Senator the Hon Mathias Cormann
Minister for Finance
Date: Thursday, 29 January 2015
STUART BOCKING: There has been plenty happening on the Federal front already of course this year. And Parliament hasn’t even resumed for the year. One of the key Cabinet members is the Finance Minister Mathias Cormann and he is on the line. Minister good morning.
MATHIAS CORMANN: Good morning Stuart and good morning to your listeners.
STUART BOCKING: Thank you very much and all the best for 2015.
MATHIAS CORMANN: Yes, looking forward to 2015. We are very confident and optimistic that 2015 will be a good year for Australia.
STUART BOCKING: Tell me, how do you start work on a second Budget, which is coming up in the months ahead when so much of your first remains up in the air?
MATHIAS CORMANN: What we need to do in 2015 is build on the progress that we made in 2014 when it comes to strengthening our economy, creating more jobs and repairing the Budget. So yes, some of our structural reforms from our first Budget are still being debated and we will still have to do some more work to get them through the Parliament, but we are in a much stronger position now than we would have been if we hadn’t made some of the difficult but necessary decisions last year.
STUART BOCKING: Given so many of those Budget projections are based on Treasury estimates, they need some starting points based on where we are at with various reforms, what savings are there, what aren’t. Is it going to be difficult to come up with hard and fast figures over and above the difficulties you usually face framing Budget given that so much of the first Budget is still up in the air? How much faith can we put in those figures?
MATHIAS CORMANN: We provided half yearly updates on the state of the Budget just before Christmas and what we showed there is that there was an impact from global economic headwinds because commodity prices in particular for iron ore and oil and gas have been falling unexpectedly and quite dramatically. There also are of course the negotiations and delays in the Senate. We provide regular updates on how the Budget is tracking and that will continue to be the case. But the important point here is, in 2014 we were able to scrap the Carbon Tax and the mining tax. We were able to reduce red tape cost for business by more than $2 billion a year. We were able to start the significant infrastructure investment rollout. We were able to finalise three Free Trade Agreements with key economies like China, Japan and South Korea. All of that is already starting to show an impact. In 2014, more than 210,000 new jobs were created at a rate more than three times as high as the year before. So we need to continue to head in the right direction. We need to continue to make progress. And when it comes to the state of the Budget, we are in a much stronger position now than we would have been if we hadn’t made these sorts of decisions last year and indeed...interrupted
STUART BOCKING: Well is that right because the deficit has actually worsened?
MATHIAS CORMANN: We inherited a situation where we were heading for $667 billion worth of Government debt within the decade and growing. As a result of our decisions we have been able to bring that down by nearly $170 billion and falling. So we are heading in the right direction. We do have some more work to do. Yes, there are some structural reforms...interrupted
STUART BOCKING: That may be on the overall debt but in terms of the deficit year to year, the deficit has actually blown out.
MATHIAS CORMANN: The deficit continues to reduce over the forward estimates. The trajectory is right. We are working to get into surplus as fast as possible. It is not as fast as we would have liked on coming into Government, but we did inherit a very challenging starting position, $123 billion worth of projected deficits over the forward estimates and debt heading for, as I said, $667 billion. We are working to turn that around. Whatever the situation now, we are at least $40 billion better off over the forward estimates than we would be under Labor given that they are opposing many of the measures that we are putting forward and they are even opposing some of their own savings...interrupted
STUART BOCKING: Yeah, that’s right. We have heard that. Given how...interrupted
MATHIAS CORMANN: And they are wanting to restore some of the spending that we have removed.
STUART BOCKING: Given how difficult it has been to get support for the cuts you announced in the Budget last May, do you plan on pressing ahead with further cuts in the next Budget?
MATHIAS CORMANN: This is a marathon, not a sprint. We will continue to work on our plan to build a stronger, more prosperous economy, where everyone has the best opportunity to get ahead and we will continue to work on getting the Budget under control, getting spending under control and making sure that as a nation we can live within our means, that we are not continuing to borrow from our children and grandchildren in order to help fund our lifestyle today. We think that is very important if we want to protect our living standards today and if we want to increase and improve opportunity for the future rather than undermine it. If we don’t make some of these decisions today, they will only become harder down the track. The longer we wait to get ourselves back into a situation where we can live within our means, the harder these decisions will become down the track. We think that we need to continue to take action today.
STUART BOCKING: I’d agree with that but why is it seemingly; it has been so hard getting that message through? All the polls tell us that if we were going to an election tomorrow, people want Bill Shorten and Labor back after six chaotic years under Labor. How can we be in this situation that a brand new Government so early in its new term, promising so much, having outlined all of the challenges that you outline, how can it be that there could be this overwhelming sentiment that we want to go straight back to Labor?
MATHIAS CORMANN: There is still some way to go until the next election. When you have to make difficult though necessary decisions that is not always popular. We have got to continue to work hard to explain what we are doing and why, to take people into our confidence. We are not doing any of this for fun. We are not doing any of this because we enjoy being unpopular. We don’t. We are doing this because it is the right thing to do for the country, because it is the right thing to do for Australia. We will continue to press ahead. It is an important job, it is a necessary job. We are committed to building a stronger Australia, to put Australia on a stronger foundation for the future and we just have to keep at it.
STUART BOCKING: We saw those inflation figures out yesterday. Do you think the Reserve Bank will resist cutting interest rates when it meets next week for the first time this year?
MATHIAS CORMANN: The Reserve Bank makes its own decisions independently, as they must. The inflation figures that came out yesterday were very good news for families indeed. What it showed of course is that the fall in petrol prices has had an impact and that also, on the back of scrapping the Carbon Tax, in the September quarter electricity prices fell sharply and they continued to remain flat in the December quarter and that is of course good news for families, for pensioners and indeed for businesses and for job creation.
STUART BOCKING: I saw some comments recently from a Federal Court Judge, Richard Edmonds. He is a leading tax expert. He claims the super system is totally skewed to allow tax avoidance by the wealthy. He says more personal incomes such as gifts and bequeaths should be taxed. Justice Edmonds added that taxation of the family home, fringe benefits and negative gearing all need to be considered, but says with the exception of perhaps one or two, politicians aren’t interested in tax reform. What is your response to that?
MATHIAS CORMANN: We are about to engage in a very comprehensive conversation with the Australian people about how our tax system can be improved. How we can ensure that we deliver lower, simpler and fairer taxes and collect those taxes in the most efficient way possible. When it comes to superannuation though, we made very clear commitments in the lead up to the last election that we wouldn’t make any unexpected, adverse changes to superannuation tax and regulatory settings because people saving for their retirement need certainty and stability around policy settings. You can’t have Governments continuously chopping and changing these policy settings. But having said that, everyone across Australia over the next year will have an opportunity to put forward their ideas and their suggestions on how our tax system can be improved, how it can be made fairer and more efficient and the Government will consider the findings out of that White Paper review process and take any proposals we would want to adopt to the next election.
STUART BOCKING: Given that these will be difficult arguments, difficult debates, it will be done around the spectra of scaremongering from Labor. Do you have any political capital left to be able to mount some of these difficult arguments?
MATHIAS CORMANN: I believe that it is very important for us to have an open, transparent conversation about how we can put Australia on a stronger foundation for the future, including by making sure that we raise the necessary revenue to fund the important services of Government in the most efficient, least economically distorting way possible, because that of course is going to be important if we want to maximise our economic growth opportunities into the future. And look, you know that is going to be a conversation that the Government is going to have in the lead up to the next election and people across Australia will have the opportunity to pass judgment on what we are putting forward by way of pre-election policy proposals at the time of the next election.
STUART BOCKING: The leading retailer Gerry Harvey today expresses concerns that there are too many powerful lobby groups in Canberra doing the bidding of profit shifting multinationals. He argues that companies paying their fair share of tax are left without a voice in Canberra. Is he right?
MATHIAS CORMANN: I don’t believe so. From my point of view and from the Government’s point of view, we are totally committed to making sure that every business, every company that generates profits in Australia has to pay their fair share of tax on those profits generated here in Australia. We already here in Australia have the toughest anti avoidance tax laws in the world. But, we are also mindful of the fact that given changes in business practices, given changes in global economic dynamics, we have to be ever mindful of the need to improve our tax framework and again, over the next 12 months, there will be some significant focus on all of this. Through the G20, we are actually working very hard and Australia has led the charge on making sure that there is a more robust approach, to making sure that multinationals operating in different countries around the world pay their fair share of tax wherever they generate their profits, including here in Australia.
STUART BOCKING: Just a couple of other points: when did you find out that Prince Philip had received an Australian Knighthood?
MATHIAS CORMANN: The morning of Australia Day when I received a copy of the Press Release.
STUART BOCKING: So that was your first understanding as to what was happening? If Tony Abbott had sought your advice, what would you have told him?
MATHIAS CORMANN: Look, I am not going to comment on this.
STUART BOCKING: Well you are a key Cabinet Minister, imagine it goes to Cabinet. What would your advice to the Prime Minister have had been?
MATHIAS CORMANN: Cabinet deliberations are of course confidential for good reasons, in order to ensure that Cabinet discussions can be appropriately robust, so that we are able to make the best possible decisions for Australia. Now in relation to this particular decision, the Prime Minister has taken responsibility for the decision he has made. He has learnt his lesson. He has indicated that he will take a different approach in the future, that he will consult more widely. I think it is now time to move on and for all of us to focus on the important issues for Australia and that is how we can build a stronger, more prosperous economy, how we can ensure that Australia is safe and secure in the context of global economic headwinds and in the context of rising global threats.
STUART BOCKING: You say that he has learnt his lesson. I can go all the way back to when he basically free lanced on this gold plated Paid Parental Leave scheme when in Opposition. Again something that wasn’t taken to the Shadow Cabinet at the time. Now as the Finance Minister, you have been having to juggle the costs of that in all of the work that you do. Does it suggest he has learnt anything given that was back when he was in Opposition; he was freelancing on this stuff with this so called captain’s picks. And it is still happening.
MATHIAS CORMANN: Well as the Minister I work very closely with the Prime Minister and the Treasurer. I can assure you that all of us and indeed the whole Cabinet and the whole of Government is focused on doing everything we need to do to help build a stronger, more prosperous economy, to create more jobs and to repair the Budget. We are now focused on our second Budget. There is a lot of work underway in order to make sure that we build on the progress we made last year. Let’s just wait and see what is in the Budget.
STUART BOCKING: Alright and who will lead us to the next election?
MATHIAS CORMANN: Tony Abbott.
STUART BOCKING: Alright, appreciate your time Minister, thank you.
MATHIAS CORMANN: Always good to talk to you.