Senator the Hon Mathias Cormann
Minister for Finance
GARY ADSHEAD: Good morning everybody, thanks for your company today. Just remember keep on listening if you did miss out in the Federal Budget then we’re giving away $1000 cash as well today. We will be giving away $1000 cash. I hope to do it in my program in relation to the mystery laugh, so just keep on listening through the course of the program.
Okay, so the Federal Budget was handed down yesterday evening and you know, the pundits so far are saying sort of transparency is the key here that you can see that it’s about perhaps undoing some of the damage from last year’s Budget. Let’s speak now to the Federal Finance Minister, Mathias Cormann. Thanks for your time, Minister.
MATHIAS CORMANN: Good morning.
GARY ADSHEAD: Okay, so are you surprised that the pundits all seem to be saying the same thing, that last year’s Budget, the measure and the tone in it, it seems obvious now that you’re trying to undo the damage from that and trying to save the Federal Governments future, not necessarily the nation’s.
MATHIAS CORMANN: We are entirely focussed on what is in our national interest and on what will help us strengthen growth, create more jobs and get the Budget back into surplus as soon as possible. When we came into Government in September 2013 we were confronted with a weakening economy, rising unemployment and a Budget position that was rapidly deteriorating. We came into Government with a responsible long-term economic plan. Last year's Budget was the first major step and last night’s Budget was the next major step in taking Australia forward, strengthening growth, creating more jobs and getting our Budget under control.
GARY ADSHEAD: You won’t concede that last year’s Budget was a misstep?
MATHIAS CORMANN: More than 80 per cent of last year’s Budget measures have been implemented. There has been some debate about some of the more controversial items. We have all, the Prime Minister, the Treasurer, myself, we have all been on the record saying that on reflection we tried to do too much at once. Last year’s Budget was the right Budget for the times last year. Obviously there has been a lot of water under the bridge. Global and domestic economic conditions have changed and we have carefully considered where we’re at as a country and we have adapted our economic plan to ensure that we make the best possible progress in the year ahead.
GARY ADSHEAD: Bottom line though is that spending outweighs revenue, that’s not surely what the plan was all about given some of the comments from last year, Budget emergency, need to tighten our belts, the days of entitlement are over. Really not much has changed in the last 12 months.
MATHIAS CORMANN: What hasn’t changed is the timetable for a return to surplus. We inherited a very challenging Budget situation. We inherited unsustainable spending growth. We inherited 3.6 per cent spending growth above inflation from the previous government. We have been able to reduce that down to 1.5 per cent spending growth above inflation on average per annum. We are on a trajectory to a surplus by 2019-20. The deficit is projected to decrease every single year over the forward estimates both in dollar terms and as a share of the economy, from $35billion in 2015-16, which is well below market expectations, to just under $7billion in 2018-19. From where we sit, we are making responsible, measured decisions to get the Budget back to surplus as soon as possible but in a way that is economically responsible.
GARY ADSHEAD: But what you’re saying is that if everything goes well, but the reality is that the deficit jumped to what was predicted in this Budget, didn’t it? And because things, iron ore royalties etc. haven’t gone the way the Government’s needed.
MATHIAS CORMANN: No Government in Australia, whatever its political persuasion controls what happens to global commodity prices. It is true that we have had to write-down almost $90 billion in expected tax revenue, significantly because of falls in the price for iron ore. Iron ore represents about 21 per cent of our national export income. The price was at $120 per tonne when we came into government is at about $58 now. We have obviously had to make significant revenue downgrades, but despite all of that, we remain on a credible pathway back to surplus. Despite all of that, we are still expected to get back into surplus within the same timetable as in last year’s Budget.
GARY ADSHEAD: Given some of the commentary that’s around this morning that it’s a Budget that shows the Government’s in retreat, that it’s a Government that’s setting itself up for an early poll perhaps. Do you sort of feel a bit damned if you do, damned if you don’t?
MATHIAS CORMANN: There is always going to be commentary. Our job is to consider all the information. Our job is to make judgements in the national interest. We work every day to do the best we can to put Australia on a stronger foundation for the future. The commentary will take care of itself. Some people will be negative no matter what you do. If you go one way, they say you should have gone the other way. If you go the other way, they say you should have gone the first way. You can’t really take too much notice of that. At the end of the day, we were elected to do a job. We are giving it our best and after three years, when the next election is due in the second-half of next year, people will pass judgement on whether they think we have done a good job and whether they think we have got the ideas to take Australia forward for another three years.
GARY ADSHEAD: Given that there’s not too much in this Budget that I would consider, or that too many people would consider unpalatable, are you hoping that Labor will just get in behind this time, given what happened in the last 12 months?
MATHIAS CORMANN: We certainly hope that Labor will start considering the national interest, rather than just focusing on their political self-interest. We certainly hope that Labor will reflect on what needs to be done in order to strengthen growth across Australia, strengthen job creation across Australia and to get the Budget on a more sustainable foundation for the future.
GARY ADSHEAD: Alright, now it’s obviously in the selling. How do you feel it’s going at the moment, Minister?
MATHIAS CORMANN: We are doing the best we can. It will be up to others to judge on how it’s going.
GARY ADSHEAD: The small business, we call it stimulus package really, in terms of tax cuts, what do you say is the driver behind that and how confident are you that it’s going to be taken up and you’re going to get the result you want?
MATHIAS CORMANN: We want to strengthen growth, in particular, in the non-mining parts of the economy across Australia, including in the great state of Western Australia. So what we have done is delivered a 1.5 per cent tax cut to small business and we have structured it such that all businesses, whether incorporated or non-incorporated, any small business with an annual turnover of less than $2million is able to access that tax cut in practice. That will deliver a boost to growth and importantly, we have also offered the opportunity to small businesses to claim an immediate tax deduction for each and every asset they purchase up to $20,000 from Budget night last night up to 30 June 2017. We want businesses to go out there and invest, to invest in being the most successful they can be and to employ more Australians.
GARY ADSHEAD: Are you confident that that can’t be abused? Already one scenario of a business, someone with an ABN number for example, putting a solar panel system on their house because they would claim that they work from their home, but really that’s to benefit the house not the business. What do you say to that?
MATHIAS CORMANN: The truth is the applicable laws in terms of what is an allowable tax deduction will continue to apply. The change that we have made is that up until last night the only immediate depreciation that was available was for assets up to $1000. So we have increased that to $20,000. What it essentially means is that consistent with all of the relevant rules about what is an allowable tax deduction for business purposes, we have essentially said to businesses that we are increasing the threshold and please go out and invest in assets and equipment that helps your business be the most successful it can be. If people abuse any tax law there are compliance arrangements in place to ensure that doesn’t happen.
GARY ADSHEAD: Don’t forget that your Government went to two elections with a paid parental leave system. That has been abandoned and now you are going to punish people for quote unquote ‘double dipping.’ Just explain that to people and why it seems completely at odds with the sort of generous package that was being proposed by your Government in the first place.
MATHIAS CORMANN: Well we actually said in the lead up to the last election that we would get rid of double dipping. To explain that, most women across Australia have access to just one paid parental leave arrangement which is the taxpayer funded scheme provided by the Government. Now some women have access to more generous paid parental leave arrangement through their public sector or private sector employer, often at a full replacement wage. That is great. What we are saying is that if we have access to a more generous paid parental leave arrangement through your private or public sector employer it is not fair to all of the other women who have access to just one scheme to ask the taxpayer, to expect the taxpayer to fund a second scheme for you. That is really an equity and fairness measure. We think that we need to put everyone onto the same level to a degree, although women who continue to have access to more generous paid parental leave arrangements will choose that arrangement rather than to opt for the default taxpayer funded scheme through the Government.
GARY ADSHEAD: Confirmation in the Budget that WA’s GST share gets down to around 30cents in the dollar. Now I don’t know if you have heard this commentary but Alannah Mactiernan from Federal Labor is suggesting that with the Commonwealth Grants Commission projecting a further fall in iron ore royalties, they are saying that GST for WA could be in an around 18cents by 2017/18. What do you make of that?
MATHIAS CORMANN: Well that is not right. What I would say to Alannah Mactiernan is to read page 82 of Budget Paper No. 3. That clearly sets out that when you take the expected developments in terms of iron ore prices and iron ore production volumes into account, the GST share for WA is expected to increase to about 50 per cent by the end of the forward estimates. Yes, next financial year it is going to be just below 30 per cent and that is why the Prime Minister and I came to Western Australia the other day to provide additional federal support in recognition of the particular challenge that Western Australia is facing at the moment. We provided an additional $500 million next financial year to invest in important infrastructure across Western Australia. We said we would see what may need to be done in 2016-17 when we know what the actual relativity is, but after that the projections in the Budget are actually that the GST share for Western Australia starts increasing again. Having said all of that, there is an issue that needs to be addressed. The Prime Minister has made very clear that he wants this to be addressed through the Council of Australian Government with all State and Territory Premiers and Chief Ministers and he has suggested that COAG should be considering the introduction of a 50 per cent floor. Now towards the end of the forward estimates it is expected that Western Australia goes past 50 per cent again and that would obviously be a sensible time to consider doing something like that.
GARY ADSHEAD: Do you accept that perhaps some of the way that it was handled last Budget, some of the language, some of the concern that it raised in the business community is something that you have had to undo with some respect with this Budget?
MATHIAS CORMANN: We came into Government facing a very challenging situation. On reflection, it is true that we tried to do too much at once in our first Budget. We tried to do it for the right reasons, but obviously having the benefit of further public and private conversations and having reflected on how things have and haven’t worked we have taken a slightly different approach. We have learnt from how things went last year and we have tried to do it better this year. Fundamentally, what we are trying to do is strengthen growth, create more jobs and get the Budget back onto a sustainable foundation for the future. So that the important services and benefits provided by the Federal Government are affordable in the economy over the medium to long term. That is what we are trying to do.
GARY ADSHEAD: Minister thank you for joining us this morning.
MATHIAS CORMANN: Always good to talk to you.