Senator the Hon Mathias Cormann
Minister for Finance
JON FAINE: It’s an immediate 100 per cent deduction. After that, you can still put it on your depreciation register as I understand it. Let’s check with the Minister for Finance who is standing by. Senator Mathias Cormann from Western Australia is representing the Treasurer this morning for the Budget discussion. Senator Cormann, good morning to you.
MATHIAS CORMANN: Good morning Jon. Good morning to your listeners.
JON FAINE: Glen from Werribee wants to know if he can immediately go and buy a vehicle and my understanding of it is he can?
MATHIAS CORMANN: Of course he can immediately buy a vehicle but the immediate asset write off only applies to any item used in the operation or conduct of a business that costs less than $20,000. Any item that costs more than $20,000, the current depreciation arrangements apply.
JON FAINE: So if he buys a $19,999 ute, he can write it off straight away. If he buys $20,001 ute, he can’t. He can only put it on his depreciation register?
MATHIAS CORMANN: You’ve got to put a line in the sand somewhere.
JON FAINE: Understood, but is that correct, what I just said?
MATHIAS CORMANN: That is correct.
JON FAINE: Okay, thank you for clarifying that. We were talking a moment ago with Chris Bowen. Effectively, you and Joe Hockey and Tony Abbott, you’ve capitulated on the challenge of reforming Australia’s economy by this Budget, have you not?
MATHIAS CORMANN: No we haven’t. We came into Government confronting a weakening economy, rising unemployment and a Budget position that was rapidly deteriorating. We have been implementing our plan for stronger growth, more jobs and to repair the Budget. Last year we laid the foundation, this year we have taken our next steps in strengthening growth, creating more jobs and getting the Budget back to surplus as soon as possible.
JON FAINE: Senator Cormann if that was laying a foundation last year, then I don’t want you coming anywhere near a renovation anywhere near my place, thank you very much because that foundation collapsed from under you. You are surrendering reform, you’re surrendering principle. Everything you’ve argued in Opposition and for the last 18 months in office and instead going for a sugar hit.
MATHIAS CORMANN: Our challenge on coming into Government was to strengthen economic growth and the economy is strengthening, to create more jobs and jobs growth is strengthening and to get the Budget back on a credible path back to surplus and it is. Indeed, the timetable for getting back into surplus remains unchanged from last year’s Budget, despite having lost $90 billion in expected tax revenue over that same period.
JON FAINE: But people will invest in all the wrong things is what we’re already learning. From both of our callers this morning. Shan from Mulgrave the business adviser and Glen from Werribee. People aren’t going to invest in things that provide a long term sustainable return, instead they’re going to buy toys and gadgets and gizmo’s which is not what the economy needs.
MATHIAS CORMANN: Actually I don’t agree with that at all. Businesses across Australia who have been given this opportunity to instantly depreciate up to $20,000 worth of investments still have to make the outlay. They still have to make the expenditure. They will be able to deduct some of it through their tax arrangements, but in the end, they’re not going to spend money on things that are not going to help them grow their business. They will invest in things that will help their business to be more successful, that will help them employ more Australians and that is exactly what the economy needs.
JON FAINE: So do you thank the Senate then for saving you from the own goal of last year’s Budget?
MATHIAS CORMANN: No we don’t.
JON FAINE: Well how else do you explain it? It’s a complete volte-face.
MATHIAS CORMANN: I don’t accept that. We went into last year’s Budget facing particular challenges. The global economic conditions have changed. The domestic economic conditions have changed. We do have a responsible long term economic plan, which is adaptable to changing conditions. In this year’s Budget we have made judgments in the national interest on how we can best put Australia on a stronger foundation for the future, considering the circumstances that we are currently in.
JON FAINE: The best foundation for Australia’s future it would seem reading between the lines is for the Abbott Government to think, let’s do whatever we need to, to get people to re-elect us and then we’ll have another go maybe with a Senate made up somewhat differently if we get the chance in the next government in the next term in office.
MATHIAS CORMANN: We are focused at all times on making the best possible decisions that are in the national interest. It is not as if we haven’t been doing anything over the last 18 months. We got rid of the carbon tax, we got rid of the mining tax, we entered into three Free Trade Agreements with major economies in our region, we’ve rolled back red tape costs for business by more than $2 billion a year. We have been getting the Budget back on a more sustainable foundation. Yes, you’re right. We didn’t get all of the things through that we would have liked over the last 12 to 18 months, but we are now heading in the right direction. We are making progress and the Budget last night is the next step in our economic plan to get Australia on a stronger foundation for the future.
JON FAINE: Why do you punish Victoria?
MATHIAS CORMANN: We don’t.
JON FAINE: Victoria by the fourth year of the outlook in this Budget is receiving about half of its population share of government infrastructure investment in grants and you’re refusing in any way put Federal money into any public transport or infrastructure in Victoria, except a tunnel that the Victorian state election was just contested over and your arguments were rejected.
MATHIAS CORMANN: The Victorian State Government has not come forward with any credible projects. What the Victorian State Government has done so far is spend $1 billion worth of taxpayers’ money not to build a road. They have told us that they were not supportive of the East-West Link and in recent weeks, they have come out and said they want to build the West-East Link instead. Why any government would waste $1 billion of taxpayers’ money to end up building West-East Link instead of the East-West Link is beyond me. The truth is we’ve got…interrupted
JON FAINE: Then you don’t understand the needs that Victorians just voted on, with respect Senator Cormann. If you came and spent some time here, you’d understand that the proposal that your State Liberal colleagues went to the people over was a dog and was rejected out of hand and the alternative proposal now looking at for a second river crossing is something desperately needed and very popular in Melbourne.
MATHIAS CORMANN: I spend a lot of time in Victoria. I spend a lot of time in Melbourne. Whatever way you look at it, there is no context in which I can understand any government giving away $1 billion of taxpayers’ money not to build a road. Having said that, we are clearly on the record as saying that when the Victorian State Government comes forward with an actual thought through project, of course the Federal Government will engage. We have put $3 billion into the Budget as a contingent liability to work with any Victorian State Government in the future that wants to join with us in building what is a very important infrastructure project for Victoria, which is the East-West Link.
JON FAINE: You created a special investment fund for Northern Australia.
MATHIAS CORMANN: Yep.
JON FAINE: You said that you recognise therefore how Government and Federal Government concessions can create infrastructure for regions that need it. The Northern Australia Infrastructure Facility is clearly a good idea, but other places need it too. Geelong desperately needs it because it is going to lose the car industry. South Australia, Tasmania, why not do it across the Board? Super funds have trillions of dollars they want to invest. All you have to do is help them find a way to do it.
MATHIAS CORMANN: The Northern Australia Infrastructure Facility does actually copy a concept that we have successfully trialled with WestConnex in New South Wales. We are keen to explore opportunities in other parts of Australia and it is a matter of identifying…interrupted
JON FAINE: So why didn’t you do it? Super funds are calling for it? You’ve not put one cent into public transport, anywhere that I can find and yet that is what is desperately needed in the big cities of Sydney, Brisbane and Melbourne in particular. Not one cent, nor have you enabled that investment to be made by the private sector and super funds.
MATHIAS CORMANN: Jon, there is always more to be done. We have made a significant effort in last year’s Budget and in this year’s Budget through our Asset Recycling Initiative to leverage additional State Government investment in infrastructure and also private…interrupted
JON FAINE: I’m not talking State Government investment with respect Senator. Trillions from super funds I am talking about.
MATHIAS CORMANN: …And to leverage additional private sector investment. There is always more to be done and we are all ears, talking to people around Australia, consulting with people around Australia…interrupted
JON FAINE: Talking and consulting doesn’t make jobs and it doesn’t solve problems, so you need to do more than that. How much talking do you need?
MATHIAS CORMANN: There is always more to be done and we are committed to do more, but in the meantime, yesterday was the next step and there will be further steps in the future.
JON FAINE: Does that mean that you are going to do it? The example of the North Australia Infrastructure Facility, could we have a Southern Australia Infrastructure Facility too please?
MATHIAS CORMANN: We carefully considered what we are doing in Northern Australia after extensive consultations…interrupted
JON FAINE: Who did you consult with? You didn’t consult with anyone here about it clearly, because they would have said could we have that too.
MATHIAS CORMANN: This was actually a very specific election commitment in the lead up to the last election that we would go through a process looking at how we can seize the opportunities across Northern Australia. There is a particular infrastructure gap across Northern Australia that we believe needs to be addressed. In terms of Victoria, in terms of Southern Australia, we have significant infrastructure investments ready to go, as it happens…interrupted
JON FAINE: Like what?
MATHIAS CORMANN: In Victoria, the State Government in Victoria decided to walk away from a $3 billion…interrupted
JON FAINE: No sorry Senator Cormann, the people of Victoria voted. There was an election. Tony Abbott said that it’s a referendum on the East-West tunnel. The people decided and you’re not respecting that decision.
MATHIAS CORMANN: And the State Government in Victoria hasn’t come to us with any other credible alternative proposal that we could partner with them on to invest in infrastructure for the future of Victoria. As soon as they do we will engage in these conversations.
JON FAINE: I don’t know what needs to be put to you, other than what everything is. But let’s move on our time is tight and I will quickly mention the State Treasurer, joining us a little later this morning and I will continue the discussion there as well. With some theatrical flamboyance, Joe Hockey in the middle of his Budget speech last night held up some papers which he said was the draft legislation from multinational tax avoidance and collections scheme. Some legislation that would collect tax being sent offshore. Yet when we examine the detail of the Budget papers, the revenue from the multinational tax in the Budget is asterisk.
MATHIAS CORMANN: That is because we are being very cautious. When Paul Keating introduced the Petroleum Resource Rent Tax in the early 90’s he actually estimated $0 in revenue and he raised quite a bit more, but that was because Paul Keating was being cautious then. Wayne Swan when he introduced the mining tax, said it was going to raise $12 billion and it didn’t raise a zac. The problem was that he had already spent all the money he thought it would raise and more. Now we believe that there is money to be raised here. We believe that all businesses generating profits in Australia should pay their fair share of tax, including and in particular multinational businesses. Wherever there are contrived arrangements designed to avoid tax in Australia, we will be giving additional powers to the tax office to see through those contrived arrangements…interrupted
JON FAINE: But you don’t expect those additional powers in that legislation to generate any money at all?
MATHIAS CORMANN: Well that is not true.
JON FAINE: That is what is in your own Budget papers.
MATHIAS CORMANN: We are being entirely transparent. We are not putting a number on it because we want to raise as much as we can in order to ensure that all businesses in Australia, including and in particular multinational businesses pay their fair share of tax each year…interrupted
What is a fair share is the whole point?
MATHIAS CORMANN: Sure. We are not going to pretend that there is a specific, accurate number that we can predict at this point. We will go after as much money as we can…interrupted
JON FAINE: You don’t trust your own legislation to deliver one dollar to the Budget.
MATHIAS CORMANN: That is not right.
JON FAINE: Well that is what the papers show.
MATHIAS CORMANN: We expect way better than that and what we will do in the Mid-Year Economic and Fiscal Outlook and in next year’s Budget is report on how much we have actually achieved. Just because we are being cautious and not putting a dollar figure on something that is very hard to predict, doesn’t mean we are not expecting to raise any revenue from this.
JON FAINE: I’m indebted to you for putting up with my impertinent questions this morning Minister and I look forward to another opportunity soon. The Minister for Finance, Senator Mathias Cormann speaking to us from the national capital.