Senator the Hon Mathias Cormann
Minister for Finance
Date: Thursday, 4 June 2015
SANDY ALOISI: New figures on the national economy yesterday showed growth running below average and incomes falling but the numbers still exceeded expectations and the Treasurer has hailed them as terrific. To look at how the economy is travelling we are joined by Finance Minister Mathias Cormann. He is speaking here to Marius Benson.
MARIUS BENSON: Mathias Cormann good morning.
MATHIAS CORMANN: Good morning.
MARIUS BENSON: Can I begin, before we go to the economy by asking you about one of the most famous people from your home state from Western Australia that is Alan Bond, now in a critical condition in hospital. A lot being written about him this morning, people placing him on that continuum from hero to villain. How should he be assessed?
MATHIAS CORMANN: I’m not going to make an assessment of Alan Bond at this time. I only know about what I have read in the paper in terms of his present condition. It is obviously a very difficult situation for him and his family and I wish him well.
MARIUS BENSON: Okay, I will leave Alan Bond there and go to the economy, Joe Hockey yesterday saying they were a terrific set of numbers , but that is the view of the Treasurer as ‘salesman’ rather than the Treasurer as ‘analyst’ surely?
MATHIAS CORMANN: That is an objective fact. The economy is strengthening compared to where we were when we came into Government, growth is stronger than what it was and things are heading in the right direction. The result yesterday came in above market expectations, it is broad based growth across exports, household consumption, services and dwelling investment. We have to remember this is the first quarter of the year, so before the Budget. What we have aimed to do in our Budget is to keep the momentum going, in particular with our small business and jobs package.
MARIUS BENSON: But that 0.9 per cent quarterly growth figure puts the annual growth rate at 2.3 per cent, that is sub average, it is not enough to have an impact on unemployment to reduce the jobless numbers nor to boost incomes, when did sub average become terrific?
MATHIAS CORMANN: This is looking backwards. If you look at 0.9 per cent in one quarter that is clearly a very strong result. It is one of the fastest growth rates in the world, certainly faster than any of the G7 countries. But if you say we are still growing below trend, yes of course, and that is what we have said in the Budget. The outcome yesterday is squarely consistent with what we predicted in the Budget and yes there is more work to be done. We are implementing our plan for stronger growth and to facilitate more jobs to be created. That is why we have to continue to head in the right direction. Have we made as much progress as we would like? No. Do we need to keep going down the same path and implement our plan for stronger growth? Yes of course and that is exactly what we are doing.
MARIUS BENSON: You say that things are getting better but are people entitled to look at their pay packet and think that it doesn’t feel to me like things are getting better? The increase in wages, 0.1 per cent, a tenth of one percent and that is a decline. It continues a long-term decline in national incomes.
MATHIAS CORMANN: We are going through a significant structural adjustment. Our terms of trade have fallen sharply in recent times. Iron ore representing 21 per cent of our national export income has seen the price for that commodity fall from a peak of $180 a tonne to in the $50’s at the moment. These things are having effects through the economy, but what the national account figures of the first quarter show is that we actually have turned a corner, that economic growth is strengthening and that the plan that we have put into place for stronger growth and more jobs is actually working.
MARIUS BENSON: But none of that is reflected in people’s income, national income shrank for the fourth successive quarter, obviously they’ve all fallen on your watch, can I put to you an assessment in the Fin Review this morning from Andrew Charlton who is an economic analyst, also a former adviser to the Rudd Government, he says ‘Australia’s living standards are falling on a sustained basis for the first time in 50 years.’ Do you dispute that, that our living standards are falling?
MATHIAS CORMANN: We are in our 25th continuous year of growth and as I have just indicated we have gone through a massive structural adjustment on the back of a significant fall in the terms of trade. That is why we need to implement our plan for stronger growth and more jobs because we obviously have to ensure that growth into the future is sustainable and we can continue to protect and build living standards and opportunity into the future. The priority right now is to ensure that growth strengthens to the point where employment growth is strong enough to absorb the effect of population growth and then we have to keep moving ahead, improving our competitiveness, improving productivity, bringing down the cost of doing business and making sure that everybody has the best opportunity to get ahead. That is exactly what we are doing.
MARIUS BENSON: But do you accept that living standards are falling and have been falling throughout your period in Government?
MATHIAS CORMANN: Clearly wages growth is very low, inflation is very low too…interrupted
MARIUS BENSON: But wages growth isn’t low it is in reverse.
MATHIAS CORMANN: Obviously as we go through this structural adjustment, an important part of making sure that growth into the future can strengthen from a sustainable basis... interrupted
MARIUS BENSON: Can you indicate when you think living standards might improve?
MATHIAS CORMANN: Our focus right now is to ensure that we strengthen growth, that we create more jobs so that the unemployment rate can come down into the future and obviously to ensure that everybody across Australia has the best possible opportunity to get ahead. In recent years there has been significant growth in living standards over a sustained period, in particular on the back of unprecedented increases in our terms of trade, unprecedented levels of mining investment and growth in mining related exports. There is an adjustment happening now and that is just a normal part of the cycle.
MARIUS BENSON: Mathias Cormann can I just ask you a quick question to end, various Ministers are declaring they weren’t the source of recent Cabinet leaks, have you been the source of leaks from Cabinet from Monday or from the previous Monday?
MATHIAS CORMANN: I never leak out of Cabinet. Never ever. Obviously Cabinet confidentiality is central to good government, it is central to making sure that Government makes the best possible decisions in our national interest. So absolutely not.
MARIUS BENSON: Mathias Cormann, thank you very much.
MATHIAS CORMANN: Good to talk to you.