Senator the Hon Mathias Cormann
Minister for Finance
TOM CONNELL: Hello and welcome to Saturday Agenda. I am Tom Connell filling in for David Lipson and we are in the midst of course in the final sitting fortnight before the Easter break where the Government will prepare in earnest for the 2015 Budget. This time last year we knew the tough Budget was on the way even if the nature of some of the spending cuts came somewhat out of the blue. This time around, according the PM, things will be different, almost boring were his words. The upcoming Budget, easier for families, tax cuts for business. The Budget repair job that was an emergency is now apparently on hold, at least for now. For more on this, I am joined by Finance Minister Mathias Cormann who is joining us from our Perth studio. Minister, thanks for your time and just before we get onto the Budget, we saw very late yesterday afternoon this Moss Review released. It looked at sexual abuse in Australia’s detention centre on Nauru. It found evidence of rape, sexual assault of minors and guards trading marijuana for sexual favours from female detainees. Apart from adopting the recommendations, how about allowing more media access to shine a light on what is clearly a very dark place?
MATHIAS CORMANN: Some of the content in the report that you mentioned is very concerning. As you have indicated the Department has accepted all of the recommendations and all of the recommendations will be implemented. Beyond that, I will leave it to the Minister for Immigration to respond to these sorts of inquiries as that falls fairly and squarely within his remit.
TOM CONNELL: Just broadly though, do you think it should be open to the media or even to other organisations to monitor what is going on so it is just not these occasional reports and me or you don’t know that much about what is going on?
MATHIAS CORMANN: I am not a commentator, I am a Minister in the Government and the Minister with
responsibility for this area is Peter Dutton as the Immigration Minister. I will leave him to deal with these sorts of issues.
TOM CONNELL: Alright, on to your responsibilities, you are the Finance Minister as you point out. Often the remit there is to be making the cuts in Budget time. It sounds as though you may be a little less busy this time around judging from the rhetoric of the PM lately.
MATHIAS CORMANN: Last year was our first Budget in our first term. When you have a change of Government, you need to change direction. So there is going to be more significant change in the first Budget of a first term Government. We did do a lot of the heavy lifting this time last year. This year’s Budget will build on the progress that we have made last year. You would remember that when we came into Government, we inherited a weakening economy, rising unemployment and a Budget position that was rapidly deteriorating with a forward spending growth and debt growth trajectory that was manifestly unsustainable. Now over the past year, the economy has been strengthening, jobs growth has been strengthening and the Budget is now in a better position than what it was. We have made some significant progress. There is further to go but we will continue to press ahead in an orderly and methodical fashion to get us on a more sustainable foundation for the future.
TOM CONNELL: You talk about the heavy lifting. The biggest cut that was actually passed to take affect was foreign aid and that’s not really structural because well the Government still says it wants to ultimately increase foreign aid in the future, the other big thing was hospitals and schools. Again that doesn’t kick in until 2017. So how much structural change has actually happened?
MATHIAS CORMANN: There has been significant structural change. If you look at the forward trajectory in the Intergenerational Report, you would have seen that the previous Government had us on a trajectory taking us to Government net debt at 122 per cent as a share of GDP. Quite unbelievable. If all of our Budget measures would be passed, that would mean that we would be paying off Government net debt in full by 2031. But the trajectory that we are currently on has achieved a halving of the debt trajectory that Labor had put the country on. In terms of Government deficits, the previous Government had us on a trajectory taking the deficit to 12 per cent as a share of the economy. We have been able to halve that trajectory over the next few decades. But yes, there still is further work to be done. If all of the measures in the Budget were to be passed, we would be able to stabilise spending at current levels as a share of the economy and we would be in surplus all the way through from 2019-20 to 2054-55, all other things being equal. So it is a matter of continuing on a better trajectory ...interrupted
TOM CONNELL: Sorry Minister but all of the Budget though wasn’t passed of course, in part because it seems as though it was unpopular, and because it has led even to a lack of support in the party room as well. Are you frustrated by voters because if the polls are accurate, they are not as concerned about debt as you seem to be, they are more worried about funding cuts.
MATHIAS CORMANN: Firstly, there is nothing new under the sun. There is nothing unusual about not everything in the Budget being passed 12 months down the track. It has always been thus. It was the same under the previous government. It was the same under the government before that. When you have got more substantial structural reforms, there has to be a significant level of debate, significant level of scrutiny. Inevitably, there are adjustments along the way to ensure that you get the balance absolutely right. That is a process that we are currently going through. The previous government had to take private health insurance rebate means testing which they pursued to the Parliament three or four times over a three year period. There is nothing new under the sun, that inevitably always happens.
TOM CONNELL: Right, so you’re saying now, not all the Budget was passed, we are on the right track. When it came out this was the tough medicine Australia had to have, all of the Budget needed to be passed, we would find alternative savings if we don’t find these ones. What’s changed because dare I say there is less of an appetite for debt and perhaps if I may put it to you Mathias, has the Government become economic girlie men on this front?
MATHIAS CORMANN: Not at all. We are absolutely focused on the job at hand to put Australia on a stronger foundation for the future, to deal with the debt and deficit disaster that Labor left behind. You talk about having to deal with Budget measures still from last year’s Budget. Until a few weeks ago, we were still dealing with Budget measures from Labor’s last Budget. We were able to pass a particular savings measure through the Senate a month ago, in relation to making sure that taxpayer subsidies for research and development are better targeted. A measure which was initiated by Labor, but which Labor under Bill Shorten ended up opposing. So when it comes to the particular description which you have just used, that is one that fairly and squarely applies to Bill Shorten, because he tells us that he would bring the Budget back to surplus more quickly than the Coalition. Yet he is opposing most of the savings that we’ve put forward, about $30 billion worth of savings. He is not telling us where he would increase taxes or impose deeper cuts in order not only to get into surplus, but into surplus more quickly. He was a senior Minister in the government that created the mess that we’re finding ourselves in. You’ve got to remember, at a time when revenue was starting to fall towards the tail end of the previous government, they decided to ramp up expenditure permanently into the future in the period beyond the forward estimates. That is not something that was reflected in their last Budget but that is something that we now have to deal with.
TOM CONNELL: Okay. Just take you though to your own Government. Tony Abbott came to power with a big mantra about tackling debt, if he goes to the election no where near having delivered a surplus at that time and very likely not having one in the forward estimates either, what are voters going to make of that? That he’s squibbed it?
MATHIAS CORMANN: Voters will see that we worked very hard to put the country on a better forward trajectory. They will see that we are making progress. We are now heading in the right direction and if we hadn’t made some of the difficult, though we would say necessary decisions, then we would be in a much weaker position than we now are. Our message to the Australian people in the lead up to the next election will be that we need to continue to head in the right direction, that we need to continue to make progress in the right direction and that the last thing the country needs at a time when we are facing global economic headwinds, is to go back into a situation where structurally we pile on more and more expenditure that is not affordable in the economy in the years ahead.
TOM CONNELL: Okay, I just want to go to a couple of policy points then within that. The aged pension is something that a lot of Australians are getting now, at least 80 per cent the part pension and we know that the family home is exempt. So to take you to a point that Labor’s saying they wouldn’t want to back in, they’re saying a $2 million house in Sydney might not actually be someone living in a life of luxury. But what’s wrong with telling someone if you want to get the pension, you will have to move from a $2 million house, maybe down to a $1 million house. It’s not slumming it is it?
MATHIAS CORMANN: We want to ensure that the aged pension is sustainable for the long term and indeed forever. So there are some adjustments that we need to make in order to ensure that happens. Our commitment is to ensure that those adjustments are as incremental, as gradual as possible, to ease the transition to a more affordable, a more sustainable trajectory. That is why we are proposing ever so slight adjustments to the indexation arrangements. But that is also why when it comes to means testing, we have proposed for a three year period form 2017 onwards to freeze eligibility thresholds. What the freezing of eligibility thresholds means when it comes to the income test, or the asset test is that people at the upper end will essentially, progressively be impacted by having their entitlements ever so slightly reduced moving forward. The key here is, yes we’ve got to ensure that the pension is on a sustainable and affordable trajectory for the future, but our commitment to pensioners is that we want to do that in the most gradual and the most incremental way possible, to ease the transition to that trajectory in the best possible way.
TOM CONNELL: Okay, why not ease though for example, the family home into the test? You could have it applying only five per cent in the first year, ramp it up slowly. This is just about always going to be far and above the biggest asset particularly in Australia where we have such high property prices. Can you keep ignoring this?
MATHIAS CORMANN: You could ask that question as many times as you like. The Government recognises that people have a particular bond to their family home. The Government recognises that there is a particular emotional connection to the family home, which is why we have been very clear that the family home will not be part of the asset test under a Coalition Government. Now if Labor is proposing to do something different they should say so. Our position is black and white, very clear. Our way forward in making sure that the pension is sustainable into the future is to do it gradually.
TOM CONNELL: Very, very briefly, I just want to get to one more topic. Sorry, Minister, the GP co-payment. Just one more topic, the GP co-payment is obviously something that you’ve backed away from. Does it feel though that you’ve almost switched sides, because you’re saying let’s charge at the end of this policy, let’s charge the wealthiest Australians a small amount to go to the doctor, and Labor is saying no, it’s almost like you’ve switched sides on that isn’t it?
MATHIAS CORMANN: It’s hasta la vista co-payment, indeed, you’re quite right. What we’re not giving up on though, is on our commitment to ensure that Medicare is protected for the long term, that Medicare is sustainable for the long term. What we’re not walking away from is our commitment to ensure that vulnerable patients can have access to bulk billing arrangements. But we do also believe that there is a need for reform to ensure that those of us who can afford to make a contribution, can do so. Obviously the way that we’ve put forward didn’t work and wasn’t the right way forward. We are now working with the medical profession and other stakeholders to come up with another better way forward.
TOM CONNELL: Mathias Cormann, we’ll watch this space, but as ever thanks for your time on Saturday Agenda.
MATHIAS CORMANN: Always good to talk to you.