Senator the Hon Mathias Cormann
Minister for Finance
RISHAAD SALAMAT: The Australian Government, Tony Abbott’s Government delivering its second Budget promising tax cuts for small businesses and increased spending on families. That coming despite a ballooning deficit which has been blamed on plunging commodity prices. Joining us now from Canberra is Mathias Cormann. He’s Australia’s Minister for Finance. Minister, thank you very much for joining us this morning. Let’s start with what Tony Abbott said in the lead up to this Budget which he described as being dull and almost boring, is that the way you saw it?
MATHIAS CORMANN: This Budget is our next step in implementing our long term plan for stronger growth, more jobs and to bring the Budget back into surplus as soon as possible. I’ve got to correct your introduction there. Deficits in Australia are not ballooning. They are reducing every year of the Budget forward estimates from $35 billion in 2015-16, which is below market expectations, down to just under $7 billion in 2018-19, with an expectation of getting back into surplus by 2019-20, which is the exact same timetable as in last year’s Budget.
RISHAAD SALAMAT: Indeed those are your projections. How are you going to meet those projections if you don’t have wide scale structural reform which many people have been arguing? Where are you with that?
MATHIAS CORMANN: We are pursuing structural reform. Importantly, we are keeping spending growth under control. We inherited spending growth from the previous government of about 3.6 per cent above inflation. We have been able to bring that down to about 1.5 per cent on average every year over the current four year forward estimates period. There is more work to be done, but we are taking a measured, responsible approach given where the global economy and the domestic economy is at and the numbers are there for all to see. We are on a credible pathway back to surplus. We are investing in stronger growth and stronger job creation
RISHAAD SALAMAT: Absolutely and the numbers are indeed there for all to see as you just mentioned. Minister, do you think there was enough in this Budget to allay fears by some of these ratings agencies and some of the noises coming there that Australia could lose its AAA rating?
MATHIAS CORMANN: We are very confident that the Budget will not cause any concern at all. We are very confident that the ratings agencies will be comfortable with our strategy to bring the Budget back to surplus over a reasonable period.
RISHAAD SALAMAT: Let’s talk about some of the economic packages in here. I think you’ve got a package here for childcare that many people say could stall in the Senate. Are you confident you can get the bulk of this through what is a divided lawmaking body?
MATHIAS CORMANN: We believe it is a very good package. It is designed to make access to childcare simpler, more affordable and more flexible as part of helping families in Australia get into work, stay in work and be in work. Like families around the world, families in Australia do have to balance the challenges of work and family and so what we have sought to do is help families participate in the workforce in a way that also ensures that their children are well cared for.
RISHAAD SALAMAT: Absolutely. The thing is, to get the economy going as well, I think you’re trying to favour small business and you’ve got a 1.5 per cent tax cut on small firms. Is that really going to be enough to engender the so called ‘animal spirit’ many people say that Australia lacks?
MATHIAS CORMANN: We have delivered a 1.5 tax cut to small business for about 96 per cent of all businesses across Australia. But on top of that, we’ve done more than that. We have also offered the opportunity for businesses with an annual turnover of up to $2 million a year to immediately write off any investment in assets or equipment up to $20,000, without a limit on how many individual investments they might want to make to immediately deduct that from their tax liability in any one year. We believe that will encourage businesses to invest in their future success, in their future growth and it will encourage them to employ more Australians.
RISHAAD SALAMAT: The thing is, the mining side of the economy is suffering from declining commodity prices. Do you foresee a rebound taking place and how in effect do you rebalance the Australian economy?
MATHIAS CORMANN: The most significant commodity which we export is iron ore, which represents about 21 per cent of our national export income. Since we came into Government in September 2013, the price for iron ore has gone from $120 a tonne to about $58 a tonne now. When we closed the books on this Budget, our revenue forecasts were based on an assumption of $48 US a tonne so there is a bit of upside risk there at the moment. Nobody can reliably predict exactly what will happen with commodity prices…
RISHAAD SALAMAT: We’ve lost the line there. Mathias Cormann there, the Australian Finance Minister.