Senator the Hon Mathias Cormann
Minister for Finance
Date: Wednesday, 13 May 2015
MATT TAYLOR: Maybe not limp but certainly a duller Budget than what we got 12 months ago and that was something that the Government promised we would get given the reaction to a number of measures that they implemented, or tried to implement this time 12 months ago. But let’s just give you a little bit of the headline detail again. I know we have been talking about it all morning to you, but the 15-16 deficit at $35.1 billion, that is perhaps a little bit better than what many commentators were expecting over the forward estimates, that four year period. It does of course move closer towards a surplus, about $6.9 billion is the deficit that we will see in the final four years of this Budget before we do get back to surplus around 2019-20. Take a listen to some of what Joe Hockey had to say about his second Budget when he handed it down late yesterday.
JOE HOCKEY [EXTRACT]: We have balanced the challenges of the current economy. We have taken into account the demands of Australians to be confident and invest in the future and also we are continuing with a number of structural initiatives from last year’s Budget that ultimately are going to help us to strengthen the overall Australian economy.
MATT TAYLOR: Joe Hockey there. The Budget this morning, receiving a bit of a mixed response, some praising it for not being as harsh as 12 months ago. Some saying it doesn’t go far enough to reign in debt and deficit. Let’s speak to one of the architects of the Budget. The Finance Minister, Mathias Cormann, joining us out here on the lawn at Parliament House. Thank you very much for joining us as always. Do you think that you have got the balance right in the Budget? You don’t want to damage confidence, we want business to go out and invest but we have also got to try and rein in the deficit. So you think you have succeeded on that front?
MATHIAS CORMANN: Well obvious we do. We very carefully considered the best way forward and we have taken a very measured, responsible and fair approach. When we came into Government we faced some significant challenges, weakening economic growth, rising unemployment and a rapidly deteriorating Budget position. We set out to implement a plan for stronger growth, more jobs, and to bring the Budget back into surplus as soon as possible. The economy is strengthening, jobs growth is strengthening and the Budget is on a credible path back to surplus. Indeed in last night’s Budget the timetable for a return to surplus was exactly the same as in last year’s Budget.
MATT TAYLOR: Some this morning have been calling it a Labor style Budget. The fact that it’s thin on debt and deficit reduction and big on spending. How would you respond to that?
MATHIAS CORMANN: That is a ridiculous proposition. It is a Budget that delivers a tax cut to small businesses. Labor was a Government that increased spending, increased taxes and increased debt and deficit. We have got the Budget on a credible path back to surplus. We have the Budget on a credible path to bring Government net debt down from 2016-17 onwards as a share of the economy. We are just getting on with the job of strengthening growth, creating more jobs and getting the Budget back under control.
MATT TAYLOR: Okay, Hong Kong has a question for you.
SUSAN LI: Hi Mr Cormann, it’s Susan here in Hong Kong along with Burnie. I want to talk to you about forecast because some are saying right now that the Coalition is being really too optimistic when it comes to growth forecasts. You’re predicting GDP to expand two to three per cent. You already overestimated economic growth last year by 1.7 per cent so why would anybody believe your forecast for the next few years?
MATHIAS CORMANN: We completely reject that. Our forecasts are based on very realistic assumptions. For example, the assumption underpinning our revenue in relation to iron ore prices is based on a forecast of $48 US a tonne. Right now it is trading at $58 US a tonne. 21 per cent of our national export income comes from iron ore production and exports, so it is a very important driver of nominal growth and revenue growth in Australia. If anything the risk is on the upside. The truth is, over the past year and a half, people have said we were too pessimistic and they were proven wrong, now some people are saying we’re being too optimistic, that’s wrong too. We are relying on the best available information provided by the experts in Treasury. Obviously these are forecasts and over time we will continue to adjust them as better information becomes available.
BERNIE LO: Minister, where is the evolution aspect in this Budget? We know very, very well that the best days of the mining boom are over. In terms of transitioning Australia away from resource reliance to something else, I mean what you’ve got in this Budget is breaks for small and mid size business, that’s great but that’s not going to create tens of thousands of jobs, and also chasing multinationals on the issue of tax evasion. Trying to milk something that is already existing there. So, do you understand why there’s a certain amount of criticism that there isn’t that evolution or transitional aspect that some might have liked to see?
MATHIAS CORMANN: Well there actually is exactly that transition. We are transitioning from growth in the mining part of the economy to the non-mining parts of the economy, which is why we have delivered a tax cut to 96 per cent of businesses across Australia. About one in two jobs in Australia is created by small businesses. The proportion of small business as a part of the overall economy is very high in Australia compared to other economies and what we have done last night is provide incentives to businesses across Australia to be more successful, to employ more people across Australia and to help boost growth into the future. Of course small businesses purchase products and services from bigger businesses, so it is something that will flow through the economy as a whole.
MATT TAYLOR: Talk to us about that small business package, because I guess that was the cornerstone of the Budget last night. This $5.5 billion, there are tax cuts, incentives to invest, also the write offs. What have you heard from small business, I guess, in the last 12 hours since the Budget was handed down?
MATHIAS CORMANN: The small business package has been very well received by small business indeed. There is quite a level of excitement and I have had lots of feedback from small business people right across Australia saying that they will now hire, they will now invest, and that this is the sort of incentive, the sort of encouragement they were looking for to get back onto the playing field.
MATT TAYLOR: Hong Kong?
BERNIE LO: Why should people outside Australia, Minister, care about this Budget? Is there anything in there that would attract foreign direct investment into Australia? Obviously a Budget, by definition, is local, is national but for those people in Hong Kong, in Singapore, all your neighbours in Australia is there any facet of this Budget that we should focus on, that we should latch on to and consider?
MATHIAS CORMANN: The Australian Government has got a responsible long term plan to strengthen growth, to create more jobs and to generally make our economy more competitive internationally, reducing the cost of doing business. Foreign investors have actually expressed a very strong vote of confidence in what this Government is doing. Foreign direct investment has increased by about 23 per cent over the past 12 months compared to the previous 12 months and we of course hope for and look forward to increased foreign investment in the years ahead.
MATT TAYLOR: Just finally, on the crack down on multinationals and tax avoidance, are you scared that that might damage investment into Australia, because when we had the mining tax under the previous administration, you guys were quick to say that it was going to damage investment from offshore into Australia. Isn’t this the same sort of thing?
MATHIAS CORMANN: No it is not the same sort of thing. The mining tax was a complete failure because the previous Government acted in an ad hoc, ham fisted, ill-considered way. They didn’t consult properly, they didn’t dot the I’s and cross the t’s. They assumed that they were going to raise $12 billion in revenue, spend all the money they thought it would raise and then it raised nothing. What we are doing is taking a cautious and considered approach. We are determined to ensure that any business generating profits in Australia pays their fair share of tax in Australia, consistent with our laws and where there are tax arrangements in place which are contrived to avoid tax in Australia then we will give additional powers to our taxation office to ensure that tax is paid consistent with our laws. Now that is an integrity measure. We think that that is appropriate. We have not put a revenue figure against it. We will obviously want to raise as much as we can to ensure that a fair share of tax is paid here in Australia
MATT TAYLOR: Alright, we’re out of time. Thanks very much for coming to chat to us, as always. Mathias Cormann, Finance Minister there.