Senator the Hon Mathias Cormann
Minister for Finance
Date: Wednesday, 13 May 2015
JANINE PERRETT: Welcome back. Well the Budget has been handed down, including handouts. Now the hard work begins to sell it. Spin city here in Canberra at the moment but a man who is actually the nation’s Finance Minister, not just a spinner, Senator Mathias Cormann. Welcome back to the show.
MATHIAS CORMANN: Good to be back.
JANINE PERRETT: It seems like only last week you were on. We got the pre Budget sell and now we get the post Budget sell. Certainly wasn’t dull as I said. Let’s look at just the broad, the main, I think the centrepiece of it, the what would you call it, the handout? You don’t like the word, the stimulus package? What is the word for what you’ve done with the small business write off?
MATHIAS CORMANN: Well it’s not a hand-out.
JANINE PERRETT: What’s the word?
MATHIAS CORMANN: Tax cut is a good word for starters. So there is a 1.5 per cent tax cut for 96 per cent of businesses across Australia. Then of course there is the $20,000 instant asset write off, which allows small businesses with turnover of up to $2 million a year to immediately write off investments in assets and equipment. It helps them strengthen the growth of their business, helps them be more successful and to employ more Australians.
JANINE PERRETT: Now I spoke to you last night on Paul Murray’s show. I said this is a stimulus package, you said no, it’s not a stimulus, the difference being?
MATHIAS CORMANN: What I said, it’s not a stimulus in the Labor way, because Labor just spent taxpayers’ money. We’re not spending taxpayers’ money, we are letting taxpayers have more of their own money. We are letting business taxpayers have more of their own money so that they can make judgments on how to invest, where best to invest, how to be the most successful they can be and employ more Australians. This is part of the considered, responsible, long term, economic plan to strengthen growth, create more jobs, and of course to get our Budget back into surplus as soon as possible.
JANINE PERRETT: So no blank cheques like they did to spend on schools or whatever you want?
MATHIAS CORMANN: No money for school halls, no money for pink batts, no $900 cheques for people. This is about encouraging business to have a go. This is about encouraging businesses who are having a go to get ahead.
JANINE PERRETT: Have a go. It’s a have a go Budget. We know that, we’ve got that message.
MATHIAS CORMANN: That’s good.
JANINE PERRETT: It was interesting you mentioned blank cheques, because one of the things I’ve found interesting in this was the $150,000 each electorate is going to get, each politician.
MATHIAS CORMANN: Well in every community across Australia, there are always community organisations that are looking for some capital.
JANINE PERRETT: Exactly, but aren’t you basically, isn’t that old fashioned pork barrelling? That just means a blank cheque to every politician to give to win votes back, school halls, whatever they want to spend it on.
MATHIAS CORMANN: It’s not pork barrelling. This is about investing in local communities and of course it’s equally available to every local member, whatever their party political persuasion. This is...interrupted
JANINE PERRETT: So because you give it to the other lot, I suppose it’s not pork barrelling?
MATHIAS CORMANN: We’re not giving it to members of parliament for their own use, we’re giving it for investment in their local communities.
JANINE PERRETT: And you don’t think they’ll use it to win favour for votes?
MATHIAS CORMANN: Well there is obviously going to be a process around identifying how the money is best spent.
JANINE PERRETT: Okay. I just wanted to clear that up on stimuluses and blank cheques. Now the trickledown effect, as I said, you announced this last night, it started at 7:30pm. I haven’t yet seen any pictures from my local Officeworks where the people were queued up until midnight when it was open.
MATHIAS CORMANN: People do have until 30 June 2017.
JANINE PERRETT: That’s exactly it. I said to people today who were rushing their accountants, you’ve got two years; you don’t have to do it today.
MATHIAS CORMANN: Some people might want to do it this financial year and next financial year and the year after depending on how profitable they are and depending on whether they have things that are sensible to invest in.
JANINE PERRETT: Presumably it would be nice if this stimulus, I mean to help the economy and confidence continued for two years, but isn’t part of this about getting the economy kick started now? I mean, don’t you want people to go out and show that there is confidence at the moment?
MATHIAS CORMANN: Well it’s not about kick starting. The economy has been strengthening. Jobs growth has been strengthening. What we’re doing in this Budget is to keep the momentum going. We haven’t just started in this Budget. This Budget is the next step in the implementation of an overall long term economic plan. We came into Government in September 2013 when the economy was weakening, unemployment was rising and the Budget position was rapidly deteriorating on the back of an unsustainable growth trajectory. What we have done since then is we have implemented a plan to strengthen growth, getting rid of the carbon tax, getting rid of the mining tax, getting rid of red tape costs for business to the tune of $2 billion a year, signing three Free Trade Agreements, investing in infrastructure. So we’ve been doing all sorts of things to boost growth, and the Budget yesterday just builds on that and it seeks to keep the momentum in terms of stronger growth and more jobs going.
JANINE PERRETT: Funny you mentioned mining tax there. I thought you might mention it later and I could ask this question later. It’s like the drinking game whenever you mention it, but you did say it: mining tax. Today, there’s a really interesting story that Glencore has confirmed the ATO is doing an audit on them because of the miniscule amount of tax they’re paying: $177 million on billions. We’ve seen a Senate tax inquiry, we’ve seen the Treasurer in this Budget clamp down on multinationals that he feels aren’t paying their fair share. You were one of the most outspoken people in support of the big miners claiming they paid their fair share of tax. Did they con you Senator Cormann?
MATHIAS CORMANN: No they didn’t. If you look at where most of the company tax revenue comes from. The two main sources in terms of company tax revenue in Australia is the resources sector in recent years and the financial services sector.
JANINE PERRETT: Then why are they part of this clamp down on people not paying their fair share?
MATHIAS CORMANN: I’m not going to talk about individual taxpayers, but what I will say is that through the work of the ATO, we have identified about 30 multinational taxpayers who are, on the face of it, engaged in tax avoidance behaviour. What the Treasurer did yesterday, and this is a matter of integrity rather than coming up with a new tax on top of all of the other taxes which the mining tax didn’t raise any money.
JANINE PERRETT: But weren’t they avoiding it at that time or is this only a recent trend thing? When you were defending them saying they were big contributors to tax.
MATHIAS CORMANN: Janine, whatever way you go into it. I’m not going to talk about the individual tax affairs of individual taxpayers. What I will say though is that we want every business in Australia that generates profits in Australia to pay company tax on their profits. If you look at where a large chunk of the company tax revenue comes from in Australia in recent years certainly, a large chunk has come from profitable mining companies. And a large chunk has come from the financial services sector. Now if there are integrity issues, if there are compliance issues, we’ve got to give ourselves the tool to pursue them. But that is a very different proposition from Labor coming up with a new tax which then they said would raise $12 billion in revenue, which they then spent all of the money they thought it would raise and more and then it didn’t raise any. And guess what? If the mining tax was still in place now, not only would it not raise any money, not only would we be paying millions to administer a tax which doesn’t raise any money, we would be spending billions and billions in relation to the unfunded promises that Labor had attached to it. That was one of our major structural reforms to the Budget, helping to get the Budget back on track.
JANINE PERRETT: We’re not going to be in agreement on this but I did think it was interesting that Glencore admitted they are being audited.
MATHIAS CORMANN: You’re advocating for a mining tax are you?
JANINE PERRETT: I’m advocating that if they indeed are not paying their fair share, I’m advocating it’s good they’re going after it. I do worry that people got conned at the time. That they were great taxpayers and the ATO doesn’t seem to agree with that.
MATHIAS CORMANN: People certainly conned the Labor party at the time. Julia Gillard and Wayne Swan signed a fantastic deal didn’t they?
JANINE PERRETT: We’re never going to agree on this. Let’s go back to the Budget today. We saw on the stock market, the stock market lifted. But certain stocks really benefit. Now looking at the things that people can spend this money on and we’re talking about stimulating the economy and getting confidence back, helping small business. We don’t have a car industry as we know. They can buy cars. I don’t think we make tractors, a lot of the electronic stuff is all going to come from overseas. The big winners today are the Bunnings, Harvey Norman, a lot of the bigger companies. How does small business get the benefit of this?
MATHIAS CORMANN: Businesses investing in equipment that helps them be a more successful business will help them be…interrupted
JANINE PERRETT: That will take a little while though.
MATHIAS CORMANN: Sure. Well you have got to start and I am very confident. The advice that we have is that businesses across Australia do have capital reserves, they do have the capacity to invest. We want to give them the encouragement to have a go and that is why we have developed this $20,000 immediate asset write off initiative. We are very confident that as part of an overall economic plan, that it will help boost growth and create more jobs.
JANINE PERRETT: Okay. Your triple A credit rating, one of the agencies today said, right we are going to stick with it, we stopped that speculation that we had heard for the last few weeks.
MATHIAS CORMANN: That was always ridiculous speculation.
JANINE PERRETT: I agree with you on that. However it was wasn’t a total tick. They did say they are concerned about spending and they are concerned about what happens for reform going forward? Do you take note of that, if you take on board that they think we are good enough to have a triple A credit rating. Do you listen to that and say, yes we have to be careful?
MATHIAS CORMANN: We agree that there is more work to be done and we are on a better trajectory now than what we were under the previous government. We are now headed in the right direction. We are making progress. If some people suggest it would have been good to make more progress, sure, but we are going as fast as we can and we are going as fast as economically responsible in the circumstances that we are currently in.
JANINE PERRETT: What about those who say the electorate is confused? They don’t know what kind of Government you are anymore. Last year you had a hard line Budget, you did the reform, you talked about the debt and deficit crisis, this year it is like a Labor Budget and you’ve completely reversed and the electorate is now confused on what you stand for?
MATHIAS CORMANN: Any suggestion that this is like a Labor Budget is just wrong. We are following a very responsible, long term economic plan. We inherited some challenges; we are dealing with those challenges. Last year, yes we made some tough decisions and more than 80 per cent of our Budget measures from last year have been legislated and have been successfully implemented.
JANINE PERRETT: But what about...interrupted
MATHIAS CORMANN: Some people are suggesting that business tax cuts are spending measures. Well they are not. Some of the commentary and some of the questions last night and during the day today were sort of suggesting somehow it was a Labor Budget because we were spending money on small business. We are not spending money on small business, we are giving them tax cuts.
JANINE PERRETT: Okay let’s talk about spending and that warning from the ratings agencies and a number of commentators , maybe the more intelligent ones who can tell the difference between spending and tax but spending as a percentage of GDP at 25.9 per cent is the same level as many years of the Labor Government.
MATHIAS CORMANN: Yeah sure…interrupted.
JANINE PERRETT: Isn’t that a worry?
MATHIAS CORMANN: If you look at the forward trajectory over the forward estimates we are bringing it down to 25.3 per cent as a share of the economy by the end of the forward estimates…interrupted
JANINE PERRETT: Which is still higher than many years of the Labor Government.
MATHIAS CORMANN: Well the last year of the Howard Government it was at 23.1 per cent and that is where we should try and get back to but you are not going to get there within one, two or three years. Labor took six years from having inherited a strong economy, a strong Budget position with no debt, $20 billion surplus. They took six years to get us into the situation where we were headed for $667 billion worth of Government debt, $123 billion of projected deficits. We have brought the deficit down to $82 billion over the forward estimates. Debt is expected to be $112 billion less than what it was headed for under Labor. There is more work to be done and we are committed to the task but we have got to do it in a sensible fashion.
JANINE PERRETT: You said 80 per cent of the previous Budget has passed, but that 20 per cent includes a lot of numbers that are included in the Budget that you might not ever get through. Education deregulation for example, it has been knocked back. Why is it still counted in your bottom line?
MATHIAS CORMANN: If you say a lot of numbers, that is wrong…interrupted
JANINE PERRETT: Orwell, 20 per cent but they are worth a lot of money.
MATHIAS CORMANN: If I can answer it. In relation to a number of measures we have decided not to proceed with them, like the GP Co-payment measure, we have taken it off the table and that is reflected in the Budget. In relation to the under 30’s measure ‘so called’ in relation to access to unemployment benefits we have taken that off the table…interrupted
JANINE PERRETT: But what about what is still in, education deregulation?
MATHIAS CORMANN: In relation to the pension indexation, we have taken it off the table and that is reflected in the Budget…interrupted
JANINE PERRETT: The one still in there.
MATHIAS CORMANN: And the higher education reforms we remain committed. We are very confident that when it is all said and done they will pass the parliament. They are very important reforms for Australia, they are very important reforms to ensure that our universities can compete with the best in the world.
JANINE PERRETT: But wishes aren’t actually numbers are they?
MATHIAS CORMANN: But Janine it has always been thus, Governments have to fight for important reforms. Governments have to make the argument, they have got to convince people, they have got to persuade people. You don’t expect us to just turn around and not proceed with any of our very important reform proposals.
JANINE PERRETT: I want to ask you something. The Victorian Government today, we have got the $1.5 billion for the East West which I gather in the Budget you thought you would get back. The Victorian Premier is saying no. Not only am I not giving you back the money, he claims he had a secret deal with the Prime Minister not to give the money back. How are you going to get the money back? Are you going to sue them? Take control of assets?
MATHIAS CORMANN: He doesn’t have a secret deal with the Prime Minister.
JANINE PERRETT: So you are going to get the money back?
MATHIAS CORMANN: We will get the money back.
JANINE PERRETT: How?
MATHIAS CORMANN: It is federal money. There is an agreement between the Federal Government and the State Government and there is obviously a lot of money that flows between Federal and State Governments. There is $1.5 billion that under the agreements between the Federal Government and the State Government is destined for an investment in the East West Link project, which is tied to the East West Link project…interrupted
JANINE PERRETT: Could we see quite an ugly wrangle?
MATHIAS CORMANN: If I could just say, the State Government in Victoria has decided to waste $1 billion of taxpayers’ money not to build a road. That is quite a ridiculous proposition…interrupted
JANINE PERRETT: We know that but how are you going to get the money back? Could we see a court case coming? Withholding other funds for them?
MATHIAS CORMANN: Let me just say that I am very confident that when it is all said and done we will get that $1.5 billion back, unless, unless the State Government in Victoria changes their mind and decides to proceed with the East West Link project that we continue to be committed to.
JANINE PERRETT: Alright, Daniel Andrews has got the message there and so have we. Of you go on selling the Budget, your magical mystery tour. Thanks for talking to us tonight.
MATHIAS CORMANN: Always good to be here.