Senator the Hon Mathias Cormann
Minister for Finance
CHRIS KENNY: Now we’re going to cross live to the Finance Minister Mathias Cormann. Mathias thanks for joining us after what has been a very busy Budget week for you.
MATHIAS CORMANN: It’s good to be back.
CHRIS KENNY: Look I want to get to the substance in a second. I think there’s too much focus on polls, but polls make news and this is the first major poll out after Budget week, showing the Government back in a neck and neck position with the Labor party, will be heartening for you, particularly given the leadership scare there was for Tony Abbott earlier in the year, to see him leap ahead as preferred Prime Minister. Must warm the cockles of your soul Mathias Cormann.
MATHIAS CORMANN: All the way through we have been focussing on the job at hand, which is to implement our economic plan for stronger growth, to create more jobs and to get the Budget back to surplus as soon as possible. I think what happened this past week is two things, one people across Australia could see that we were continuing to make progress, heading in the right direction and they could also see Bill Shorten as the alternative Prime Minister completely lacking in substance when it came to putting forward a credible alternative plan.
CHRIS KENNY: So you’re saying a lift in the polls was predictable? Isn’t it exactly what the Budget was aimed at doing?
MATHIAS CORMANN: That’s not what I was saying. What I was saying is that we continue to focus on the job at hand, which is to do everything we can to put Australia on a stronger foundation for the future. There is a job to be done and we’ll keep doing it to the best of our ability.
CHRIS KENNY: Right, just on that, what I wanted to know about the Budget and about the plan you’ve outlined now over the next five years and especially the coming year, what on earth happened to Australia’s spending problem, the Government’s spending problem?
MATHIAS CORMANN: We inherited a weakening economy, rising unemployment and a Budget position that was rapidly deteriorating on the back on unsustainable spending growth and we have been addressing it. The economy is now strengthening, new jobs are being created and the Budget is now heading in the right direction. We are getting spending growth under control. When we came into Government, we inherited spending growth at 3.6 per cent above inflation on average per annum. We have brought that down to about 1.5 per cent on average per annum in this year’s Budget. Spending as a share of the economy, now instead of trending to 26.5 per cent, where it was headed under Labor, is now peaking at 25.9 per cent and heading down to 25.3 per cent as a share of the economy. Is there more work to be done? Of course there is. Are we satisfied with where we have got to? No, we’re not. We think that we need to do more. But at least we are now heading in the right direction and the Budget on Tuesday keeps the momentum going both when it comes to economic growth and jobs and when it comes to getting the Budget back into surplus as soon as possible. Finally the Budget is actually on track to get back to surplus on the same timetable as in last year’s Budget.
CHRIS KENNY: I’ll come back to the surplus in a moment. But on spending, you campaigned strongly from opposition about the Federal Budget having a spending problem and that was very much what you tried to attack in last year’s Budget. You’ve given up on winding back Government spending haven’t you? This coming year you don’t reduce spending at all, it’s less than a rounding error. The impact, 0.3 per cent, the actual reduction in Government expenditures.
MATHIAS CORMANN: I’ve got to say I’ve got to reject that. Since we came into Government, nearly 80 per cent of the Budget repair effort has been on the expenditure side. Even just since MYEFO before Christmas over the 2014-15 forward estimates spending is down by $7.3 billion. In this Budget, where ever we have initiated new spending on higher priority areas, that’s been more than fully offset by spending reductions in other areas and ... interrupted
CHRIS KENNY: But you’ve still got spending as a share of the economy at the same level it was at the 2009-10 stimulus phase.
MATHIAS CORMANN: And that is lower than it would have been under Labor, because under Labor we were on a trajectory to 26.5 per cent spending as a share of the economy by 2023-24. If you look at what the IGR showed spending on the trajectory that Labor put Australia on was headed for 37 per cent as a share of the economy. Under Labor, spending as a share of the economy was trending up. Under us, it is now trending down... interrupted
CHRIS KENNY: It’s flattening now, it’s flattening for now. What you’re saying it’s going to trend down in the future.
MATHIAS CORMANN: It is projected to trend down from 25.9 per cent this year to 25.3 per cent at the end of the forward estimates. We’ll keep at it to ensure we get spending further under control.
CHRIS KENNY: Alright, I just want to show you something that your Treasurer, your colleague the Treasurer, Joe Hockey said on the ABC this morning. This is how he characterised his second Budget.
JOE HOCKEY [EXCERPT]: We focused on continuing with our economic plan which is built on last year's Budget, it is built on a number of decisions we have made since we came to Government. We are continuing with that economic plan.
CHRIS KENNY: Mathias Cormann, that’s just simply not true is it? That you’re continuing with an economic plan. Your Budget ran into all sorts of obstacles last year. You couldn’t get the Budget through the Parliament that you wanted to get through, so you’ve drastically modified your economic plan.
MATHIAS CORMANN: Joe Hockey is exactly right. As I said earlier, we inherited a weakening economy, rising unemployment and a Budget position which was rapidly deteriorating. We came into Government with a plan to strengthen growth, create more jobs and to repair the Budget. Growth is strengthening, more jobs are being created, the Budget is heading in the right direction. Yes, we have faced some additional, unexpected challenges like global economic headwinds and some headwinds in the Senate. We have had to adapt our plan, but it continues to be the same responsible, long term economic plan, which continues to focus on stronger growth, more jobs and getting the Budget back into surplus as soon as possible. Our plan is adaptable. It has to be flexible to changing circumstances and that is what we have done.
CHRIS KENNY: The most obvious change in circumstance since the last Budget, since the first Budget that you’re involved in was of course the new Senate came into place and through the Palmer United Party and others it has become a lot more unpredictable and obstructionist than I think anybody expected. Isn’t that what has changed your economic approach? Isn’t that what has changed your fiscal plan?
MATHIAS CORMANN: No, the most significant change since we came into Government and the most significant change since last year’s Budget is what has been happening to our terms of trade and in particular to the price of iron ore.
CHRIS KENNY: So what you’re saying, are you saying that if the Coalition parties and if the Government had the numbers in the Senate there would be nothing different about this Budget? There’s nothing else that you would like to do in economic management in this country that you would try if you could get it through the Senate.
MATHIAS CORMANN: Chris, that is not what I said. You asked me what was the most significant factor since then and what I said to you was that the most significant factor is that when we came into Government the price for iron ore, remembering that iron ore represents about 21 per cent of our national export income. When we came into Government, the price of iron ore was at $120 a tonne. By the time of last year’s Budget it was down to about $92 a tonne. By the time of MEYFO it was $60. Earlier in the year it was in the low $40s. Since we came into Government we’ve had to write off about $90 billion worth of expected tax revenue off the back of, in particular falling terms of trade. So would it be nice if we got more measures through the Senate? Sure. But we did get 80 per cent of our Budget measures from last year’s Budget through and we’ll keep at it.
CHRIS KENNY: Sure, that’s all I’m enquiring on. I mean, we see in this country that effectively Senate crossbenchers, because of the obstructionism of Labor it must be said, the Senate crossbench effectively have a veto on your fiscal plans. And what I would like to know and like you to share with our viewers, what else would you like to do in economic management, in fiscal repair, if you could actually get it through the Senate?
MATHIAS CORMANN: This is the point. The only reason that the crossbench in the Senate has got the sort of influence that they do is because Bill Shorten has vacated the field. Bill Shorten wants to be the alternative Prime Minister, yet on Thursday night in his Budget reply speech he completely failed his test of leadership. He failed to show Australians how he would pay for his spending promises. He failed to show how he would pay for not proceeding with the savings measures that he continues to oppose. So far he is opposing about $17 billion worth of savings and revenue measures that we have put forward. He is opposing about $6.5 billion in Labor’s own savings and revenue measures. He wants us to restore $31 billion worth of spending where we have already passed the savings. On Thursday night he made another $6.6 billion in unfunded promises. So far he has not identified a single spending reduction of his own. He has not identified a single alternative spending reduction. That is the problem.
CHRIS KENNY: He has announced some extra revenue measures.
MATHIAS CORMANN: That is not a spending reduction. That it is not a spending reduction.
CHRIS KENNY: Of course it is not and I have had a really good go at him Friday night for his abysmal Budget-in-reply but I want talk about the reality that leaves the country in. There was one line in Joe Hockey’s speech on Tuesday night that really worried me and it must really disappoint you in Government and that is, he virtually boasted about the fact that the country is now only spending, every day $96 million more than it is earning. In other words we are now only borrowing $96 million a day, we are going further into debt by $96 million a day. The reason he is proud of that and you are proud of that as Finance Minister, is because under Labor it was $133 million a day. That really crystallises for us the challenge ahead for getting the Budget back on track, doesn’t it?
MATHIAS CORMANN: Chris it shouldn’t. If you want to look at where we are headed you have to look at the trajectory that we are on. Under the previous government we were on a deteriorating trajectory which was taking us into a worse and worse position. Under the Coalition now we are on an improving trajectory. You might say that you would like the trajectory to be steeper and faster and all of that, but we are now heading in the right direction, we are now making progress. The key is to continue to keep heading in the right direction, to continue to make progress that way.
CHRIS KENNY: There is no doubt about that, you want to be headed in that direction, but I just think it should sound alarm bells when we are talking about a spending problem and how much Governments can spend for people to realise that we are still borrowing close to $100 million a day, in each and every day. Now on that, where it is all going, you mentioned a surplus earlier and the fact that you are on track to reach a surplus in 2020. The growth forecasts of over three per cent in those outer years, expecting that revenue is going to lift by $90 billion over those years the way that you say and there is no unexpected expenditure. You wouldn’t stake your political career, you’re a young man, you’re a Senator, you will be around for a long while. You wouldn’t stake your political career on delivering a surplus in 2020, would you?
MATHIAS CORMANN: We have always said that we will deliver a surplus as soon as possible. I can’t predict the unpredictable. What I can say is that the forecasts and the assumptions in the Budget are based on the best available information at that time and based on the best available advice. Things down the track could change, but what we have done is we have put a plan together, which is based on the best possible information at that time. I might just hasten to add here that all of the major economists, bank economists and others have come out and actually endorsed and supported the forecasts that we have made when it comes to economic growth.
CHRIS KENNY: Alright, I just wanted to get you on paid parental leave as well. There is all sorts of argy-bargy around this. The media and Labor have been playing a sort of silly game where they had a go at you because your wife has had access to the Government’s scheme and a private scheme and other politicians, there is no doubt that Labor politicians would have accessed this as well. No doubt my wife has accessed Government paid parental leave as well. But the point is you are saying that people should not be able to access both a generous employment scheme and the Government’s Centrelink scheme, in particular more than half of the people you are targeting are public servants who get 14 weeks at full pay or 28 weeks at half pay and then can top that up with the Government scheme. Nothing wrong with that at the moment, they are mad if they don’t double dip. Anyone is mad at the moment if they don’t double dip under the rules. What I find interesting about this is given that Tony Abbott has had to give up his six month scheme because it was politically unpopular and Labor and others opposed it and given that you are now tightening up on this double dipping, where on earth is the paid parental leave policy hitting? Do you as a Finance Minister, do you as a Government think it needs to somehow be more generous? That everyone could get what the public servants are getting? Or do you think that we are stuck with the $11,500, that is 18 weeks on the minimum wage, for everyone and the only people who did better than that are mainly public servants, but of course some people in the private sector who get generous schemes?
MATHIAS CORMANN: So many different questions in that Chris. Firstly, yes as you know, we announced earlier this year that we would not be proceeding with the paid parental leave scheme that we took to the last election. If I remember well you actually were one of the leading critics of that policy that we took to the last election …interrupted
CHRIS KENNY: Let me be clear, I was against Tony Abbott’s paid parental leave scheme and I am against double dipping and I see you tightening it up. I am just wondering whether you aspire to be more generous or that is it. We are back down to this Centrelink scheme and we will stay there.
MATHIAS CORMANN: So what I was about to say, the decision that we made earlier this year was that we would prioritise additional investment in providing more affordable access to simpler, more flexible childcare instead of enhancing the paid parental leave scheme that is in place. When it comes to the paid parental leave arrangements as they currently exist, we actually said in the lead up to the last election that we would stop people claiming the Government scheme as a second paid parental leave scheme …interrupted
CHRIS KENNY: You did, it is in black and white. It is in your election costings, I’ve seen that yep.
MATHIAS CORMANN: So the point here is that everybody across Australia right now would be accessing the system as it currently stands. But my view is and the Governments view is, that that system should be changed. Given the additional investment we want to put into childcare we don’t think it should be the case that taxpayers are required to pay for access to a second paid parental leave scheme for those who are getting access to a more generous scheme through their private or public sector employer. We absolutely stand by that.
CHRIS KENNY: One last question, it will be quick but I think your answer will be quick anyway. A lot of talk about ABC bias, the ABC attacking the Government, the ABC attacked last years’ Budget as being draconian, I don’t know what their attack is this time. There is a lot of talk about ABC bias, you have been on the other end of some of those interviews. Do you think the Government needs to be more proactive in ensuring the ABC lives up to its charter?
MATHIAS CORMANN: I enjoy all of my interviews with all of your colleagues. I am responsible for the answers, I let others take responsibility for their questions and I let journalists and commentators commentate about each other. I am not a commentator.
CHRIS KENNY: But the ABC doesn’t criticise you like I do for spending too much. They just want you to spend more.
MATHIAS CORMANN: I am very happy to answer whatever questions are put to me.
CHRIS KENNY: Alright thanks very much Mathias Cormann. I appreciate your time.
MATHIAS CORMANN: Always good to talk to you.
CHRIS KENNY: That is Mathias Cormann the Finance Minister joining us from Perth. He is always generous with his time, great to have his views there.