Senator the Hon Mathias Cormann
Minister for Finance
LAURA JAYES: The Government has today announced plans to dump this 0.05 per cent bank deposit tax. This was never legislated and was first proposed in the dying days of the previous Labor Government in 2013. But why has the Government dumped it today? For the last couple of years it has always kept it open as an option. Joining me now is the Finance Minister Mathias Cormann from Perth. Minister, thanks so much for your time.
MATHIAS CORMANN: Good to be here.
LAURA JAYES: Why has the Government decided not to go ahead with this measure today? Can the Government afford it?
MATHIAS CORMANN: This is another Labor tax which the Government has scrapped. This is something that Labor did not just propose before the last election, they actually banked it in their last budget update. What the Government has decided is that it is not appropriate for the Government to attack people’s savings in their bank accounts with a $1.5 billion tax. That is the decision that we have announced today.
LAURA JAYES: But you have banked these savings in the last two Budgets as well, so why can the Government now afford to give up this revenue?
MATHIAS CORMANN: These are not savings. This is a tax which Labor announced. It is a tax which Labor banked in its last budget. We always expressed our concern and expressed our deep scepticism. We also always said that we would ask the Financial Systems Inquiry to consider this in an orderly fashion. We have gone through very extensive consultation in relation to this and we have made a judgement, that this is not a good tax to proceed with. That is why we scrapped it. This decision today means there is a cost to the budget bottom line of about $1.5 billion, which we will have to make up through savings in other areas, which we will announce in the Mid-Year Economic and Fiscal Outlook.
LAURA JAYES: In June it was reported the Government’s finance team including you, were keen to hold on to this revenue. Is that not true? What has changed between now and then, in just three months time, why do you no longer need this revenue?
MATHIAS CORMANN: You being a journalist should know better than anyone that you can’t believe everything that is written in the paper. A journalist asserted that wrongly today in the press conference with the Prime Minister and the Treasurer as well. This is a tax measure, it is a bank tax, which was initiated and banked by Labor. We always expressed our deep concern, we always made clear the process that we would follow. We always said we wouldn’t pre-empt the process, that we would provide the Government’s final response in the context of our response to the financial systems enquiry. That recommendation from the Treasurer went to the Cabinet today. We made a decision not to proceed with this Labor tax, another Labor tax on people’s savings.
LAURA JAYES: Okay. The Government has identified bracket creep as a huge drag on the economy, flagging income tax cuts in the next term. Why is this being prioritised over a Budget surplus, and when we look at figures about how much bracket creep has cost over the forward estimates or will cost, it’s in the order of about $25 billion over the forward estimates. You’re not proposing to give tax cuts in that order, are you, around $25 billion?
MATHIAS CORMANN: I reject the characterisation that this has been prioritised ahead of a return to surplus. We have laid out in the Budget a credible path back to surplus. Based on all of the current indications we are expected to get back to surplus by 2019-20. In the Budget already, we have made assumptions on the revenue side, which take into account the need for income tax cuts down the track to adjust for bracket creep. Beyond that, we do want to pursue broader tax reform, we are working to reduce spending growth to give ourselves the scope to reduce taxes. We already have got rid of a lot Labor taxes. We got rid of the carbon tax, got rid of the mining tax, reduced company tax for small business by 1.5 per cent. We want to take tax reform further. Further spending control, further efforts to improve the tax mix and also some of the decisions we have already made in the Budget will give us the room that we need to be able to do that.
LAURA JAYES: My issue with tackling bracket creep now or even over the next couple of years is that we see today, that wages growth is at a record low at 2.25 per cent growth for at least the last two years. Isn’t bracket creep therefore less of an issue in these times of low wages growth? Shouldn’t the Government be looking more closely at productivity measures rather than giving these income tax cuts? Perhaps investing more in infrastructure and those productivity measures that will drive growth?
MATHIAS CORMANN: A couple of elements here. Firstly the data in relation to wages growth that has come out in recent days shows that wages are growing more strongly than CPI, than the cost of living is growing. That is certainly a good thing for wage earners. But, bracket creep is an issue. We do already have an excessive reliance on personal income tax as a revenue source in our Budget. Bracket creep gets more and more middle income earners into the higher income tax brackets, which impacts on our competitiveness as an economy. Everything we do in Government is focussed on strengthening growth, creating more jobs and creating more opportunity for people to get ahead. Tax cuts, in particular income tax cuts and tax cuts to address bracket creep are an important part of that. That is all focussed on making sure that our economy can grow as strongly as possible, but we do have to make the numbers add up, that is true.
LAURA JAYES: Minister, the author of your commission of audit Tony Shepherd, only two weeks ago told me here on Sky News that “GST absolutely needs to be looked at by this Government”. Will you heed his warning?
MATHIAS CORMANN: We are currently engaged in a tax reform discussion with the Australian people. In the lead up to the last election when it came to tax we said we would get rid of the carbon tax and the mining tax and we have. We said we would reduce company tax for small business and we have. We said we would get rid of Labor’s attack on those using fringe benefits tax arrangements in the context of their car leasing arrangements and we have. We have done the things we said we would do. Beyond that we said we would have a conversation about improving our tax system for the medium to long term and that is a conversation we are currently engaged in.
LAURA JAYES: But how long is that conversation going to take. Will you take some kind of proposal on the GST to the election, given that you now have the backing of two important states that is South Australia to an extent, and also New South Wales. Mike Baird is the only one that seems to be taking the leadership on this issue, Minister?
MATHIAS CORMANN: We will take a tax reform package to the next election as we’ve said we would. I’m not going to pre-empt what is in the tax reform package. That is work that is currently being done and there are a range of conversations underway, including about how the tax mix in Australia can be further improved in order to put us on a stronger, more competitive foundation for the future. Seeking to lower the level of reliance on income tax is certainly part of that conversation. We have been quite candid and upfront about that for some time. But, we are still engaged in the process right now. We haven’t reached a conclusive landing yet, but our intention is to finalise all of this in good time before the next election.
LAURA JAYES: As a West Australian MP, you know more about the seat of Canning than most of us. Do you think the Government will be safe in that seat, and will we see a big swing away do you think?
MATHIAS CORMANN: We have an outstanding candidate in Canning in Andrew Hastie, who is working very hard to win the trust of the people of Canning to represent them in the Federal Parliament. He has some big shoes to fill. Don Randall was an outstanding local member. Andrew Hastie, the same as Don Randall has, wants to fight for the best interests of the people of Canning in Canberra, in the Federal Parliament. That is what he is currently campaigning for.
LAURA JAYES: At the moment we look at the polls, the Government is eight points behind the Opposition when you look at the latest Newspoll and Ipsos poll. But this will be an actual litmus test of how the Government is in the electorate. How much weight will you be putting on this result in the seat of Canning?
MATHIAS CORMANN: We are working very hard every day to put Australia on a stronger foundation for the future. It is true that the people of Canning will have the first opportunity to pass judgement to a degree, on the performance of the Government. But more importantly, they will be able to pass judgement on the candidates who are presenting themselves to represent them in Federal Parliament. Andrew Hastie, having had a distinguished career as an SAS captain, fighting for the Australian way of life overseas, is now putting himself forward for the consideration of the people of Canning, to fight for them and fight for their best interest in Canberra. We hope that he will be joining us in Canberra after September 19.
LAURA JAYES: Are you concerned about some leaks from your colleagues against your Treasurer in recent days?
MATHIAS CORMANN: I’m not a commentator, I work very closely with the Treasurer, who is doing an outstanding job. We are focussed every single day on doing the best we can to help put Australia on a stronger economic and fiscal foundation for the future, to strengthen growth, to create more jobs and to get the Budget back in shape. I’m not going to get myself involved in gossip.
LAURA JAYES: So the media is not running a jihad against the Government or anything like that?
MATHIAS CORMANN: I’ll leave the commentary to you. I’m focussed on the job that I’ve got to do, which is to work closely with Joe Hockey, the Treasurer, the Prime Minister and all of my Cabinet and Parliamentary colleagues to put Australia on a stronger economic and fiscal foundation for the future.
LAURA JAYES: Mathias Cormann, Finance Minister, talking to us from Perth this afternoon. Thanks so much for your time.
MATHIAS CORMANN: Always good to talk to you.