in the Budget and what we have confirmed again in the Mid-Year Economic and Fiscal outlook is that we put a tax cap into our modelling. When we talked this time last year about the debt growth trajectory that we inherited, with debt going to $667 billion within the decade and growing beyond that, that was on the basis under the previous government of an assumption that there would be no adjustment for bracket creep whatsoever. That middle income earners would be allowed to end up in the highest tax brackets. Our modelling underpinning our Budget numbers includes a tax cap of 23.9 per cent as a share of GDP, which is the average in the period from the introduction of the GST to the GFC. All other things being equal there is an assumption built into our numbers that there will be an adjustment for bracket creep sometime in the future.  

ADAM CREIGHTON: One of those major taxes that you mentioned Minister earlier was of course the GST, raising something like $50 billion a year. Various commentators have interpreted Joe Hockey’s remarks to mean that the Government’s effectively ruled out any increase in the GST, yet we were all led to believe that the white paper was comprehensive and everything was on the table. So is it indeed true that the Government has ruled out any further increase to the GST?

MATHIAS CORMANN: The white paper process is comprehensive and everything is on the table. The point that the Treasurer made is that there can’t be any change to the GST without a broad consensus, including a consensus among all of the States, including the Labor states. He also made the point that any tax reform, because we don’t want to increase the tax burden as a whole, there will have to be offsets. If you make changes on one hand, there’s got to be an offset on another hand. Right now there is very limited capacity to do so.

PETER VAN ONSELEN: So he’s effectively ruled out any change to the GST. I mean, Labor did it pre the Henry review they wouldn’t let it be included. The Coalition has let it be included in the white paper but has just made it clear before the white paper’s released that you’re not interested in it?

MATHIAS CORMANN: What we’ve said is what we’ve said all the way through. In the lead up to the last election we said there would be no change to the GST full stop, end of story in the first term of an Abbott Government. We also said we would engage in a conversation about medium to long term tax reform priorities through the tax white paper review process. We have not, unlike the Labor Party, taken anything off the table when it comes to going through this tax white paper reform process. However, what we have also said, the final point that we made was that any proposal to change our tax system, any reform proposal designed to strengthen Australia, strengthen economic growth opportunities across Australia would be taken to a subsequent election. Let’s not get ahead of ourselves. Let the process run its course. Let the conversation take place. Our focus will be on achieving consensus around a number of key tax reform priorities and let’s see where we can get to by this time next year.  

TROY BRAMSTON: Minister, you just mentioned the GST. If the Government would not consider an increase in the rate, would you consider broadening the base, for example to include food. That’s something that John Howard and Peter Costello still seem to indicate would be a good way to go. So can I ask you that firstly about broadening the base of the GST. And secondly you just said let’s start the conversation so what areas of taxes would you like to see changed? 

MATHIAS CORMANN: So here we go again right. You can ask me about the rate, the base or anything, the commitment in the lead up to the last election was very clear. No change to the GST full stop, end of story in the first term of the Abbott Government but the start of the conversation through the tax white paper reform process during our first term in relation to how our tax system can be improved, how it can be made fairer, simpler, more efficient. Let’s see what sort of consensus can be achieved around tax reform priorities towards the end of next year and early 2016. Whatever tax reform proposals we adopt, we will take them to another election before legislating them. Now I’m not going to start a running commentary on things that may or may not happen depending on how the conversation progresses over the next twelve months or so.    

ADAM CREIGHTON: You mentioned the Reserve Bank earlier. That reminds me of the Financial System Inquiry. We had forty something recommendations recently from David Murray. And of course one of those was to lift the capital levels of banks so that they are unquestionably high. I realise of course that the Government is still considering all of those recommendations but I’m just wondering if you have any thoughts on any of those recommendations and in particular the banking one. 

MATHIAS CORMANN: The Government is currently considering those recommendations and when we’re in a position ...  interrupted

PETER VAN ONSELEN: Well let’s just begin the conversation.

MATHIAS CORMANN: ... when we’re in a position to make an announcement about our response we will do so.

PETER VAN ONSELEN: Can I ask you, before we run out of time Senator Cormann, I want to ask you for a frank assessment, it strikes me that both sides of politics have booby-trapped the Budget going into the change of government elections. Labor did it as the Prime Minister has said on repeated occasions, going into the last election on the spending side, with massive amounts of spending baked into the forward estimates and beyond. But equally in fairness, John Howard and Peter Costello did it going into the 2007 election on the revenue side with massive tax cuts, which Troy Bramston alluded to earlier. Can we have a frank beginning of a conversation about the fact that booby-trapped Budgets going into a change of government elections has been a bipartisan problem in this country?

MATHIAS CORMANN: I completely reject that. Firstly, the tax cuts that you’re talking about were actually implemented by the Rudd Labor government, so I’m not sure ... interrupted 

PETER VAN ONSELEN: But they were announced, don’t get me wrong, they were and that was because Kevin Rudd was trying to narrow his point of difference with the Government. But they announced and then copied by Rudd. They were announced by Peter Costello.

MATHIAS CORMANN: Peter, that is all very interesting you trying to defend the motivations of Kevin Rudd and Wayne Swan and why they did certain things. The point is this, in 2007 John Howard and Peter Costello left behind a strong economy, a strong Budget, a strong surplus, no Government net debt, the Government was collecting more than $1 billion in net interest payments on the back of a positive net asset position. Right now we’re spending more than $1 billion a month on interest payments to service the debt that Labor left behind. There is no doubt that Labor in government when they thought they were about to lose government they locked in massive additional expenditure on a permanent basis, structural increases in expenditure without any regard whatsoever about what the nation could afford. That is most certainly something that we are now having to deal with. We are dealing with it. We’ve made significant progress since September last year, but there’s much more work to the done.

PETER VAN ONSELEN: Alright Senator Cormann, you’ve always been very generous with your time with us here on Australian Agenda. You have again today. We appreciate your company on the program. Have a Merry Christmas and a happy new year, thank you very much. 

MATHIAS CORMANN: Same to all of you.  

[ENDS]

Senator the Hon Mathias Cormann, Minister for Finance, Perth