ABC TV - Lateline

Senator the Hon Mathias Cormann
Minister for Finance






Operation Sovereign Borders, negative gearing

EMMA ALBERICI: To discuss the day's events, Finance Minister Mathias Cormann joins me now from Canberra. Mathias Cormann, thanks very much for joining us.

MATHIAS CORMANN: Good evening Emma. Good to be back.

EMMA ALBERICI: So as Finance Minister, you've got your hands on the nation's purse strings. So tell us, has the Government paid people smugglers to turn back boats?

MATHIAS CORMANN: As Finance Minister I'm not involved in the day today operational matters related to Operation Sovereign Borders. As has been indicated by the Prime Minister, the Foreign Minister, the Minister for Immigration, the Government doesn't comment on operational on-water matters. We don't comment on security and intelligence matters. Incidentally, tonight Labor's hypocrisy has been revealed really, because when Labor and Bill Shorten were asked tonight to rule out that any such payments were made under the period of the Rudd and Gillard governments, what was the answer by Mr Shorten? That they don't comment on security and intelligence matters. This is just the Labor party creating a bit of hyperbole.

EMMA ALBERICI: Let's talk about you rather than the Labor party. If what seems tantamount to a bribe was paid, as the Finance Minister, would you necessarily know about it?

MATHIAS CORMANN: That is a hypothetical question. As I have already indicated, the Prime Minister and the Government overall has taken ...interrupted 

EMMA ALBERICI: It's a hypothetical question, but would you know about it?

MATHIAS CORMANN: It is a hypothetical question. As I have already indicated to you, I'm not involved in the day to day operational matters related to Operation Sovereign Borders. These are matters that are appropriately the responsibility of the Minister... interrupted 

EMMA ALBERICI: I will take that as a no.

MATHIAS CORMANN: These are appropriately matters that are the responsibility of the Minister for Immigration.

EMMA ALBERICI: If you are concerned about discouraging people smugglers from making the journey, then isn't it better to say there's no way they'd ever receive money from our Government, rather than having the Prime Minister let this rumour stay out there that perhaps they may well be rewarded for their criminal deeds?

MATHIAS CORMANN: Hang on. This Government has actually stopped the boats. We came into Government after a disastrous  ... interrupted

EMMA ALBERICI: That wasn't the question, with respect, let's go back to the question. Which was, you say ... interrupted 

MATHIAS CORMANN: I'm actually answering your question.

EMMA ALBERICI: You're saying about this is about operational matters so you can't comment on it and you want to discourage people smugglers, so wouldn't it be better to say there is no way on earth Australian authorities would ever pay a criminal?

MATHIAS CORMANN: The people that have boosted the income of people smugglers are the Labor party. When they dismantled the successful border protection policies of the Howard Government they absolutely boosted the business model of people smugglers. More than 50,000 people arrived here illegally on more than 800 boats. We did what we said we would do before the last election. We have stopped the boats. We have stopped that illegal trade. The discipline in not commenting on operational on water matters was a very important feature of our strategy to stop the boats arriving, to stop the drownings and to stop the budget blow-outs quite frankly that were linked to the massive blow out in illegal boat arrivals under the previous government.

EMMA ALBERICI: Was an important feature of your policy to do whatever it takes?

MATHIAS CORMANN: It's a very important feature of our policy to implement our policy effectively. We came into Government when there was a serious problem...interrupted 

EMMA ALBERICI: To do whatever it takes?

MATHIAS CORMANN: We came into Government when there was a very serious problem on our borders. We said that we would turn around the boats. We said that we would do a range of other things and our security agencies ...interrupted 

EMMA ALBERICI: You never said you would pay people smugglers?

MATHIAS CORMANN: I don't accept the assertion that you're making. The Prime Minister, the Government has not commented either way. We have not confirmed or denied. That is not... interrupted 

EMMA ALBERICI: Immigration Minister Peter Dutton and the Foreign Minister Julie Bishop both last week gave outright denials when asked about this issue. Why was it okay to comment on operational matters then but not now?

MATHIAS CORMANN: Indeed, the Minister for Immigration and the Minister for Foreign Affairs have got particular responsibilities. They're both on the National Security Committee. The Minister for Immigration and Border Protection is directly responsible for Operation Sovereign Borders. So I let them answer for themselves. What I can say to you is that we came into Government with a very clear objective and that is to stop the flood of illegal boat arrivals that had developed under the previous government, because they decided to water down the successful border protection policies of the Howard Government. The people smugglers flourished under the previous government. They're no longer flourishing now. 

EMMA ALBERICI: Liberal MP Andrew Laming has said that his Queensland electorate basically doesn't care about whether or not people smugglers were paid by the Government. What about the people of WA? What are they making of this? 

MATHIAS CORMANN: Let me just go back to the basic principle. The Government takes its responsibility of protecting our borders seriously. We deploy all of the assets and all of the resources of the Government in a way that is lawful. All of the agencies of Government are conducting themselves consistent with Australian legal requirements. Of course. But I point out again - you are not all that keen for me to make this point - but it is actually very telling - when Bill Shorten was asked to rule out that the previous government at any one point in time made such payments... interrupted

EMMA ALBERICI: I think...interrupted

MATHIAS CORMANN: Let me please answer...interrupted

EMMA ALBERICI: I think Australians would generally find it unpalatable to pay people smugglers whether you're from Labor or whether you're from the Coalition. 

MATHIAS CORMANN: If I could just make my point for a moment. So Bill Shorten refused to comment one way or the other because he pointed to security or intelligence matters. So does that mean that I'm now saying that definitely such payments were made under the Labor period in government? No, I'm not saying that because you can't draw that conclusion. That is the only point I'm making. 

EMMA ALBERICI: Nicholas Cowdery the former New South Wales DPP and in fact international law expert Don Rothwell both say any Australian people smugglers would likely be in breach of section 73 of the Criminal Code that specifically deals with assisting people smugglers. Do you agree? 

MATHIAS CORMANN: You're making an assumption based on something that quite frankly you don't know. 

EMMA ALBERICI: No, but I’m asking you, do you agree that any such payment would be illegal? 

MATHIAS CORMANN: Let me just make the point this way. All of the border protection agencies that are working very hard to support the Government's objective of stopping the boats are acting in a way that is entirely lawful and consistent with all of the relevant Australian legal requirements. 

EMMA ALBERICI: Just to make it clear, you believe taxpayers don't have the right to know how their money is being spent in this regard? 

MATHIAS CORMANN: Taxpayers would be very pleased that we've been able to turn around a situation where Australia was faced with an $11 billion budget blow out as a result of Labor having lost control of our borders. We've been able to stop the boats. We've been able to save significant resources because we were successful in stopping the boats. A very important feature of us being able to achieve that objective is to keep discipline when it comes to not commenting in relation to operational on water matters. 

EMMA ALBERICI: Let's move onto housing affordability. If you're serious about addressing this, isn't it about time negative gearing and the more than $13 billion of tax deductions it creates were scrapped once and for all? 

MATHIAS CORMANN: No, the Government doesn't agree with that proposition. A previous Labor government back in the mid 80s tried this and they walked away from it for clear reasons and that was that there was evidence that it was pushing up rental prices, in particular in those markets where there were low vacancy rates. We don't want to go down a path, which in the past has proven to be counter productive, which would push up the cost of private rental accommodation, because that is not the right way forward.  

EMMA ALBERICI: You say there was evidence it was pushing up prices, but with respect, the facts don't seem to support your claims. If the brief abolition of negative gearing in the 80s really did push up rents, wouldn't we have seen that Australia wide rather than only in Sydney and Perth and I've got a graph here that I think you can see as well that illustrates the point particularly well. When it was abolished, rents went up briefly, and then you can see they were actually higher before negative gearing was abolished and then they were higher again after it was abolished, but there doesn't seem to have been any sort of massive impact that would definitively show evidence that it was the abolition of negative gearing that pushed up prices? 

MATHIAS CORMANN: So why do you believe then that the Labor party, after a very short period scrapped the removal of negative gearing when back ... interrupted

EMMA ALBERICI: Because 1.3 million people or thereabouts, voters used negative gearing and the reality is that it's a very difficult ask for any government to ignore those votes.

MATHIAS CORMANN: The problem with this graph is it doesn't show the forward trajectory. What the Government in the mid 80s would have been very conscious of was the forward trajectory in terms of rental affordability in particular. Yes, the impact of policy changes is different in different markets depending on where you are in the cycle. But the important point here is that there is actually no such thing as negative gearing as such in our tax laws. Negative gearing is a colloquial description of a very basic proposition and that is that you're able to deduct the expenses incurred in generating an assessable income. That is a very basic principle that runs right through our tax laws. The other important point is that contrary to the perception that some people try to create, overwhelmingly, low and middle income earners are actually taking advantage of this opportunity. Nearly 900,000 out of 1.3 million Australian taxpayers who take advantage of negative gearing actually earn less than $80,000 a year, about half a million of them are indeed ... interrupted

EMMA ALBERICI: Can I just interrupt you because you're running out of time but you would know that actually that's taxable income, indicates that they earn not very much money but we know the way to reduce taxable income is to use negative gearing. In fact, Saul Eslake the very well-respected economist with Bank of America, Merrill Lynch, says it's difficult to think of anything that would do more to improve affordability conditions for prospective first home buyers than the abolition of negative gearing? 

MATHIAS CORMANN: I can absolutely think of something that would do more and that is to increase the supply of land. If we want to genuinely and sustainably improve housing affordability, what we will do is we will increase the supply of land. We ensure that the construction of housing in Australia, the cost of constructing a house in Australia comes down to more of an international standard. If you compare the cost of building a home in Australia to that of building a home in the US, it is significantly higher. We've got to look at a whole range of areas where we can take measures to significantly improve housing affordability. The principal one among them to increase the supply of land. 

EMMA ALBERICI: How do you explain the fact that Australian rental vacancy rates are lower than in other countries where they don't have negative gearing? For instance, in the US, where negative gearing has been generally unavailable since 1986, the rental vacancy rate has never been lower than 7 per cent, whereas in Australia, which has had negative gearing since the early 1900s, the rental vacancy rate has never been higher than 5 per cent?

MATHIAS CORMANN: If you've got low vacancy rates and you get rid of the capacity to deduct expenses incurred in investing in the provision of private rental accommodation, then you will reduce the supply of private rental accommodation. If the demand stays the same, you will actually push up the cost of private rents. That is the exact point that I was making before. You are actually confirming my argument. If there is a stronger demand in Australia than in other parts of the world for private rental accommodation and you reduce the supply of private rental accommodation because you get rid of this capacity to deduct expenses against that income, you will actually be making the problem worse. 

EMMA ALBERICI: Senator Cormann we're out of time. Thank you very much. 

MATHIAS CORMANN: Always good to talk to you.


Senator the Hon Mathias Cormann, Minister for Finance, Perth