Senator the Hon Mathias Cormann
Minister for Finance
Date: Wednesday, 13 May 2015
PATRICIA KARVELAS: Joe Hockey has been in his element today, selling a Budget which looks like the polar opposite of last year’s document. The 2014 Budget was a collection of tough and unpopular cuts to Government programs. With the Government saying it was intergenerational theft not to make big, big savings. Yet this year, there are multibillion dollar spends in small business, childcare and infrastructure pitched at middle Australia. Joe Hockey says that it is not Budget flip-flopping but rather it is a flexible plan. Finance Minister Mathias Cormann joins me now. Welcome back to Drive Minister.
MATHIAS CORMANN: Good to be back.
PATRICIA KARVELAS: A very different Budget to last year, with an eye to political sensitivities, that’s the verdict of former Prime Minister John Howard. Do you admit that the heart of the Budget is about being re-elected and it’s all about politics?
MATHIAS CORMANN: No. The Budget is about putting Australia on a stronger foundation for the future. We came into Government confronted with weakening economic growth with rising unemployment and a Budget position that was rapidly deteriorating. Since then we have been working to turn that situation around. We have an economic plan, focused on stronger growth, more jobs and repairing the Budget, putting the Budget back into surplus as soon as possible and that is what we are continuing to do.
PATRICIA KARVELAS: Minister, the deficit is falling in your forward estimates but it is not because of spending cuts like you promised when you were in Opposition and in your first Budget but because of bracket creep. So how can you tell us that you’re a low taxing Government when bracket creep is doing all the work for you?
MATHIAS CORMANN: That is not quite right. Bracket creep is not doing all the work...interrupted
PATRICIA KARVELAS: It is doing a lot of the work right?
MATHIAS CORMANN: There is an element of bracket creep and as we have said publicly on many occasions, we would like to deliver more income tax cuts to address bracket creep. But you can’t do that unless you are able to get your expenditure down and there is obviously some more work to be done on that front. Right now, spending as a share of the economy is trending down from 25.9 per cent now to 25.3 per cent as a share of the economy by the end of the forward estimates. We have controlled spending growth more tightly than the previous Government. Instead of 3.6 per cent spending growth above inflation, we have brought that down to about 1.5 per cent per year on average above inflation. There are some pressures in the Budget. For example in this forward estimates period, the ramp up of the NDIS comes into the forward estimates more significantly, which leads to an increase in expenditure on the NDIS of 67 per cent above inflation. So we have made sensible judgments. Importantly, since MYEFO before Christmas, expenditure over the current forward estimates is $7.3 billion lower than expected at that time and all of the new spending that we have initiated in this Budget because of the important priorities it seeks to address has been more than fully offset by savings in other parts of the Budget. Finally I have just got to correct one statement out of your introduction. We are not spending money on small business. We are introducing tax cuts. We are providing tax cuts which leave more of peoples’ own money with those businesses. Those businesses will be able to decide how to invest their money in stronger growth opportunities for their businesses, helping them be more successful, helping them to employ more Australians.
PATRICIA KARVELAS: On RN Drive my guest is Finance Minister Mathias Cormann. Our number is 0418 226 576 if you want to text me and you can also tweet us at @RNDrive. I want to go to a few specific things because I know you’ve been talking all day about this. I’ve heard a few of your other interviews, I’m right across how much you’ve been talking. Tony Abbott has come under sustained attack, particularly in Question Time over senior Ministers descriptions of double-dipping for new mothers. Do you accept that it’s kind of contradictory to talk about women of calibre needing high maternity leave schemes, paid parental leave schemes and now describing them as double dippers?
MATHIAS CORMANN: We’re not just describing this like that now. We actually did raise this issue in the lead up to the last election…interrupted
PATRICIA KARVELAS: Hang on a minute, I need to clarify this. You did absolutely talk about double-dipping. But it was at the time that you were promising a rolled gold paid parental leave scheme that would give women up $75,000 for six months. So that was the parameters, that they couldn’t get two schemes under that arrangement. Now you’ve taken that off the table, but now you’re going to give them less. There’s no status quo, you’re taking money away from women after they have babies.
MATHIAS CORMANN: If I can address that. What we’re saying now is entirely consistent with what we said then. Right now, most women can only access one paid parental leave scheme, which is the taxpayer funded government scheme. Some women have access to more generous paid parental leave arrangements through their private or public sector employer. What we’re saying is that if women choose to access their more generous paid parental leave arrangements through their private or public sector employer, in many cases at full replacement wages, then we don’t think it is appropriate in those circumstances for the taxpayer to be asked to pay for a second paid parental leave arrangement at the same time. We think that is a fairness issue. We think it is a matter of equity in the system.
PATRICIA KARVELAS: But do you accept that it is a different proposition now that you’ve taken that policy off the table and you’re not legislating for the bigger scheme. That’s it’s not actually the same promise because the other half of it no longer exists.
MATHIAS CORMANN: You’re quite right. We have decided not to proceed with the paid parental leave scheme that we took to the last election. That is a matter of public record…interrupted
PATRICIA KARVELAS: So it makes the double-dipping different doesn’t it, given that the other half isn’t there?
MATHIAS CORMANN: That is where I’d completely disagree with you. The fundamental unfairness where on one hand you’ve got most women across Australia only able to access one, the taxpayer funded default paid parental leave scheme, whereas on the other hand you’ve got women who are able to access more generous private and public sector paid parental leave arrangements at the full replacement wage and a taxpayer funded scheme as well, in those circumstances we don’t think it’s fair that on top of already more generous paid parental leave arrangements, that they, on top of all of that, still also can access a taxpayer funded default scheme.
PARTRICIA KARVELAS: So you’re not going to change the language?
MATHIAS CORMANN: Well the language is honest. Are you suggesting that we should spin?
PARTRICIA KARVELAS: I know some people say you shouldn’t. I’m asking whether you’re willing to, so if you stop calling it that, you would call it spin, is that right?
MATHIAS CORMANN: We are openly, transparently and honestly explaining what it is that we’re doing and why. I would have thought that’s what journalists expect us to do?
PARTRICIA KARVELAS: On RN Drive, my guest is Finance Minister, Mathias Cormann here. Our number here 0418 226 576. Let’s move to something else. We can’t talk about PPL the whole time. On the $5 billion Northern Australia Infrastructure Facility that will be available for projects like ports, railways and other sort of projects. Who will it be available to and when and for what kind of projects?
MATHIAS CORMANN: Well you’ve just mentioned a whole range of projects that it could be available to.
PARTRICIA KARVELAS: But who and when?
MATHIAS CORMANN: This is obviously about investing in economic infrastructure, in productivity enhancing, job creating infrastructure. The specifics of all of this are yet to be announced but there is a $5 billion Northern Australia Infrastructure Facility that we have provisioned for in the Budget and the purpose here is to leverage private sector investment in economic infrastructure for the future. Now obviously it is going to be important to ensure that it is quality infrastructure, that it is infrastructure that can deliver a commercial benefit and as such, we are looking at complementing Federal and State Government investment in infrastructure with additional private sector infrastructure investment.
PARTRICIA KARVELAS: Is the money spent over a 12 year period? That’s one of the stories I read today suggested that it would be spent over a 12 year period, is that the case?
MATHIAS CORMANN: Well it depends. Obviously it’s going to be a matter of identifying the right project. It’s a matter of identifying the right partners. It’s about making sure that all of the i’s are dotted and the t’s are crossed and we’ll move as quickly as we can, but we go as slowly as we need to. We have trialled this approach to a degree in the context of the WestConnex Project in New South Wales. We know that it can work and we believe that this is just going to be another part of a multi-pronged approach seeking to boost investment in economic infrastructure.
PARTRICIA KARVELAS: Small businesses get a 1.5 per cent cut, that’s creating a two-tiered company tax rate, it’s going to have inevitable consequences. How is that going to phase in? How are you going to make sure that small businesses wanting to move beyond a turnover of $2 million can do it without trying to sort of structure their affairs in a way that tries to avoid the highest tax bracket?
MATHIAS CORMANN: Every small business wants to become a big business. Every small business wants to become a more profitable business.
PARTRICIA KARVELAS: Not if they have to pay higher tax.
MATHIAS CORMANN: Well you know what? 1.5 per cent tax in return for more profit, I’m sure that most businesses would like to be more profitable and generate more income for themselves. If your question is, would we have preferred to be able to provide a tax cut to all business? Sure. But we’ve made a responsible and balanced decision based on what is affordable in the current climate. We’ve delivered a 1.5 per cent tax cut to 96 per cent of businesses across Australia and we’ve also, of course, delivered the opportunity for a $20,000 instant asset write off for any investment by those small businesses into assets or equipment that will help them boost their future growth and success.
PATRICIA KARVELAS: Mathias Cormann, as we were talking about, spending is at 26 per cent of GDP which the Prime Minister Tony Abbott agreed today, is an issue. Why is that not a Budget emergency? That is exactly what you said when Labor was at that level of spending. Surely the same economic principles apply?
MATHIAS CORMANN: Firstly the problem with Labor was that when they were facing certain challenges they were making the situation worse by locking Australia into further unsustainable spending growth, permanently and structurally into the future. In particular, in the period beyond the published forward estimates, years five, six and beyond. Now what we have done, we have implemented, we have started to implement our economic plan to strengthen growth, create more jobs and get the Budget back to surplus as soon as possible. What you will have seen in yesterday’s Budget is that we are on a credible path back to surplus, that the timetable to get back to surplus is the same timetable as in last year’s Budget. We are now heading in the right direction. We are making progress and instead of increasing expenditure when confronted with lower than expected revenue, we are reducing expenditure growth. We are working to get expenditure under control and yes people might say that they would have liked us to have cut expenditure faster and by more, well we are progressing based on what is achievable and we are heading in the right direction.
PATRICIA KARVELAS: Isn’t the underlying message of this Budget that the economy is so weak a stimulus is needed? That is the position of the Reserve Bank with its decision to keep interest rates so incredibly low. This is a stimulus Budget isn’t it? It’s kind of a Labor style Budget?
MATHIAS CORMANN: I completely reject that it is a Labor styled Budget and I also reject this assertion that the economy is so weak. The economy has been strengthening. Jobs growth has been strengthening. What we are wanting to do in this Budget is to keep the momentum going. We want to ensure that as we move forward we can continue to strengthen growth, that we can get back to trend growth and above and that we can get back into a situation where additional employment growth actually leads to falls in the unemployment rate. That is what we are working towards. That is the responsible, long term economic plan that we have been pursuing ever since we have been elected to Government.
PATRICIA KARVELAS: Even a conservative commentator Piers Akerman says it is a Labor styled Budget because it does involve this stimulus kind of style in it. You don’t concede that that is the way you are heading and that people will be cynical that your Budget last year was so radically different to the path you are taking now?
MATHIAS CORMANN: I don’t agree with that at all. When we came into Government we faced certain challenges. We had a plan to deal with those challenges and the plan is actually working. Obviously when you have got changing economic conditions, when you have got changing conditions in the world economy and the domestic economy, you have got to adapt and adjust your way forward. That is what we are doing. That is what we should be doing. What will be interesting is to see what Bill Shorten has to say about Labor’s alternative Budget. Will he tell us where he will make savings. Will he tell us where he will cut spending? If he doesn’t agree with our savings, how will he ensure that the Budget gets back into surplus? Or is all of the effort from Bill Shorten going to be on the tax side? Is all he is going to be prepared to do is tax people across Australia, saving for their retirement, to pay for his spending?
PATRICIA KARVELAS: Mathias Cormann I am going to ask your opposite number that any moment now. Thanks for joining us on RN Drive.
MATHIAS CORMANN: Always good to talk to you.
PATRICIA KARVELAS: Now that was Finance Minister Mathias Cormann.