Sky News – Australian Agenda

Senator the Hon Mathias Cormann
Minister for Finance






Economy, Tax reform, China-Australia free trade agreement, Canning by-election

PETER VAN ONSELEN: To discuss some of these issues, we're joined as I mentioned earlier by the Finance Minister, Senator Mathias Cormann. Thanks for being here. 

MATHIAS CORMANN: Good to be here.

PETER VAN ONSELEN: Can I start with this, a lot of specifics to get to Senator, but can I start in a broad sense with a slogan. It’s a slogan that the Government is running about fighting for jobs and growth. I just wonder whether there are concerns on both those fronts within the Government. The Reserve Bank tells us that growth is somewhat anaemic and of course when it comes to jobs, whilst there are new jobs being created, the unemployment rate nonetheless is as high as its been for quite some time. 

MATHIAS CORMANN: Firstly, the Reserve Bank Governor in his most recent statement on monetary policy pointed out very clearly that the unemployment rate is now forecast to be lower than had been previously anticipated. That this is in part because of better labour market conditions of late. By way of a general point, we came into Government with a plan to strengthen growth and create more jobs. If you look at the evidence the plan is working. The first quarter of this year, with 0.9 per cent growth we had one of the fastest growth rates in the developed world. Stronger growth than any of the G7 economies. 335,000 new jobs have been created in the economy since we came into Government. About 19,100 a month, which is more than four times as many as in the last year of Labor. So, we’re trending in the right direction. You’re right the unemployment rate is not coming down as fast as we would like, but to a large degree that is because of increased levels of workforce participation. For example, we now have the highest level of female workforce participation since ABS records were kept. That is very pleasing. With population growth, you do get more people coming into the workforce. So, 335,000 new jobs being created, but 450,000 more Australians seeking work. So that is where we are at. But we are now heading in the right direction. We have just got to keep at it. 

PAUL KELLY: Minister, we had the Treasurer and the Prime Minister say this week the Government will take personal income tax cuts to the next election. How will those cuts be financed?

MATHIAS CORMANN: Two elements to this. Firstly, in our Budget we have actually already made an assumption of income tax cuts in the future, by including a cap on tax revenue as a share of GDP. In our assumptions we’ve put a cap of 23.9 per cent of tax revenue as a share of GDP, which is the long term average in terms of tax revenue, into our Budget forecasts. Secondly, we are looking at the tax system overall. We want to improve our tax system to ensure it is designed such that it helps facilitate stronger growth and stronger job creation. That means, to really address our current heavy reliance on income taxes, by looking at ways to improve the tax mix.   

PAUL KELLY: Okay, so what you’re really suggesting is that this is not just a tax cut but this is a broader tax reform package. Is that your main point?

MATHIAS CORMANN: That is our objective. To take to the next election a tax reform package which positions Australia in the strongest possible way for the future. We said in the lead up to the last election that this term we would scrap the carbon tax, scrap the mining tax and reduce company tax for small business and we have done that. We also said we would start a conversation with the Australian people about medium to long term tax reform. That is currently underway. As part of that discussion, we are saying very candidly to the Australian people that our tax system relies too heavily on income taxes. Income taxes in Australia, by international standards, are too high. But you’ve got to work your way through all of these issues. Closer to the next election, it will be our intention to put a policy to the Australian people for implementation in a second term of the Abbott Government. 

PAUL KELLY: Alright, one of the main themes from the reform summit this week, just to reinforce your point, was that there is too much of a burden on the personal income tax system. So, can I therefore ask in terms of the reform package that the Government takes to the election, would the principle here be to have a switch from personal income tax more towards other taxes and indirect taxes? Will that principle be at the heart of this package?

MATHIAS CORMANN: If you reduce revenue from one tax source, you need to make that up from other sources. The overall objective is to raise the necessary revenue for Government in the most efficient way possible, in the least distorting way in the economy possible and in a way that doesn’t undermine the capacity to grow the economy moving forward. There are two elements to this. Right now, we are focussed on getting spending growth under control. So by spending less than what was originally planned when we came into Government by the previous government, that gives us some room. But beyond that, if we want to raise less revenue in order to improve our competitiveness from one tax source, then that’s got to be made up in other areas. That is the conversation that we are currently having. 

PAUL KELLY: Okay, well this leads us, in terms of this discussion obviously, to the GST and we’ve seen some movement here of course over the last several weeks with the proposal from the New South Wales Premier. So, in terms of the thinking of senior Ministers in the Government do you think that it is politically possible in the context of an election for the Abbott Government to be looking at some sort of changes to the GST? 

MATHIAS CORMANN: Right now we are having a conversation about how we can improve our tax system. Indeed, the Premier of New South Wales and the Premier for South Australia, Jay Weatherill have come out and made very constructive contributions to that debate. The conversation is ongoing. I’m not going to pre-empt where we are going to land in terms of our reform package that we take to the next election. Clearly, there is a conversation to be had. We’ve always said in relation to the GST that we would want to see a broad community consensus and a broad political consensus in the context of any such reform. But certainly the conversation so far has been encouraging. 

PAUL KELLY: Can I just ask one final question, I mean, would you let the Labor party veto your tax plan?

MATHIAS CORMANN: Let’s cross that bridge when we get there. The Labor party these days is not the party of Bob Hawke and Paul Keating. Under Bill Shorten they don’t have the same economic reforming zeal as what they might have had in the past. So we’re certainly not going to put our hopes into Bill Shorten standing up and doing the right thing by the country. 

TROY BRAMSTON: Minister you mentioned Bob Hawke. He made an important intervention this week into the debate over the China-Australia Free Trade Agreement. No doubt that helps the Government’s cause. But are you willing to accept that in order to get the enabling legislation through the Senate where you don’t have the numbers, you might have to be open to possible amendments, working either with Labor directly or the crossbench, to ensure that trade deal gets over the line?

MATHIAS CORMANN: No. The deal with China is a very good deal. It is a very important deal for our prosperity into the future and Bob Hawke is quite right with his intervention. Essentially he was politely telling Bill Shorten to step away from this racist, protectionist, dishonest campaign, that is run by the CFMEU and other parts of the union movement. It is a campaign that is based on a lie. Bill Shorten as a national leader, should show that he has got the strength of character to stand up for the national interest and to stand up for a deal that will deliver great benefits for Australia over decades to come. 

TROY BRAMSTON: The trade union campaign against the free trade deal is of course highly energised at the moment and inside the Labor party there is clear opposition to it as well. How do you see this debate playing out? Is it a case that the deal will not be able to get over the line, or do you think that you will be able to work with Labor, either to pass the agreement or carry the day in the Senate regardless of Labor opposition to it? 

MATHIAS CORMANN: When it is all said and done I can’t believe for one minute that Labor would stand in the way of a deal that will help Australian business get better access to a key market, which is China. I can’t believe for one minute that when it is all said and done, and when all the noise has subsided that Bill Shorten will stand in the way of stronger growth and more jobs, which this free trade agreement with China will deliver. 

PETER VAN ONSELEN: Can I ask you this then Senator, so you say that, but when we look at the situation regarding the free trade agreement, all we seem to hear from the other side of politics is noise about concerns within it. I guess the real issue is, is the Government going to compromise on some of the what you might call minor details, to get the bigger picture achieved?

MATHIAS CORMANN: That question, with all due respect, ignores how these sorts of agreements are negotiated. This has been a very lengthy negotiation with China. The previous government made no progress over six years in government in relation to that particular free trade agreement. We have achieved an agreement. We are duty bound to now act on the agreement that we have reached with the Chinese Government. That is what we will be doing. It is a good deal for Australia. It is a good deal for Australian business and it is a deal that will help Australian business employ more Australians. 

TROY BRAMSTON: Minister, can I ask about the trade union Royal Commission. We do expect that this week the Royal Commissioner Dyson Heydon will make a decision about whether he will stay or go. Do you think that it is possible that if he does go, that a new Commissioner could be appointed and that the focus on criminality and corruption in the trade union movement could continue? Or are you worried as some are, that if the Commissioner does go, then the Commission itself could be in jeopardy?

MATHIAS CORMANN: I’m not going to get into hypotheticals. There is obviously a judicial process underway and Commissioner Dyson Heydon is considering certain submissions and will make a decision and that is his role. In terms of the work that the Royal Commission into union corruption has done, union corruption is a cost to the economy. It holds our economy back, it imposes costs on families right across Australia by not having it properly addressed. The reason we have established this Royal Commission into union corruption is to get rid of it, is to eliminate corruption wherever we can, in order to bring costs in the economy down and in order to improve economic growth and job creation into the future. Whatever happens in terms of who is in charge, the work of the Commission is very important. It is very clear just looking at the evidence how important that work is. Dozens and dozens of union officials have been referred for further law enforcement investigations and prosecutions. Indeed Bill Shorten’s own evidence raises a series of serious questions. He by his own evidence, accepted personal undeclared benefits from an employer with whom he was negotiating on behalf of his members. In any private sector workplace ... interrupted 

TROY BRAMSTON: I tipped your answer there Minister, but why haven’t you this morning given a strong defence of the Commissioner Dyson Heydon as Tony Abbott did just a few days ago?

MATHIAS CORMANN: That is just ridiculous. Whenever I have been asked about Commissioner Heydon I have always given a very strong defence of him. He is a highly distinguished individual, with a great reputation for integrity, a great distinguished career as a senior judicial officer, as senior judge at the High Court. I have always been very clear in defending Commissioner Heydon. But having said that ... interrupted

TROY BRAMSTON: Yes, but you didn’t answer the question if he should stay or go, you didn’t answer that question. Stay or go?

MATHIAS CORMANN: Troy, because quite frankly it is not proper for a member of the executive to interfere in what is a judicial process. I know that the Labor party get themselves all excited about these things but let me be very clear. This is a matter that is currently before Commissioner Heydon and it is appropriately a decision for him. I’m not going to give him public advice on the decision that he is about to make. That doesn’t mean in any way, shape or form that I have got any concerns in relation to Commissioner Heydon. Not at all. Commissioner Heydon is a distinguished individual. 

PETER VAN ONSELEN: And for anyone watching they can tune right in here at Sky News at 10am tomorrow to find out what Dyson Heydon’s judgement is.

PAUL KELLY: Minister, can we just move to the Canning by-election. 


PAUL KELLY: Given the high profile debate now about the Australia-China FTA, is this dispute likely do you think, to figure as an important issue in the by-election?

MATHIAS CORMANN: I’d like to think that people in Canning will see this as another significant effort by the Government to strengthen growth, create more jobs and create better opportunity for people to get ahead. People in Western Australia perhaps even more than in other parts of Australia, very well understand the importance of our trade relationship with China. A lot of the economic growth in Western Australia in recent years has been on the back of strong demand for our resources out of China. People in Western Australia have got a very well informed view about the importance of the trade relationship with China. Many people in Canning indeed are working as fly in fly out workers on resource projects in the Pilbara. I’d like to think that people in Canning and people in Western Australia generally are very conscious of the importance of this deal to be finalised and for this deal to be passed by the Australian Parliament. 

PAUL KELLY: Look, they are fine words. This is a pretty explosive claim. The claim is, that Chinese workers will come to this country and take Australian jobs. This is a pretty lethal political exercise and its one that could get a lot of traction. How concerned are you, how concerned are you that the Australian public are likely to accept this sort of campaign?

MATHIAS CORMANN: That claim firstly is wrong. What the CFMEU is hanging their hat on is the fact that you can enter into an investment facilitation arrangement without labour market testing. But an investment facilitation arrangement doesn’t actually allow you to bring workers into Australia either. Any project company or anyone who wants to bring a temporary skilled workforce into Australia has to enter into a labour agreement through the Department of Immigration and Border Protection. There are all of the usual safeguards which continue to be in place in relation to bringing in skilled workers the same way as they apply to any Australian project that wants to bring in skilled workers from overseas. That is, you’ve got to in the first instance offer these jobs to Australian workers. You have to prove that there are no appropriately skilled Australian workers available for particular jobs. The union campaign on this is entirely dishonest. But clearly, the reason the unions are running this campaign is because they do believe that this sort of populist, protectionist, racist campaign gets some political traction. All I can say to you is that I know that in Western Australia people understand very well the importance of our trade relationship with China. They also understand the opportunities in terms of economic growth and job creation that come from our strong trade relationship China. I’d like to think that people in Canning would reject this dishonest, populist, racist campaign by the CFMEU and supported through his silence by Bill Shorten in this Canning by-election. 

PETER VAN ONSELEN: So, Senator to look specifically at the by-election, what is an acceptable swing do you think for the Government to tolerate against it. At one level when you have the death of a local member swings are relatively moderate. But by the same token, Don Randall was very popular and it is a difficult climate at the moment for the Government. What would you consider to be a good result for the Government in Canning? 

MATHIAS CORMANN: Peter, I will let you do the commentary and the analysis after people have voted. We are working very hard to earn the trust of the people of Canning again. We’ve got an outstanding candidate in Andrew Hastie, a former SAS captain. He is campaigning very hard to earn the trust of the people of Canning, to represent them in Canning. We’re working to win and we’ll leave the commentary about what the result means to people like yourself.

PETER VAN ONSELEN: Alright, we’ll look to maybe do that a little later in the program. Senator Mathias Cormann, Finance Minister, you’re always generous with your time. We appreciate you joining us on Australian Agenda, thanks very much.  

MATHIAS CORMANN: Always good to be here.


Senator the Hon Mathias Cormann, Minister for Finance, Perth