Senator the Hon Mathias Cormann
Minister for Finance
DAVID LIPSON: Well next week it’s the final sitting fortnight before the long winter break and the Government is fairly confident it will be able to get some of its key savings measures through the Senate. Earlier I spoke to the Finance Minister Mathias Cormann about that and other issues.
Finance Minister thanks for your time.
MATHIAS CORMANN: Good to be here.
DAVID LIPSON: Coming into the final sitting period, before the long winter break and in the last week Labor has actually supported a couple of your savings measures, including $3 billion worth of tax cuts that won’t proceed. Also scrapping tax concessions for dependent spouses. That’s worth about $300 million. When do you expect those two measures to go through the Senate?
MATHIAS CORMANN: The reversal of the second round of income tax cuts that was linked to Labor’s carbon tax was actually a Labor budget measure. It was a measure which Labor initiated in their last budget, banked in their last budget, but failed to legislate before losing government. When we first tried to legislate that measure on their behalf, Labor voted against it. So we’ve welcomed the fact that Labor has changed their mind and we now expect it will have smooth passage over the next week or two.
DAVID LIPSON: And what about the other measure, the tax concessions for dependent spouses? Are you confident that that measure will pass as well?
MATHIAS CORMANN: We’ll never take anything for granted with the Parliament. Our priority in this sitting fortnight is to get our small business and jobs package through the Parliament. That is the important and central part of our plan for stronger growth and to create more jobs. There are a range of other priorities. We have got to get the appropriation bills through to ensure that Government can continue to run smoothly. Then there is the Medical Research Future Fund and various other key Budget measures that we would like to see pass. And the families package sometime in the second week of the fortnight.
DAVID LIPSON: You’ve been negotiating with Labor on those savings measures I’ve mentioned, are there an other areas where you have been encouraged that there may be some room for an agreement?
MATHIAS CORMANN: We are doing as we said we would do. We are implementing our plan for stronger growth, more jobs and to repair the Budget. The Government is prepared to work with anyone in the Parliament that is of goodwill and that wants to help us in our efforts to strengthen growth, create more jobs and get the Budget back to surplus as soon as possible. We’re talking to all parties in the Parliament and hopefully we’ll be able to get a majority for most if not all of the measures in the Budget eventually.
DAVID LIPSON: One of those that you are talking to and we’ve discussed this before, the Greens in regards to the fuel indexation changes, they seem amenable, but still no big breakthrough. Are you any closer to a deal on that?
MATHIAS CORMANN: As with all things, we pursue things in a prioritised and sequential manner and we have still got a bit of time. Right now the fuel excise changes in last year’s Budget have been given effect to by the Government through tariff proposals that were tabled in Parliament towards the end of last year. So we need to deal with that in the second half of the year after we come back from the winter break. So we’re quite comfortable that we will have enough time to work our way through those issues. But as you have indicated, the indication certainly from the Greens under the new leadership of Senator Di Natale is that they are prepared to talk to us. We will continue to pursue those issues. There are a few bits of homework that both of us have to do and we’ll work our way through that in an orderly fashion over the winter break.
DAVID LIPSON: Labor has left the door open to some significant savings in the area of housing affordability, including perhaps imposing a limit on negative gearing for established homes. On that issue, why should someone who perhaps has four or five investment properties still be getting tax concessions on them when they already sort of have so much wealth in the bank.
MATHIAS CORMANN: I’ve got to correct you there. That is actually not a savings proposal. That is a proposal to increase tax. What I’ve got to point out here is since Labor lost government in 2013, they have not come up with a single dollar in proposed spending reductions. They have not come up with a single dollar in alternative savings proposals. All of the proposals that Labor has come forward with were to increase taxes. Increased taxes on people’s retirement savings, increased taxes on people who are investing in providing housing to people that are renting property across Australia ...interrupted
DAVID LIPSON: Sure sure, all that does end up on the bottom line though of course. And back to my question though, why should someone with four or five investment properties ...interrupted
MATHIAS CORMANN: It is an important distinction though.
DAVID LIPSON: You’re right, you’re right, I concede that. But why should someone with four or five properties still be getting taxpayer concessions for investing in further properties after that?
MATHIAS CORMANN: They are not taxpayer concessions. If you invest in generating an income and there is a cost of generating that income, which if you take out a loan and you pay interest in order to invest in a property which is then rented out to somebody who is renting that property and if you make a loss then the applicable tax law is that you can deduct those losses incurred against other taxable income. That is not a concession, that is just the application of the prevailing tax laws where you can deduct investment expenses from the income that you’re generating and where you can deduct losses in relation to one activity from taxable income in relation to another activity. It is not quite right to say that somehow this is a concession available to a few in the way that you have characterised it there. The fundamental point here is this, Labor in the past has sought to make that change in government to negative gearing arrangements and they had to step back from that and reverse that very quickly because of the effect that had on the rental market, pushing up the cost of rentals for people that access the private rental market. We believe that in the context where there is strong demand for rental properties that the effect would again be the same. If we were to make changes to negative gearing as you’re suggesting and the Government is not planning to make any such change incidentally, if we were to make such changes, it would put upward pressure on rents and that would not be in the public interest.
DAVID LIPSON: But these sorts of tax, I know you don’t like calling them concessions, but these tax arrangements they do also, you would concede wouldn’t you, increase demand and therefore push up costs for those hoping to buy their own home.
MATHIAS CORMANN: There’s a whole range of factors at play in any market and you’re quite right, the price of housing and as the price for anything is a function of demand and supply. If demand exceeds supply prices go up. If supply exceeds demand prices go down. And if demand and supply is in balance then prices are broadly in balance. The truth is, because housing prices in markets like Sydney and Melbourne are trending up, that is why you see additional investment in building construction, in construction of new apartments and the like, because that is responding to the increased level of demand. Over time, the best way to improve housing affordability in the context of demand exceeding supply is to increase supply. That is one of the things we are working on with State and Territory Governments as appropriate.
DAVID LIPSON: Yeah because that really is the ultimate responsibility of the State and Territories rather than the Federal Government by a large part.
MATHIAS CORMANN: Indeed.
DAVID LIPSON: I want to just get your thoughts quickly on the overall health of the economy because we saw some mixed data out today, including really positive employment numbers but then consumer confidence seeming slumping and suggestions from some quarters that the sort of Budget boost was starting to wear off. What is your take on the economy now?
MATHIAS CORMANN: Economic growth is strengthening. Economic growth in the first quarter this year was at 0.9 per cent, ahead of market expectations. This year so far, in 2015, 111,000 jobs have been created. 22,200 a month on average, compared to 3,600 a month in the last year of the Labor government. So both economic growth is now stronger, jobs growth is now stronger. Not strong enough yet in order to bring the unemployment rate down to the level that we would like to see it, so we’ve got to work a bit harder. We have got to work a bit harder to strengthen growth and to create more jobs, but we’re certainly now heading in the right direction. We're making progress. Over time, I’m very confident that will also be reflected in consumer and business confidence.
DAVID LIPSON: And when it comes to taxpayer dollars, just finally, does is it represent good value for money to be paying people smugglers to turn asylum seeker boats around and go back to Indonesia?
MATHIAS CORMANN: I don’t accept for one minute that that is an accurate reflection of what is happening. I know that you are speculating here in the context of some comments that were made by the Prime Minister. The Prime Minister didn’t say that at all. The Prime Minister has done as he has always done, he has refused to comment one way or the other in relation to operational matters related to our successful efforts to stop the boats. The Minister that deals with these matters on a day to day basis is the Minister for Immigration, Minister Dutton. He has provided appropriate answers along the way.
DAVID LIPSON: But it’s more than speculation because this has come from an Indonesian police chief and asylum seekers who claim that these people smugglers were paid $5000 in cash. Now the Prime Minister not willing to sort of rule it out outright as his Minister was. It has raised questions again hasn’t it?
MATHIAS CORMANN: The first point to make is that I am the Minister for Finance and I’m not involved in any way shape or form in day to day operational matters related to Operation Sovereign Borders. The Prime Minister has essentially stuck to his very long standing practice not to provide a running commentary on operational matters. He didn’t confirm or deny. He didn’t make comment one way or the other. He certainly didn’t indicate that payments had been made. The Minister for Immigration as he always does, does provide answers as appropriate in relation to questions on these sorts of matters and he has on this occasion.
DAVID LIPSON: Finance Minister, Mathias Cormann thanks so much for that.
MATHIAS CORMANN: Always good to talk to you.