Senator the Hon Mathias Cormann
Minister for Finance
Date: Wednesday, 15 April 2015
STUART BOCKING: Plenty of talk today about the International Monetary Fund downgrading its economic outlook for Australia, suggestions interest rates will have to be cut again. Gina Rinehart claiming we are at risk of becoming the Greece of the South. This is all against the backdrop of the Government framing its second Budget. One of those involved in that task is the Finance Minister Mathias Cormann. And I am pleased to say he is on the line. Minister, good morning.
MATHIAS CORMANN: Good morning Stuart, good morning to your listeners.
STUART BOCKING: Thank you very much for your time. What is the starting point for this Budget given you’ve still got $40 billion worth of savings blocked in the Senate. How long can you leave those projected savings on the books for?
MATHIAS CORMANN: Firstly, the Budget this year will build on the progress that we have made since last year’s Budget. While there is some more work to be done, it is also important to note that we have made significant progress since last year’s Budget. We are now in a stronger position than we would have been if we hadn’t passed some of the very significant savings that did go through the Senate. If I can just pick one example, we got rid of the mining tax and all of the related unfunded spending promises that the previous government had attached to it. On current prices, the mining tax would definitely have raised nothing, yet the unfunded promises attached to it would have cost about $17 billion over the current forward estimates. We will save more than $50 billion over the decade by getting rid of that tax. And a lot of other savings... interrupted
STUART BOCKING: Why haven’t you done the same thing with the removal of the carbon tax? Because $2 billion worth of compensation attached to that is still being paid. Why haven’t you taken the same moves there in relation to the carbon tax being removed?
MATHIAS CORMANN: We did get rid of most of the so called compensation attached...interrupted
STUART BOCKING: Well there is still about $2 billion of it though.
MATHIAS CORMANN: What we did keep in place is the first round of income tax cuts and the pension increases that were attached to it, because we didn’t think in the circumstances faced by Australian pensioners it was appropriate to remove the pension increase that was part of the carbon tax compensation. But all of the industry assistance and a lot of the other inefficient spending the previous Government attached to the carbon tax we have removed and we are continuing to go down the path of identifying further savings.
STUART BOCKING: So if those $40 billion worth of savings that are currently blocked in the Senate don’t get through, does that then worsen the deficit by a further $40 billion?
MATHIAS CORMANN: We are working now to put the next Budget together. As we are doing that, we are considering what is happening in the global economy, what is happening with global commodity prices and we are considering what is happening in the Senate. We are framing a Budget that will put us on the strongest possible foundation for the future, that will maximise opportunities to get spending under control, reduce the deficit and get us back into surplus as soon as possible.
STUART BOCKING: But the difficulty is that you could be starting a further $40 billion behind the eight-ball than you hoped to have.
MATHIAS CORMANN: The question here is really a question for the Labor party. Given the global economic challenges that we are facing as a nation, given the unsustainable spending growth trajectory they left behind, we really think that it is time for Bill Shorten to rise up to the occasion and to stand up for the national interest. To join in with us to repair the Budget as part of joint efforts to strengthen economic growth and opportunities for Australia.
STUART BOCKING: I know Tony Abbott has this speech before the Australian Chamber of Commerce and Industry today, he has been talking about a tax cut for small business, a new families package. Can we honestly afford any new spending at the moment?
MATHIAS CORMANN: We have got to make sure that we get the balance right. We need to strengthen economic growth. Stronger growth will help boost revenue without the need for new taxes. Our small business package is very much part of strengthening economic growth. In order to make any commitments in the context of a better deal for families, in the context of a better deal for small business, we have got to find savings elsewhere and that is the work that we are doing at the moment, to make sure that any additional commitments are fully offset.
STUART BOCKING: The problem you run though Minister is that you know a tax cut for small business, new families package, you then say right, to offset that, we have savings here, savings there. No guarantee you will get those savings through the Senate.
MATHIAS CORMANN: That is going to be a part of the conversation.
STUART BOCKING: Then you are dealing with the mining tax scenario where you have got a tax raising very little and all of this spending going out. You will have done something similar yourself with commitments to lower taxes for small business, increased family packages but the savings not there to fund it.
MATHIAS CORMANN: Except that one will not go without the other. The conversation with the Senate will be very clear. If they agree with us that we need a better deal for small business and a better deal for families, the quid pro quo is that a series of savings that are currently stuck in the Senate or that we are putting forward as part of the Budget need to be passed as part of the overall strategy. They won’t be able to cherry pick one or the other. It will have to be a consensus around the broader package of reform to put Australia on a stronger foundation for the future. With the mining tax repeal, that is actually what ultimately worked. We were able to say to the Senate if you want to get rid of the mining tax because it is a bad tax, which they did, you also have got to vote to get rid of the unfunded spending promises that were attached to it.
STUART BOCKING: But what if they don’t agree with a tax cut for small business or a new families package? Then suddenly what happens because you can have made all of these grand announcements, small business expecting a tax cut and suddenly you can’t get the offset savings through, you’ve got to go back on that.
MATHIAS CORMANN: If the Labor party does not agree with a better deal for small business. If the Labor party does not agree that we should make access to childcare more affordable for families then they should say so.
STUART BOCKING: This is the difficulty, the Greens for some stupid reason don’t support an increase in the excise on the fuel. So if this is the nature of the Senate at the moment, there seems to be no rhyme or reason to logic or rationale. You would have thought anything that made a non-renewable fossil fuel more expensive would have got a big tick from the Greens. They have said no to that.
MATHIAS CORMANN: The Greens are just completely, they have completely vacated the field, their position is completely ludicrous...interrupted
STUART BOCKING: The difficulty is though, you’re sharing the Senate with them and you have got all of these measures that you and others in the Senate and within the Government, you can’t get through.
MATHIAS CORMANN: Yes, but this is my point and it is a very important point. The Greens are completely irrelevant. Bill Shorten has to decide whether he also wants to be irrelevant or whether he wants to step up to the plate and actually join in, taking Australia forward, putting Australia on a stronger position for the future, helping us be the most resilient we can be in the face of global economic challenges and in the best possible position to take advantage of opportunities. Does he want to be like Christine Milne on the sidelines completely irrelevant, or does he want to be a contributor to a better Australia for the future?
STUART BOCKING: It seems to me that you are now trying to reconcile the political imperatives of trying to assist the Prime Minister’s fight back in the polls while maintaining the fiscal imperatives. Now, that’s given rise to Tony Abbott talking about a dull Budget and other things. Is that what we can afford because this is such a difficult balancing act? I know you are worried about the polls, there is an eye to what is happening in the electorate, your own State of Western Australia, but there is this fiscal imperative that is there that you have got to crack on with the Budget reform and none of that is going to be popular.
MATHIAS CORMANN: We will crack on with Budget reform. We remain committed to pursuing important and necessary economic reforms. But we will do so and we will try and do better than last year in getting people to come along with us. At the end of the day, the only sustainable way to achieve important structural reform is by getting the community to join in with you. We will do the absolute best we can to explain what we are doing, why we are doing it and why we believe that it is important for our future.
STUART BOCKING: Peter Costello wants to criticise some of your tax ideas as a morbid joke but isn’t it true that you are left to cut some of the overly generous spending that he built into the Budget at times when revenues were stronger?
MATHIAS CORMANN: Peter Costello is a giant of the Liberal party. He did an outstanding job as Treasurer for 12 years. But the challenges that he faced were quite different to the challenges that we are facing today. We agree that we should focus on lower, simpler, fairer taxes and we will do so in a way that is economically responsible and as fast as we can. In the meantime, we do have a challenge to get spending under control. We are focused on it. We will continue to do the best we can and that also does include some structural reform to some of the benefits that were boosted in the tail end of the Howard and Costello years.
STUART BOCKING: But he talks about your three year debt levy is doing nothing to ease the deficit. You look at his superannuation surcharge which was there for a short period, levies on just about everything that moved. The dairy industry, the airline industry, there were a variety of different levies which were introduced. Is anyone going to mention those or are we too worried about hurting the Costello legacy? Because he was not without tax increases himself.
MATHIAS CORMANN: The suggestion that the Temporary Budget Repair Levy does nothing to help address the deficit is objectively wrong. The Budget Repair Levy does raise quite a bit of revenue and it does help us bring the Budget back to surplus as soon as possible...interrupted
STUART BOCKING: So Peter Costello was objectively wrong on that?
MATHIAS CORMANN: It is objectively wrong to suggest...interrupted
STUART BOCKING: Well that is what he is saying.
MATHIAS CORMANN: I am giving you my view. It is objectively wrong to suggest that the Budget Repair Levy does nothing to help reduce the deficit. That is just a matter of mathematics.
STUART BOCKING: If your State of Western Australia is to gain an extra $500 million next financial year, it is a story in The Australian newspaper today, where does that money come from?
MATHIAS CORMANN: The State and Territory leaders are meeting with the Prime Minister on Friday and it will be a matter for them to sort through. The point that I have made is that the situation now confronted by Western Australia is a very challenging one and it does raise some questions for the Federation. Western Australia is expected to absorb another 16.2 per cent cut in its GST revenue next year as compared to this year. The GST was of course meant to be a reliable growth revenue for the States. Western Australia has had successive cuts for a number of years now. It is one thing for that to happen when other revenues are rising, but with the major other revenue source now in free fall on the back of significant reductions in the price for iron ore, there is a question here that needs to be resolved. How that is best done, that will be a matter for the State and Territory leaders...interrupted
STUART BOCKING: But obviously if they are wanting an extra $500 million it is not like New South Wales and Victoria are going to say to them well here you are, here is $250 million each. So if they are seeking an extra $500 million does that come from some of the other States or do you dip into consolidated revenue at a Federal level to do that?
MATHIAS CORMANN: That is a matter now on Friday for the leaders to work through in terms of what the best, fairest, nationally fairest way is to resolve some of the legitimate issues that Western Australia is currently confronted with.
STUART BOCKING: The GST, a string of experts are saying look, whack it up to 12 per cent, include food as originally intended, offer compensation to lower income groups. Is that not a saleable prospect even in the face of Labor Opposition?
MATHIAS CORMANN: In terms of the GST more broadly, what we have said in the lead up to the last election is that we would not be making any changes in the first term of an Abbott Government. We are going at present through a Tax White Paper review process and we have encouraged everyone to put forward their ideas and suggestions on how the tax system can be improved. In terms of the GST more broadly, we won’t be pursuing any changes unless there is a broad consensus and unless all of the State and Territories are on board. That is a matter where we’ve got to see how that debate unfolds over the next 12 months.
STUART BOCKING: And that would include obviously the Labor Opposition?
MATHIAS CORMANN: That includes the Labor Opposition in the Federal Parliament, that is right.
STUART BOCKING: Look, I appreciate your time this morning. Busy times for you, thank you.
MATHIAS CORMANN: Always good to talk to you Stuart.
STUART BOCKING: All the best to you, thank you. Senator Mathias Cormann, the Finance Minister.