Senator the Hon Mathias Cormann
Minister for Finance
Date: Monday, 4 May 2015
STUART BOCKING: The Federal Government hands down its second Budget tomorrow week and after the difficulties that they have encountered with the first, keen for a better reception with the second. One of those putting it all together is the Finance Minister Mathias Cormann and he joins me, Senator good morning.
MATHIAS CORMANN: Good morning Stuart. Good morning to your listeners.
STUART BOCKING: Thank you very much for your time. We have got these figures out today from Deloitte Access Economics. Commonwealth deficits to total $150 billion over the next four years, almost $50 billion worse than official forecasts. Are they accurate?
MATHIAS CORMANN: The Treasurer will reveal the numbers in the Budget, the actual numbers in the Budget next Tuesday. But let me just make the general point, Chris Richardson is certainly right that the Government has faced some significant challenges since coming into Government in September 2013. Namely, global economic headwinds, global commodity prices, the price in particular for iron ore having fallen dramatically. That is not something that is in the Government’s control. Our focus has been in the context of all of that to do the best we can to strengthen economic growth, strengthen job creation and to have a sensible path back to surplus as soon as possible.
STUART BOCKING: When you say as soon as possible, no one seems to want to put a date on it now. Does it remain just a wish at some point into the future?
MATHIAS CORMANN: It would be irresponsible to put a date on it. Our commitment genuinely is to get back to surplus as soon as possible, but to do so in a way that is economically responsible. Over the past few months we have reviewed the progress that we have made when it comes to Budget repair since last year’s Budget. We have focused on what to do with some of the outstanding issues that are still around from last year’s Budget and the best way forward in relation to those. But our overarching focus is on making sure that we do the best we can to strengthen economic growth, strengthen job creation and to repair the Budget in a way that is responsible.
STUART BOCKING: In the lead up to the last election, you, Joe Hockey, the now Prime Minister were all saying that one of the things was to end the waste, we will stop the boats, we will pay down the debt, turn the Budget to surplus. Generally, if you make a statement like that in the lead up to the election, is it reasonable for people to think that your time frame there is a three year time frame to try and turn the Budget around?
MATHIAS CORMANN: We have turned the Budget around. We did inherit a rapidly deteriorating Budget position and certainly if you look at our first Budget, spending growth was reined in to just one per cent above inflation compared to the 3.6/3.7 per cent above inflation under the previous Government. Our debt growth trajectory has been significantly reined in. But yes, there is much more work to be done. We can’t ignore though what happens in the wider global economy. We have to make judgments that are responsible. If you look at the things that we promised to do before the last election, scrap the carbon tax and the mining tax, they are both gone. Stop the boats, well the boats have been stopped and a bit later today the Prime Minister and the Immigration Minister will have something to say about the benefits to the Budget bottom line that come from all of that. We are making pretty significant progress but we just have to keep at it.
STUART BOCKING: It is difficult and I accept the iron ore price, it wasn’t so long back that the iron ore price in the Budget was upwards of $90-100 a tonne US. What can we expect in terms of the forecast price in the Budget next Tuesday for iron ore?
MATHIAS CORMANN: I am going to leave it to the Treasurer to release the Budget, but let me just say, the iron ore price actually peaked at $180 a tonne in the period of the previous Government. When we came into Government it was at $120 a tonne and people would know, it is a matter of public record that it went to below $50 a tonne. Now these sorts of falls do have material implications for our economy and for our Budget. So the work that we have been doing is to ensure that we are on the strongest possible foundation in the context of these challenges. To make sure that we are as resilient as we can be to deal with those challenges and in the best possible position to take advantage of opportunities coming our way.
STUART BOCKING: So do we talk about an iron ore price around $50 US a tonne, $40, $35? What sort of number are we talking about?
MATHIAS CORMANN: I am not going to speculate about what the numbers in the Budget...interrupted
STUART BOCKING: You don’t need to speculate, you would know. You’re the Finance Minister. You don’t need to speculate, you can tell me.
MATHIAS CORMANN: These sorts of numbers are part of the Budget to be released next week. In the meantime, it is a matter of public record where the iron ore price has been tracking. These numbers are transparently available in the market.
STUART BOCKING: Okay, now when you look at this report from Deloitte’s, they describe the upcoming Budget looking as if it has been written by Stephen King and painted by Edvard Munch. Are you having nightmares?
MATHIAS CORMANN: No, not at all. We have a job to do and that is to ensure that Australia is on the strongest possible foundation for the future. No Government controls what happens to global commodity prices. No Government controls what happens in the global economy, but what we do control is what we are doing with our own spending, what we are doing in terms of our own expenditure growth into the future. Our focus very much has been to get expenditure under control in order to ensure that we can protect our living standards, strengthen living standards and improve living standards into the future.
STUART BOCKING: You would have seen though this report today does describe Budget repair at a snail’s pace. You look at the upshot from that first Budget, a number of things which have been now dumped. You knocked a bit off the States, some off the Foreign Aid, you’ve imposed the Debt Levy for a couple of years on high income earners. Is it just too hard weening people off Government support, particularly when you have an Opposition which is determined to play things as hard in Opposition as you guys did when you were in Opposition?
MATHIAS CORMANN: We played things hard in Opposition where the previous Government was making decisions against the national interest. Where they were making decisions that led to massive increases in illegal boat arrivals. Decisions that would make us less competitive internationally like the introduction of the carbon tax and the mining tax. We supported the previous Government when they made decisions that were good for Australia. It is important for Australia that we get our Budget under control. It is true to say that Bill Shorten and the Labor party under Bill Shorten has been quite reckless and irresponsible, even more reckless and irresponsible than the previous Labor Governments under Kevin Rudd and Julia Gillard.
STUART BOCKING: Today you have seen now, he is saying, look the Government can’t afford a dull Budget which is probably right. We have got to crack on with reform, but it is very difficult isn’t it up against a whole group of vested interest parties not to mention of course a Labor Opposition which is determined to make things as difficult as it can. We get some snippets of change in the mix of child care and even without even seeing what is happening, they are up in arms saying well this is no good, people will miss out. Someone has to miss out don’t they?
MATHIAS CORMANN: Bill Shorten is in no position to lecture the Government about the need for economic reform. Bill Shorten is not even able to convince the Labor party to support their own savings that they initiated and banked in their last Budget in Government. Now when it comes to our decisions, we have made some judgments as we have already flagged that there is a need for additional investment in some areas. For example, we are committed to helping families get more affordable access to high quality child care. But what we have also said is that in order to be able to be able to afford that, we need to make savings in other areas. Our message to the Labor party and to the Parliament overall is that if you want us to help families access more affordable childcare, then you have got to help us get some of these savings through the Parliament to pay for it.
STUART BOCKING: The point is though, eventually if we are going to improve things, and that’s almost marking time, if we find savings somewhere else though we can spend money on something else. If we are to make genuine reforms to the Budget, some people have got to miss out, they have these winners and losers when Budget time rolls around, the list of losers has to be pretty long doesn’t it?
MATHIAS CORMANN: There are two aspects that are very important though when it comes to Budget repair. Firstly, stronger economic growth will lead to, over time, to stronger revenue for Government, and will help to lift living standards. So when we talk about making additional investments in childcare for example, that is part of our broader economic plan to strengthen growth which will in turn over time help with Budget repair. Having said that, we want to do that in an economically and fiscally responsible way, by paying for it with savings in other areas. So we want to replace lower quality spending with higher quality spending that delivers better outcomes.
STUART BOCKING: So are you planning now to dump these changes to the way pensions would be indexed after the next election?
MATHIAS CORMANN: There has been some speculation over the weekend. I’m going to leave it to Joe Hockey in the Budget and Scott Morrison as the Social Services Minister to make these relevant announcements. But let me make the general point, we remain absolutely committed to ensuring that the aged pension as a very important safety net for many, many Australians, remains sustainable, remains affordable in the economy over the medium to long term. That has very much been our focus as we have been putting this Budget together.
STUART BOCKING: Now of course there has been all sorts of talk about a snap poll post Budget. Where’s that sort of talk coming from? Is it mere speculation, or is there something to it?
MATHIAS CORMANN: I’ve got no idea where it comes from. I did read those reports over the weekend. Let me tell you unequivocally that we are committed to serving our full term. We were elected to work for the Australian people for three years. There is much more work to be done and we are focused on doing that job that needs doing.
STUART BOCKING: This story from the Productivity Commission today talking about plans to sell the right to immigrate to Australia. Now you’re originally from Belgium many years ago. How does that idea sit with you?
MATHIAS CORMANN: It is not Government policy. It’s not something that we’ve put forward, it is something that they have put forward. I don’t think that that is something that we’ll be looking at any time soon.
STUART BOCKING: You wouldn’t see the benefits, obviously there would be a very convenient way of plugging some holes in the Budget, but you don’t think it’s a fair way to run an immigration program, given you are someone who was part of it many years ago?
MATHIAS CORMANN: As a general comment, migrants to Australia have made a very significant contribution to our country. Most of us, one way or another, in our past, have got a migrant background. Australia as we know it today has been built by migrants and so I think we are a great migrant success story as a country and I think that will continue to be the case into the future.
STUART BOCKING: There are some economists suggesting a short sharp recession might be the only way to focus the minds on some when it comes to Budget repair. What’s your take on that? We wouldn’t have to get to that point, would we?
MATHIAS CORMANN: Our focus is on keeping the economy growing and in fact our focus is on strengthening growth so that we can strengthen opportunity and job creation. That is not something that we are entertaining in any way, shape or form.
STUART BOCKING: Are you worried about lifting taxes now given that goes against the grain of a smaller taxing Government? Talk today that you may scrap plans for a new charge on internet shopping.
MATHIAS CORMANN: Without going into the specifics about Budget speculation, it is very important that we keep our taxes as a share of the economy at a competitive level. The conversation ought to be about how we can raise the necessary revenue for Government in the most efficient way possible, not about increasing taxes overall. Because if you increase taxes overall by too much, essentially you start hurting economic growth, you start hurting jobs growth, in fact you start creating drivers for additional unemployment and that is not what we want to do. We want to strengthen growth and that means that we’ve got to focus on lower, simpler, more efficient taxes in order to facilitate stronger growth.
STUART BOCKING: In light of what happened last week, are there plans to cut aid to Indonesia?
MATHIAS CORMANN: We have made all of the announcements in relation to the overall aid budget in last year’s Budget and in the half-yearly update before Christmas last year. There will be some announcements at Budget time this year about how some of these broader cuts to the aid budget will be applied to individual countries and that will be a matter for the Foreign Minister to announce next week.
STUART BOCKING: But nothing specifically in relation to Indonesia before then?
MATHIAS CORMANN: The Foreign Minister will be announcing the specific allocation of the aid Budget to specific countries.
STUART BOCKING: I appreciate your time this morning Minister, thank you.
MATHIAS CORMANN: Always good to talk to you.
STUART BOCKING: All the best to you, thank you. The Finance Minister, Senator Mathias Cormann.