Senator the Hon Mathias Cormann
Minister for Finance
Date: Wednesday, 13 May 2015
SANDY ALOISI: Here at home, the Government last night brought down its second Budget and the sales campaign is now in full swing. One of the Government’s salesman in chief is the Finance Minister Mathias Cormann, he is speaking here to Marius Benson.
MARIUS BENSON: Mathias Cormann, good morning.
MATHIAS CORMANN: Good morning Marius.
MARIUS BENSON: 2015 is such a contrast to 2014, there are winners all over the place this year. There is small business, there is pensions, pensioners, childcare users. Everybody is happy, almost everybody.
MATHIAS CORMANN: 2015 is the next step in our responsible, long term plan to strengthen growth, create more jobs and to get the Budget back to surplus as soon as possible.
MARIUS BENSON: It has been seen as a political document directly that it may be the preamble to an early election. Will there be an early election?
MATHIAS CORMANN: No. This is a Budget for a better Australia. We are entirely focused on doing everything we can to strengthen growth, create more jobs and to get the Budget back onto a more sustainable foundation for the future. We intend to serve our full term. We are not focused on an election.
MARIUS BENSON: You intend to serve the full term?
MATHIAS CORMANN: Indeed.
MARIUS BENSON: Whatever happened to small Government and lower taxation? Spending in this Budget, 25.9 per cent, that is close to the peak of spending in proportion of the GDP by Labor during the Global Financial Crisis. Taxation, 24 per cent of GDP, that is higher than in any year for the Rudd and Gillard years.
MATHIAS CORMANN: You are actually quoting wrong figures. Taxation is at 22.4 per cent as a share of GDP. Spending as a share of the economy is coming down from 25.9 per cent to 25.3 per cent over the forward estimates. So it is heading in the right direction and the public service has been reduced back to the size of 2006-07. Yes, of course there is more work to be done, but we have made a very serious effort in getting spending under control. We have constrained spending growth to just 1.5 per cent above inflation. What is really driving spending growth significantly at the moment is the ramp up in spending on the National Disability Insurance Scheme. That is one of the reasons why we have to continue to ensure that spending in others areas of Government is brought under control so that we make space in the Budget for that very important initiative.
MARIUS BENSON: But were you disappointed at your projected spending not declining over the forward estimates over the next four years. Are you disappointed to be spending at those screeching GFC rates of 25.9 per cent this year?
MATHIAS CORMANN: We are spending less now than what we thought we would spend at MYEFO. If you look at the forecasts at the Mid-Year Economic and Fiscal Outlook before Christmas, expenditure over the current forward estimates is actually reduced by $7.3 billion. The size of the deficit continues to reduce. We inherited $123 billion in projected deficits from Labor. We have reduced that down to about $82 billion. We are on a credible pathway back to surplus. The timetable for a return to surplus is unchanged from last year’s Budget. We are still on track to get back to surplus by 2019-20.
MARIUS BENSON: But that track depends on a continuing boom. There’s been 24 years of economic growth and the track back to surplus is projected on very strong growth figures of 3.5 per cent in the near future. How realistic are those? I mean those growth figures are wound up and down on a monthly basis.
MATHIAS CORMANN: Our assumptions are very realistic. If anything, we have included an assumption on the price of iron ore of $48 a tonne and right when now the iron ore price is actually tracking at $58 a tonne. We have gone out of our way to use the most realistic assumptions possible based on the best available information from Treasury. You’ve got to remember, we’re very optimistic about the Australian economy. We have delivered a Budget yesterday which will strengthen growth. It is a growth Budget. There are a lot of initiatives in there designed to boost growth. We are backing the Australian economy. Right now, low interest rates, low inflation, lower fuel and electricity prices, spare capacity in our economy and our Budget of course will encourage people to get out there and invest, in particular small businesses across Australia with a small business tax cut and the instant asset write off up to $20,000. There are a lot of initiatives in this Budget that will help boost growth and we are very confident that these economic growth forecasts are entirely realistic.
MARIUS BENSON: The Financial Review this morning provides some analysis saying that the cumulative deficit is the worst is 60 years. Do you think the debt and deficit outlook is putting our AAA credit rating at risk?
MATHIAS CORMANN: No it doesn’t and that is actually wrong. As I’ve said to you, the projected deficits that we inherited were to the tune of $123 billion. We’ve brought that down to about $82 billion. And if you look at the debt outlook, Government net debt is expected to peak at 18 per cent as a share of the economy in 2016-17 before coming down. Gross debt is projected to be $112 billion lower than it was on track to be under Labor by 2023-24. So look, we have more work to do, there is no doubt about that. But we have made decisions in this Budget which are measured, which are responsible and which are fair. This is all part of our long term plan to strengthen growth and repair the Budget. We’re doing it in a way that takes into account global economic conditions and changes in our domestic economic conditions.
MARIUS BENSON: The commentary this morning is broadly disbelieving as this as an economic exercise, being principally a political exercise designed to sure up the position of the Government and particularly the Prime Minister and Joe Hockey. Have you put off the hard work for some time, specifically until after the next election?
MATHIAS CORMANN: I think you’re not listening to my answers. Essentially, the return to surplus is on the same timetable as in last year’s Budget. Our Budget is entirely focused on putting Australia on a stronger foundation for the future. It is the second instalment. It is the next step, in implementing our plan for stronger growth, for more jobs and for getting the Budget back to surplus as soon as possible. We remain on a credible path back to surplus. The deficit has come in below market expectations and it is reducing every single year both in dollar terms and as a share of the economy before getting into surplus by 2019-20.
MARIUS BENSON: Mathias Cormann, thank you very much.
MATHIAS CORMANN: Always good to talk to you.