Senator the Hon Mathias Cormann
Minister for Finance
Date: Monday, 11 May 2015
DAVID SPEERS: Mathias Cormann, thank you for your time.
MATHIAS CORMANN: Good to be here.
DAVID SPEERS: First, can I ask you what is this Budget meant to be about? What are you trying to do? Is it about reining in spending or is it about stimulating growth?
MATHIAS CORMANN: This Budget is about building a stronger, more prosperous economy, creating more jobs and of course continuing the Budget repair effort that we started in our first Budget. It will build on the progress that we have made since last year. It is our economic plan and of course it is adaptable and had to be adaptable to changing economic conditions given what has happened in the world economy.
DAVID SPEERS: But will it shrink the size of Government or expand the size of Government?
MATHIAS CORMANN: Our focus is on getting spending under control, reducing Government spending as a share of the economy. The specific numbers will be revealed by the Treasurer tomorrow, but that is one of our fiscal objectives...interrupted
DAVID SPEERS: Can you tell me, is this going to have more or less spending than last year?
MATHIAS CORMANN: What I can tell you is that wherever we have decided to spend more on an area of high priority, we have reduced spending in other areas to more than fully offset any additional spending. What we have done in this Budget is continue to build on the significant effort and the significant progress that we have made since last year...interrupted
DAVID SPEERS: So less spending?
MATHIAS CORMANN: We are focused on continuing to reduce spending as a share of the economy, that’s right.
DAVID SPEERS: Why then have you decided to pump $3.5 billion more into childcare, as worthy as that might be? The Productivity Commission said you shouldn’t be doing it the way you have done it.
MATHIAS CORMANN: It is about helping families get into work, stay in work, be in work. It is a measure which is good for the economy and good for families. It is part of our economic plan to strengthen economic growth. When you do strengthen economic growth, over time, that does also help with the task of Budget repair because stronger growth means stronger revenue for Government over time.
DAVID SPEERS: How are you sure that this will boost growth?
MATHIAS CORMANN: What we know from the Productivity Commission is that there are about 165,000 parents out there who would like to work more but who can’t because of difficulties with accessing the childcare system. So the package will...interrupted
DAVID SPEERS: And the lack of jobs.
MATHIAS CORMANN: Well employment is growing much more strongly now than what it was towards the end of the Labor Government. If you look at the...interrupted
DAVID SPEERS: Isn’t unemployment growing too?
MATHIAS CORMANN: Over the last 18 months, more than 250,000 jobs have been created. Last year, more than three times as many jobs were created last year than in the last year of the Labor Government...interrupted
DAVID SPEERS: But the unemployment rate has gone up.
MATHIAS CORMANN: Because of course population growth is also a reality and at this stage, employment growth is not yet strong enough to absorb the effect of population growth. But employment growth is much stronger now than what it was before. We are now heading in the right direction and we have got to continue to build on the initiatives that we have taken so far and our childcare initiative, our jobs for families package is a very important part of that approach, of that economic plan.
DAVID SPEERS: But the Productivity Commission said you should take some of the benefits away from the wealthy families. You’re not doing that?
MATHIAS CORMANN: We are absolutely putting forward a balanced package, a package which where any additional investment is fully offset by additional savings. And of course...interrupted
DAVID SPEERS: Savings from last year that were meant to help the Budget?
MATHIAS CORMANN: There are some savings from last year. There are some savings in this Budget. All up, the key principle is this, wherever we make an additional investment because there is a higher priority that has been identified, we have to fully offset that with savings in other parts of the Budget.
DAVID SPEERS: This is what I wanted to clarify with you, because there are savings that have been talked about as being tied to this childcare package. The Family Tax Benefits savings from last year. But as you point out, there are other savings in the mix as well. Is anything really tied here or do you just need to find enough savings to cover this childcare package?
MATHIAS CORMANN: We certainly have got to find enough savings to cover this childcare package. What we have said today and what we have said over the last few days and what we have said all the way through is that any additional new spending has to be paid for by spending reductions in other parts of the Budget.
DAVID SPEERS: But does it matter which part of the Budget?
MATHIAS CORMANN: To the extent that there is additional expenditure in the Social Services portfolio, there has got to be additional savings in the Social Services portfolio....interrupted
DAVID SPEERS: So it has to be in that portfolio?
MATHIAS CORMANN: We’ve put forward a holistic families package. We’re now going to be engaging with the parliament with what we believe is a well balanced, very good package, which will help families get ahead. Families having a go get ahead. This is now a question for the Labor party. Is the Labor party in favour of helping families get access to simpler, more affordable, more flexible childcare or aren’t they?
DAVID SPEERS: Or helping families after their kid turns six? Those savings though outweighed this childcare package, so you don’t need to pass all of them if that’s your equation?
MATHIAS CORMANN: You are making all sorts of assumptions. The Budget will be released tomorrow and after the Budget is released tomorrow, there will be a conversation to be had between the Government and the Parliament. At the end of this process, this additional investment in more affordable childcare has to be paid for by savings in other parts of the Budget. That is the non-negotiable, in principle position.
DAVID SPEERS: What is your view on the superannuation tax debate because some in Government have been saying you need to look at this? Others more recently, the Prime Minister in the last couple of weeks has said no you won’t. Why not?
MATHIAS CORMANN: My position has been quite consistent. I know that Bill Shorten when he was the Assistant Treasurer and the Minister for Financial Services and Superannuation initiated a class warfare targeting Australians saving for their retirement then. To the point where even Labor people like Kim Carr and Simon Crean started to bitterly complain about Labor’s class warfare against middle of the road Australians saving for their retirement. What we’re saying is this: when it comes to the age pension, the age pension is a safety net involving Government payments, which is appropriately means tested to ensure it is targeted at those people that genuinely need it. When it comes to our taxation arrangements, the proposition that has been put forward by the Labor party is about increasing taxes on retirement savings, making it harder for people to look after their own needs in retirement…interrupted
DAVID SPEERS: But at the top end?
MATHIAS CORMANN: The Labor party always wants people to think that there is this group of rich people that are easy tax targets.
DAVID SPEERS: Well it says the top 60 or 70,000. So people who are earning, it’s not taxing their balance, but their earnings off that balance. The first 75,000 free, after that you get a 15 per cent tax, still concessional.
MATHIAS CORMANN: Let me tell you, that is not the way you’re going to fix the Budget. I know that Labor…interrupted
DAVID SPEERS: Every little bit helps, you know.
MATHIAS CORMANN: Labor thinks that the only way to fix their reckless spending is to come up with another tax. What we’re saying is…interrupted
DAVID SPEERSS: What’s wrong with this one though?
MATHIAS CORMANN: We want to make sure that people are incentivised, properly incentivised to save more to look after their own needs in retirement. We don’t believe that the problem Labor is suggesting there is, is there to the extent that they’re saying. Labor always comes up with a new idea on how to come up with another tax. They usually spend the money of their new tax before they’ve even raised a cent. That’s what we saw with the mining tax.
DAVID SPEERS: Sure, I just want to bring in principle. This used to be taxed, the superannuation interest earnings. Why should it be tax free?
MATHIAS CORMANN: Hang on. So when you put money into your bank account and you receive earnings on the way through and you take your money out of the bank account again, do you think that you should be taxed as you take your money out?
DAVID SPEERS: No, that’s my money. I am talking about the interest that I earn on it. I am not talking about my money. The interest that I earn on an investment anywhere I get taxed on it and so do you.
MATHIAS CORMANN: You get taxed on your income that goes into super, you get taxed on the way through on your earnings, you don’t pay tax on the way out. Now if the Labor party...interrupted
DAVID SPEERS: No, I’m talking about the interest on that money?
MATHIAS CORMANN: You are being taxed. The question is at what level should you be taxed?
DAVID SPEERS: When you’re in retirement and you earn money off your super balance, you’re not taxed on it.
MATHIAS CORMANN: This is the point. You are taxed on the way in, you’re taxed on the way through, you’re not taxed in retirement. But that is a completely different proposition.What we are saying is that that is an appropriate way to incentivise people to look after their own needs in retirement, not to be reliant on the taxpayer, not to be reliant on the age pension, or certainly not on the full age pension. If the Labor party wants to run a campaign that they want to tax Australians saving for their retirement more, that is their right...interrupted
DAVID SPEERS: Not only have the money you put into super is fine, that’s tax free. Then you can have $75,000 in earnings off that tax free and only after that do you pay a 15 per cent tax rate.
MATHIAS CORMANN: You’re entitled to support the Labor position.
DAVID SPEERS: I’m just asking whether you think it’s a fair position.
MATHIAS CORMANN: We don’t think that it’s a fair position. We think that the Labor party is always very quick to come up with a new tax. The Labor party actually should start focusing on what is happening with expenditure as a result of some of the unsustainable positions that they locked Australia into. Labor locked Australia into unsustainable spending growth including in the period beyond their final Budget forward estimates, permanently and into the future. That spending growth trajectory has to be brought under control. No amount of distraction about tax will be able to take us away from that.
DAVID SPEERS: Let me put this proposition to you, if they back your pension changes, your savings there, would you look at their superannuation laws?
MATHIAS CORMANN: We have been very clear in the lead up to the last election, we will not be making any unexpected detrimental changes to superannuation tax and policy arrangements. That is our position.
DAVID SPEERS: Let me ask you quickly about the measures that the Treasurer has announced today. A crackdown on 30 major multinationals who have been shifting billions in profits, he says overseas, to avoid tax. Why can’t you tell us how much that is going to raise?
MATHIAS CORMANN: We are being very cautious. What we are saying is that whenever there are contrived arrangements designed to avoid tax in Australia we will give additional powers to the tax office to see through those contrived arrangements and to ensure that the appropriate amount of tax is paid in Australia. Also, if there are issues that need to be addressed there are appropriate penalty provisions to assist and support the enforcement of Australian tax laws. Labor, when they come up with a new tax or a new approach, they bank the money and they spend it. We don’t want to bank the money until we actually know that we are getting it.
DAVID SPEERS: Is there also some doubt though about how much you will actually get? Because these big companies, no doubt, will fight this tooth and nail.
MATHIAS CORMANN: It is true that it is not easy to come up with a credible, realistic estimate, which is why we are taking a cautious approach. We are absolutely determined in our resolve to ensure that companies generating profits in Australia pay their fair share of tax in Australia but we don’t want to make assumptions on how much we raise and then essentially have it flow through the bottom line.
DAVID SPEERS: And the other measure that he has announced the GST will apply to online movies, games, songs, digital products. What if one of these companies, be it Netflix or another, says no, no no, we are not going to charge the GST. What will you be able to do?
MATHIAS CORMANN: What we are doing here is making sure that foreign and domestic suppliers of these relevant services are treated in the same way, that there is some equity here. We believe that we can do it, but let’s see what happens. We are very confident that we will be able to enforce these requirements.
DAVID SPEERS: Can you confirm the reports in The Australian today that the Health Department is going to have to find savings of over $100 million, the Education Department $130 million, Immigration $168 million.
MATHIAS CORMANN: We found them. We have gone through a functional and efficiency review of the Health Department and the Education Department. We have found those savings. Those savings have been identified and they will be reflected in the Budget.
DAVID SPEERS: Any further redundancies? The unions are very worried about this today.
MATHIAS CORMANN: When we came into Government, in the lead up to the last election, we were very clear that we would work to reduce the size of the public service. That we would ensure that the public service is as efficient, as effective and as well targeted as possible. We have been progressing that. We have achieved our objective to bring the size of the public service back down to 2006-07 levels.
DAVID SPEERS: Does this mean any further reductions?
MATHIAS CORMANN: These efficiency reviews are not focused on reducing staff numbers. They are focused on making sure that we have got the best possible set up, the best possible organisations in place to deliver on the needs for the Australian people. Now if through those processes we identify waste, we will cut it. If we identify duplication, we will remove it. If we find areas where we can do things better, more cheaply for taxpayers, of course we will. We don’t have some sort of target in mind in terms of how many staff we want out of this organisation or that organisation.
DAVID SPEERS: There may be some jobs gone?
MATHIAS CORMANN: Sure. It would be remiss of us not to essentially implement efficiencies if we find the opportunities to do so. This is all about ensuring value for taxpayers from their public service.
DAVID SPEERS: Finance Minister Mathias Cormann thanks for talking to us.
MATHIAS CORMANN: Always good to talk to you.