Sky News – Australian Agenda

Senator the Hon Mathias Cormann
Minister for Finance






Housing affordability, negative gearing, Operation Sovereign Borders, Budget, superannuation, NDIS, Labor’s bank deposit tax

PETER VAN ONSELEN: That is where we will start our interview with the Finance Minister, joining us live out of Perth, Senator Mathias Cormann. Thanks very much for your company, Senator.

MATHIAS CORMANN: Good to be here.

PETER VAN ONSELEN: Alright, let me ask you about housing affordability. I mean this is something you will need to work with the States to do anything about, let’s be frank about that. In other words the Federation White Paper is going to be very important to any collaborative attempt to address housing affordability. How hopeful are you that we will see something tangible via the Government’s response to come out of this particular Federation White Paper?

MATHIAS CORMANN: You’re right. The price of anything, including the price of housing is a function of supply and demand. If demand exceeds supply, prices go up. If supply exceeds demand, prices go down. What we see in the market now is that in Sydney and Melbourne in particular, prices are edging up, which has incidentally attracted additional investment into housing construction, which is the usual response that you get to increasing prices. So there will be to an extent, a supply response as a result of what is happening in the market. But beyond that, the most sustainable way to improve housing affordability is to increase supply. A lot of those levers are levers that State Governments have at their disposal. We are working with State and Territory Governments as appropriate to see what can best be done in order to address issues as appropriate.

PETER VAN ONSELEN: Would you agree that the other two things that are the best way to sort of deal with housing affordability is just to have a good job and hold onto it and get pay increases?

MATHIAS CORMANN: Our economic plan is focussed on strengthening growth, creating more jobs and making sure that everyone has the best opportunity to get ahead, because we understand that the better the job that you can get it is self evident that the better your opportunity to accessing the housing market. We fully appreciate the challenges faced by first home buyers. We understand that it is important as part of the overall plan to give everyone the best possible opportunity in a stronger economy to get ahead.

PETER VAN ONSELEN: Senator, can I just jump in on that. Do you think that people need to be reasonable in their expectations on this, because obviously people jumped all over the Treasurer’s comments over the course of last week when he talked about this. And the Opposition reacted by saying, what about nurses and teachers and policeman who can’t have the kind of salary increases that other professions can. But if you look at real estate, there’s plenty of real estate available, even in Sydney, that people from different middle and working class backgrounds can afford. It is a matter of where you choose to live. Do people have to manage expectations?

MATHIAS CORMANN: I don’t think there is anything wrong with aspiration. I think that all of us, for our families, want the best that we can provide. We want to, aspire to improve ourselves. That is absolutely appropriate and important. That is where the Government comes in as well with our plan for a stronger economy and for more growth. We want people to be as successful as they possibly can be. We want people to strive to get ahead. With the policies that we’re putting in place we want to provide the framework where people have the best possible opportunity to do so.

PAUL KELLY: As far as you’re concerned Minister is it a priority for the Government to tackle this housing affordability issue?

MATHIAS CORMANN: What is a priority for us is to put Australia on a stronger foundation for the future, to strengthen growth, create more jobs, to get the Budget back into surplus as soon as possible and to give people the best possible opportunity to get ahead and yes, working with the States on initiatives to increase supply that will help make access to housing more affordable. But the principle point here is, that we want to provide the settings where individual Australians have the best possible opportunity to be successful, including having the best possible opportunity to access the housing market. There’s always a range of factors at play in any market. Right now in Sydney and Melbourne in particular, with demand exceeding supply, there is upward pressure on prices.

PAUL KELLY: Can I just ask you as a matter of broad principle, do you believe that the Reserve Bank should set interest rates according to the overall national requirements of the economy rather than for housing asset prices in particular cities?

MATHIAS CORMANN: As a matter of broad principle, I believe that the Reserve Bank needs to make these judgements independently based on its analysis of the economic situation. The Reserve Bank has a mandate to make judgements based on what is happening in the domestic and the global economy and that is what they do. I fully support the independence of the Reserve Bank.

PAUL KELLY: Okay, well let’s go to the issue of negative gearing. The Labor party has been running on this hard as an option, reforming negative gearing policy. What’s your view about the impact that this would have on the housing market?

MATHIAS CORMANN: I’m interested in hearing you say that the Labor party is running hard on this, because as late as Thursday or Friday, I saw Bill Shorten being interviewed and at pains to say that the Labor party had no such plans to make changes to negative gearing. I understand that there is a level of backgrounding being done by various people, presumably from within the Labor party. I’m not quite sure what the Labor party’s position on negative gearing is. What I can say is that a previous Labor government tried to make change in this space. The Hawke Government tried to make change in this space, and very quickly had to reverse the decisions that they made in relation to negative gearing because of the effect it had on rental prices. It is very simple, if you make it harder for people to invest in the private housing market and to provide private rental accommodation, if you reduce the supply of rental accommodation, you increase the price of rental accommodation. That is not something that would be in the public interest. From our point of view, the principle that you are able to deduct the cost of generating this income, including from income related to other activities, is a principle that has been in place for a very long time. We don’t have any plans to make any change to it, because we are very conscious of that fact that it would be counter productive in terms of facilitating access to affordable rental accommodation.

PAUL KELLY: Yeah, I mean surely that’s not an adequate answer though. If you’ve got tax concession like this it completely distorts investment patterns. We’ve had a lot of criticism emerging now from independent economic think tanks about the impact of negative gearing. Surely as Finance Minister its worthwhile reassessing this issue isn’t it?

MATHIAS CORMANN: I will leave you to make judgement on whether you think it is an adequate answer or not an adequate answer. What I do take issue with though, this is not a tax concession. Somebody who invests in generating an income, somebody who invests in providing private rental accommodation, is able to deduct the cost of the interest on the loan, the cost of various other aspects of providing that rental accommodation from that income. To the extent that there are losses they are able to deduct those losses from income generated by other activities. That is not a concession. That is our tax law at work as it has existed for a very long time. As I would just point out again, the evidence is actually there where a previous Labor government did try to fiddle with this and very quickly had to realise the error of their ways and very quickly had to correct their approach. Right now, to the extent that we are concerned about housing affordability, to the extent that we are concerned that there is an imbalance between demand and supply for accommodation, if you make it harder for people to supply private rental accommodation and there is similar demand, or growing demand moving forward, then that would put upward pressure on rental prices. We don’t believe that is something that would be appropriate to let happen at this point in time.

PETER VAN ONSELEN: So where are the big reforms Senator, going to come from if the Government’s not prepared to move on the GST without all the States agreeing and that’s like herding cats. If superannuation has been ruled out both in this term and the next by the Prime Minister. If negative gearing is not going to be touched and if bracket creep isn’t going to be addressed, in fact it’s getting worse with the change agreed to by Labor in relation to the tax free threshold. Where are the big changes likely to come from when we do get a response from the Government to these White Papers?

MATHIAS CORMANN: Right now we have only just started with the discussion paper. Submissions closed the other week. Only ...interrupted

PETER VAN ONSELEN: But everything has been ruled out before that’s even started.

MATHIAS CORMANN: I don’t believe that everything has been ruled out at all. There is a process now underway. Over the next few months we will be putting the Green Paper together, then the White Paper, where it will become more and more clear where the Government thinks we should go in terms of making our tax system simpler, fairer and more efficient.

PETER VAN ONSELEN: Can we just go to bracket creep for a moment. Your Senate colleague from the Liberal Democrats, Senator David Leyonhjelm, I spoke to him during the week, he’s none too impressed by the Government’s back flip in relation to bracket creep. Now this has been supported by the Labor party of course. The tax free threshold is not going to be adjusted by about a thousand dollars or so as was originally planned. His frustration is that he carved that out specifically when negotiating over the carbon tax and he feels incredibly let down by that, along with Bob Day. What’s your reaction to that?

MATHIAS CORMANN: Firstly, there was no back flip. Secondly there was no carve out. The Government has always been very clear since well before the last election, that we would seek to implement the Labor budget measure, in their last budget, to reverse the second round of income tax cuts that were linked to the carbon tax. Labor in their last budget, asserted that as a result of their decision to move from a fixed carbon tax to a floating carbon tax with a price of $12.40 a tonne instead of $25.40 a tonne, that it was no longer necessary. So the decision for the second round of tax ... interrupted

PETER VAN ONSELEN: So why does Senator Leyonhjelm felt let down?

MATHIAS CORMANN: If I might finish. If I could just finish my answer. So Labor decided in their last budget, that it was no longer appropriate to proceed with the second round of income tax cuts and that they would defer them until such time as the carbon tax would get back to $25.40. Under our Government, the carbon price is zero dollars and it will be zero dollars for as long as we are the Government and as such, we decided and we said so before the last election, that we would not proceed with that second round of income tax cuts. When we took that into the Parliament, even though it was a Labor budget measure, Labor initially voted against it. Labor now has had a change of heart and Labor has decided to support their own budget measure. This is part of about $6.5 billion worth of measures that Labor initiated in their last budget, banked in their last budget but failed to legislate and which they ended up opposing when we tried to do their work for them. I can’t speak for Senator Leyonhjelm, but what I can say is that this is entirely consistent with what we said before the election and ever since.

PETER VAN ONSELEN: Alright we’re going to take a break here on Australian Agenda. We’re talking to the Finance Minister, Mathias Cormann. We’ll continue that discussion when we come back. And as mentioned earlier, a little later in the program we will be talking to David Murray who chaired the Financial Services Inquiry. Back in a moment.


Welcome back. You’re watching Australian Agenda where Paul Kelly and I are talking to the Finance Minister, Mathias Cormann. Senator Cormann, I want to ask you about these accusations from the United Nations that Australia are paying people smugglers to turn their boats around. The Prime Minister has refused to deny this. He says he’ll do whatever it takes to stop the boats, so to speak. I wonder as Finance Minister, given that all Government spending has to be approved by you, have you approved any brown paper bags to be paid to asylum seekers?

MATHIAS CORMANN: Your comment is a bit incomplete there. When you say he refused to deny it, he refused to comment on it, and he refused to confirm or deny, which is consistent with the long standing approach taken by the Prime Minister not to comment on operational on water matters. We have to remember that the people who got the people smuggling trade going again, the people that gave the biggest ever cash injection to the people smugglers business model, was the Labor party when they dismantled the successful border protection policies of the previous Howard Government. Not only did they cause 50,000 illegal boat arrivals to get to Australia, but they also generated significant additional cash flows for people smugglers while putting people’s lives at risk ... interrupted

PETER VAN ONSELEN: But I have to ask something. The traditional approach of not commentating about operational matters, it can’t be considered good enough for a government when you’ve got the UN levelling an accusation of paying people smugglers to turn boats around. To refuse to deny that or at least explain that, I mean the operational matters argument can’t give a government, an elected government in a democratic society carte blanche to turn around and just refuse to answer what would be incredibly alarming questions. Can it? Surely.

MATHIAS CORMANN: Let me make a couple of points. Firstly, I am the Minister for Finance. I am not involved in day to day operational matters in relation to Operation Sovereign Borders. Secondly ... interrupted

PETER VAN ONSELEN: But as an elected Senator you must be concerned. I mean you must want to know this.

MATHIAS CORMANN: What I want to know is that people are no longer dying at sea as a result of our successful efforts to stop the boats. The previous government put thousands of lives at risk by dismantling the successful policies of the previous Howard Government. It is an important part of a successful operation to stop the boats to ensure that there are certain disciplines in place, which includes not providing intelligence information to the people smugglers. That is the approach that has been consistently taken by the Prime Minister. Questions in relations to the specific operational matters are answered as appropriate by the Minister for Immigration, Minister Dutton, and he has done so on this occasion. This proposition that somehow the Prime Minister has refused to deny and that somehow this is translated into payments have been made is just wrong. No indications have been made whatsoever that payments have been made and I don’t accept for one minute the proposition that has been put by some people and the interpretation that has been put by some people on all of this. The truth of the matter is, that we came into Government with a clear mandate to stop the boats. We have stopped the boats. Part of our successful efforts to stop the boats was to deploy certain disciplines in the way these operations are handled.

PETER VAN ONSELEN: But Senator, I’ve got to ask this. It appears that Julie Bishop and Peter Dutton have said it didn’t happen. The Prime Minister for some reason hasn’t backed that up ... interrupted

MATHIAS CORMANN: It does not appear that, that is exactly what they said. When you say it appears... interrupted

PETER VAN ONSELEN: Well then why won’t the Prime Minister

MATHIAS CORMANN: That is... interrupted

PETER VAN ONSELEN: If they have said that on the record, I can’t understand why the Prime Minister would refuse to back that up. Is there something that they don’t know that the Prime Minister and his office does know?

MATHIAS CORMANN: The Minister with most direct responsibility, on a day to day basis, for Operation Sovereign Borders, for our efforts to stop the boats is the Minister for Immigration, it is Minister Dutton. He has got the most direct involvement. He has got the most direct responsibility day to day to answer questions in relation to these matters. He was asked about that and he has said...interrupted

PETER VAN ONSELEN: But why won’t the Prime Minister just back him up? Why won’t the Prime Minister just consistently back up his Foreign Minister, who is also his Deputy, as well as his Immigration Minister and say, as they have both said, we have not done this.

MATHIAS CORMANN: There are a whole range of people across Australia, perhaps including you Peter, who don’t support our efforts to stop the boats. We went into the election in 2013 very clearly saying to the Australian people, we will do what it takes to stop those boats, because we don’t want to put people’s lives at risk by embarking on this very perilous journey from Indonesia to Australia. We have done what was needed to be done in order to stop the boats. Those efforts have been successful and part of those efforts has been that the Prime Minister does not provide a running commentary in relation to on water, operational matters. But I just hasten to add again here, the only party in Australia that provided a significant boost to the people smugglers business model was the Australian Labor party when they decided recklessly and irresponsibly to dismantle the successful border protection policies that had been put into place by the Howard Government.

PAUL KELLY: As Finance Minister can you give a guarantee that no such payments to smugglers have been made?

MATHIAS CORMANN: As I said to you, as Finance Minister, I am not involved in day to day operational matters related to Operation Sovereign Borders. So again, you can now try to over interpret that answer. But I will have to stick to the same formula as the Prime Minister and that is I don’t comment in relation to operational matters related to Operation Sovereign Borders. From my point of view, I actually literally am not involved in that aspect of Government administration. The Minister with responsibility for these matters is the Minister for Immigration.

PAUL KELLY: Now Senator, as you travel around the country do you find that wind farms are visually awful?

MATHIAS CORMANN: I don’t think that wind farms are particularly attractive looking, but that’s not what they are there for. They are there to generate energy. So I’m not sure that my views on what they look like are particularly relevant.

PETER VAN ONSELEN: The Prime Minister thinks they sound awful. The Treasurer said that he thinks that they look awful. What do you think looks and sounds more awful, a coal mine or a wind farm?

MATHIAS CORMANN: Again, I can see that certain journalists get quite interested in what the personal tastes of individual politicians are in relation to things that they can look at. I don’t think that the purpose of wind farm or a coal mine or a gold mine or an iron ore mine or you name it, I don’t think the purpose of any of these things is to look particularly good. The purpose is quite different in relation to a wind farm and a coal mine, the purpose is to help generate energy. When it comes to renewable energy ...interrupted

PETER VAN ONSELEN: That’s my point though Senator, I have got to just jump in there, that’s my point in a sense, I don’t mind that coal mine or an iron ore mine sounds a little bit loud or perhaps doesn’t look that pretty but for some reason a wind farm it can be commentated by a Prime Minister that it doesn’t sound great, or it doesn’t look great. What’s the relevance of that? And where’s the consistency? That’s the case isn’t it? Who cares?

MATHIAS CORMANN: Well Peter, hang on. We’re being put in a position where we’ve got to answer the questions that are put to us. You’ve just asked me whether I think they look good or they don’t look good. If you don’t think it is relevant why are you asking me the question? And once you do ask me the question then I’ve got to provide an... interrupted

PETER VAN ONSELEN: But I’m asking the question, the reason I’m asking the question is because the Prime Minister thought it was note worthy to actually comment about the sound of a wind farm. I suspect he wouldn’t do the same about a coal mine, a gold mine, an iron ore mine. He’s done it about wind farms for some sort of polemic concern about renewable energy, which I just think is a little bit silly.

MATHIAS CORMANN: You know what, all of us get asked questions and we answer the questions to the best of our ability. Sometimes the questions are relevant and the answer is relevant. Sometimes the questions are a little bit less relevant and then by definition and necessarily the answer is a little bit less relevant. I’m not sure how much is achieved here. In relation to renewable energy, the important point here is that a compromise has been reached on a bipartisan basis on the way forward. Initially, the Renewable Energy Target was meant to be 20 per cent. Because of what’s been happening in the economy and in the market, because of the way that was designed, that became in effect a target heading for 28-29 per cent, with significant consequences for the cost of doing business, the cost of electricity for consumers and business. We felt that it was necessary to bring that Renewable Energy Target back to where it was meant to be. We’ve been able to reach a compromise that the Renewable Energy Target is now set at effectively 23 per cent by 2020. That provides certainty to that important sector of the economy and that is the only thing that matters here really.

PAUL KELLY: Minister, the Government is still struggling with some of its May Budget measures. The most recent Budget measures in terms of getting them through the Senate. In terms of getting Senate approval. How confident are you that you will be able to secure the major measures in this Budget?

MATHIAS CORMANN: In this sitting fortnight we are still dealing with measures from Labor’s last budget in 2013. So there is nothing unusual that we are still working our way through some of the measures from a Budget five weeks ago. That is just the usual Parliamentary process. We will be putting our legislation to the Senate, to the Parliament overall and to the Senate, in an orderly fashion. Our priority for this fortnight is to get our small business and jobs package through as part of our plan to boost growth and create more jobs. There’s a range of other priorities, the appropriation bills will have to go through. In the second week of the fortnight we will be seeking to pursue the families package. So we’ll be working our way through things one by one. Given the indications by the Labor party that they will support their own measure to not proceed with the second round of income tax cuts linked to the carbon tax that is expected to proceed in this sitting fortnight. So we’ll just continue one by one to give effect to the measures that we’ve put forward in our Budget and to implement our broader plan for stronger growth and more jobs.

PETER VAN ONSELEN: What about superannuation though. Are you comfortable having that ruled out by your Prime Minister both this term and next given that everyone from Arthur Sinodinos to the new Secretary of Treasury, even to the super industry quite frankly have talked about the need to make some changes here and as I understand it at least one property mogul has as many as two thousand properties in his personal superannuation account where on retirement he won’t pay a lick of tax for the rental income from those two thousand properties. I mean that needs reform surely?

MATHIAS CORMANN: I was the Shadow Minister for Financial Services and Superannuation in the lead up to the last election and I was centrally involved in crafting our policy commitment not to make any unexpected detrimental changes to superannuation in our first term of Government. The reason we did that was because we recognised the importance of certainty and stability in policy settings if we wanted to encourage as many Australians as possible to save for their retirement, to save so they could achieve a self-funded retirement and not rely on the taxpayer. The problem with this area of policy is that some people seek to use extreme examples and outliers to promote a policy change that applies to everyone. My view ...interrupted

PETER VAN ONSELEN: Are you happy to extend it to a second term though Senator? Because you are going to get both the Federation and Tax White Papers finalised before this next election and presumably you will have a package to respond to that. But the Prime Minister has ruled it out for the following three years even if he wins the next election and that is where I think there is some concern within the Government.

MATHIAS CORMANN: Not just the Prime Minister, the Treasurer in his Budget speech on Budget night said very clearly that the Coalition would not increases taxes on superannuation. That is what the Labor party is proposing. The Labor party is proposing to increase taxes on people’s retirement savings in order to pay for their Budget black hole. What we are saying is we believe that people across Australia saving for their retirement need certainty and stability in policy settings. We believe it is important to continue to incentivise and encourage people to put more of their money into superannuation, so they can look after their own needs in retirement. The Labor party when Bill Shorten was the Minister for Financial Services and Superannuation was running class warfare in relation to superannuation then, clearly they are trying to do so again. They will try and cloak it in this pretense of wanting to attack the rich, but the truth is that their measures are squarely aimed at the aspirational middle-class. The Coalition is not going to be the party of higher taxes on superannuation. We are going to be the party of certainty and stability when it comes to superannuation policy settings and the Labor party is going to be the party that wants to go after people’s retirement savings in order to pay for their excessive spending.

PAUL KELLY: The Treasury Secretary, John Fraser, has indicated there is a case for action in this area of superannuation concessions, he’s got it wrong has he?

MATHIAS CORMANN: I sat next to the Secretary of Treasury in Senate Estimates when this whole issue was explored at length. What he talked about was over the very long term and in the context of the Intergenerational Report going over 40 years to 2055, that clearly once you reach certain phases in the development of superannuation that over the very long term, some adjustments are likely to have to be considered. But that is not a situation that we are in now and certainly the Government’s position is very clear. We will not be entertaining any increase in taxes on superannuation and the Treasurer has made that very clear in his speech on Budget night.

PAUL KELLY: I guess one of the questions here is if the Government is concerned about bracket creep and the marginal tax rates for middle Australia, for working Australians, how do you generate the revenue to deliver significant tax reform in terms of addressing the bracket creep problem?

MATHIAS CORMANN: The answer has got to be on the spending side. The previous government put us on a spending growth trajectory that was unsustainable. When we came into Government spending as a share of GDP was headed for 26.5 per cent by 2023-24. We are now peaking at 25.9 per cent and bringing that down to 25.3 per cent over the forward estimates. We have got to continue to work to get spending as a share of GDP on a more sustainable foundation. The Intergenerational Report showed that over the next few decades if we didn’t make any change to spending as a share of GDP under the previous Governments policy settings, it was headed for 37 per cent. Now when you are on a trajectory like that the temptation for governments in that situation is to just keep increasing tax. Our effort is to get spending under control so we give ourselves the fiscal space to provide income tax cuts down the track. In the Budget our revenue assumptions are based on a cap where tax revenue as a share of GDP is not going past 23.9 per cent. That implies that at some point down the track there would be some income tax cuts to correct for the effect of bracket creep.

PETER VAN ONSELEN: Is the NDIS fiscally sustainable?

MATHIAS CORMANN: The NDIS is a very significant and strongly growing expenditure item. It is a very important initiative, which does have bipartisan support. The Coalition is working very hard to give effect to it and the Minister responsible, Senator Fifield, is doing a very good job to ensure that is done in the most efficient and best targeted way possible. Items of expenditure like on the NDIS are another reason why we have to make space in other parts of the Budget. Whenever you identify higher priority spending areas you need to ensure that you find other comparatively lower priority spending areas that you can reduce spending in and that is what the Government is doing.

PETER VAN ONSELEN: So is the NDIS fiscally sustainable?

MATHIAS CORMANN: We are committed to making sure that the NDIS is affordable in our Budget over the medium to long term, which is why we are pursuing fiscal reforms in other parts of the Budget. If I may just say so, if the Labor party was genuinely committed to the NDIS they would help us reduce spending in other areas in order to pay for it. So far, since Bill Shorten became Leader of the Opposition he has not identified a single spending reduction proposal. He has not identified a single alternative spending reduction proposal. Not one dollar of savings have been put forward by the alternative Prime Minister and he is still opposing about $17 billion worth of savings and revenue measures that we have put forward. He is still confronted with a $56 billion budget black hole as a result of the decisions that he has made so far.

PAUL KELLY: Minister, in relation to the NDIS, isn’t the reality that it is not funded in the longer term?

MATHIAS CORMANN: It is absolutely the reality that the NDIS is not fully funded. The previous government made some changes to the Medicare Levy Surcharge, which contributed some revenue to it. It is certainly not fully funded. We are still in deficit, so Government expenditure overall is not fully funded. The reason that we are working so hard to reduce spending growth in other areas, is among other things to make the necessary space to pay for the NDIS, which we believe, and that is a bi-partisan position, which we believe is a very important initiative.

PAUL KELLY: The Government doesn’t seem to have the political courage to put this issue on the table and ask the Australian people what they would like to see cut back in order to fund the NDIS.

MATHIAS CORMANN: Hang on, our first Budget and our second Budget is our plan to...interrupted

PETER VAN ONSELEN: Quite different Budget’s though Senator, they are extremely different Budgets.

MATHIAS CORMANN: I will let you provide a running commentary on what your assessment is. The first Budget was the first Budget, which involved a significant change in direction given the very bad trajectory that we were on when we came into Government. The second Budget builds on the progress that we have made since the first. It does make some adjustments given some of the developments over the year in between the first and the second Budget. Makes some adjustments and decided not to proceed with certain measures ...interrupted

PETER VAN ONSELEN: Just some minor things such as the Medicare copayment, the indexation changes to the pension there was also no PPL between Budget 1 and Budget 2, I mean pretty significantly different Budgets you would have to agree. I mean that isn’t a commentary fact, that is a fact.

MATHIAS CORMANN: So in our first Budget we were able to control spending growth at one per cent on average, per annum above inflation compared to 3.6 per cent spending growth on average, above inflation under the previous government in their first five years. In this Budget it is 1.5 per cent. We are still on track to achieve a surplus on the same timetable by 2019-20. So yes, we have made some adjustments based on some of the feedback and some of the developments in the Parliament over the 12 months of the intervening period. That is just good government, to take into account what is happening and the feedback. After having consulted further in relation to some matters we have made some adjustments along the way. I don’t shy away from that at all.

PETER VAN ONSELEN: Well hard to do that. One quick final question if I can Senator before we let you go. Our next guest is David Murray, he chaired the Financial Services Inquiry. His inquiry recommended against a deposit tax, the Government is planning to go ahead with a deposit tax. Why did he get that wrong?

MATHIAS CORMANN: The deposit tax as you call it was an initiative of the previous Labor government which they initiated and banked in their last Budget. The Government has not actually provided its response to the Murray Inquiry yet. What we said when the issue arose after our election to Government is that we would be considering this issue as we consider the Government’s response to the Financial Systems Inquiry. That response is due in the next few months and that response will include our attitude and our decision on the way forward in relation to Labor’s deposit tax initiative, which they included in the Budget.

PETER VAN ONSELEN: Well the other part of that is the capital requirements on Banks going up, that David Murray recommended. The banks say that that would increase the costs of doing business, which could well put interest rates up, in the middle of a housing affordability debate, the Government can’t be too keen on that, can it?

MATHIAS CORMANN: These are all the sorts of things that the Government is currently considering as we are mulling over the Government’s response to the Financial Systems Inquiry. Once we have considered all of the relevant information, the recommendations and the options on the way forward and once we have made a decision there will be a public announcement. I am sure that the Treasurer and the Assistant Treasurer will be very happy to come and talk to you about that response once it is made.

PETER VAN ONSELEN: That would be wonderful. Mathias Cormann, you have always been generous to us on Australian Agenda with your time, again today, thanks very much for it.

MATHIAS CORMANN: Always good to be here.


Senator the Hon Mathias Cormann, Minister for Finance, Perth