ABC News24 – Capital Hill

Senator the Hon Mathias Cormann
Minister for Finance






National accounts, tax reform, Labor's bank deposit tax, Canning by-election

JAMES GLENDAY: The Federal Government's mantra of late has been all about jobs and growth but the latest economic figures aren't particularly rosy. The national accounts show the Australian economy grew by 0.2 per cent in the three months to June. This takes the annual growth rate to 2 per cent. Today's figures are below trend. Now to discuss this and other issues I'm joined by the Finance Minister, Mathias Cormann live from Western Australia. Good afternoon Minister.

MATHIAS CORMANN: Good afternoon. Good to be here.

JAMES GLENDAY: Your Government has repeatedly said that jobs and growth are the focus for the Government, so what is behind today's sluggish figures do you think?

MATHIAS CORMANN: The good news is that our economy continues to grow despite the biggest fall in our term of trade in about 50 years. This is when other commodity based economies like Canada and Brazil are in recession. We had 0.9 per cent growth in the first quarter, 0.2 per cent growth in this quarter, on average now real growth of 2.5 per cent over the 2014-15 financial year, which is in line with Budget expectations. The very good news is that employment growth is actually performing more strongly than had been anticipated and the unemployment rate has ended up lower than anticipated at the end of the 2014-15 financial year.

JAMES GLENDAY: But I guess 2 per cent growth over the past year, do you think that is truly a good result for the nation?

MATHIAS CORMANN: It is a much better result than we would have had if we had not changed some of the job destroying policies of the previous Labor government. If we hadn’t we would be in a worse position today if we had not got rid of the mining tax, if we had not got rid of the carbon tax, if we had not reduced red tape costs for business by more than $2 billion a year, if we had not signed free trade agreements with key countries in our region including China. I hear today that Bill Shorten is still using weasel words in relation to that very important deal for jobs and growth in Australia moving forward.

JAMES GLENDAY: Just back to today's result, do you think that they're a blip or is this is new normal for our nation? Does Australia need to re-think what normal growth rates are or should be?

MATHIAS CORMANN: We are an economy in transition. We are dealing with the biggest fall in our terms of trade in about fifty years. That is why it is so pleasing that we continue to grow, the economy continues to grow, the economy in 2014-15 grew in line with Budget expectations, at an average of about 2.5 per cent real growth in 2014-15. Nominal growth actually was slightly better than what was expected at Budget time and employment growth in particular was performing quite a bit better than anticipated, which is why the unemployment rate is lower than had been anticipated, which is consistent with what Reserve Bank Governor Glenn Stevens has been saying in recent times as well.

JAMES GLENDAY: You mentioned the Budget there, given the external pressures that currently are being put onto the Federal Budget is now the right time to be flagging income tax cuts and ruling out new taxes like the bank deposit tax which you did yesterday?

MATHIAS CORMANN: We want to improve our tax system. That is a central part of our plan for stronger growth and more jobs. Right now, income tax rates in Australia are very high by international standards. We want to ensure that our tax system is the most competitive and the most efficient it can be. That the necessary revenue for Government is raised in the most efficient least distorting way in the economy. Tax reform is a very important part of that. Between now and the election we will be putting forward our very comprehensive tax reform package for the Australian people to consider.

JAMES GLENDAY: Okay, on the bank deposit tax in particular, were you initially in favour of this measure?

MATHIAS CORMANN: No. That is not correct. These stories that were written up at various times by various journalists were always wrong. Our position has been consistent. We were very sceptical when Labor announced this tax. When they were in Government in their final weeks in Government, in 2013, we said at that time we laid out the process by which we would consider the way forward in relation to this Labor tax on people's bank savings. We said we would consider our approach in the context of the Financial Systems Inquiry, after the Financial Systems Inquiry considered that particular Labor proposal. The Financial Systems Inquiry recommended against it. Yesterday we made a decision not to proceed with this Labor tax on bank accounts because we think it's the wrong way forward.

JAMES GLENDAY: The revenue raise by this tax would have been gone into a stability fund to essentially cover the cost in the unlikely event of a default or a major banking meltdown. If that does come to pass in the future who is going pay, who is going to foot the bill for that, it will have to be taxpayers won't it?

MATHIAS CORMANN: You talk about the unlikely event and since then we have further improved prudential regulation. The way to avoid future bank failures is not by setting up a big capital fund by raiding people's savings in their bank accounts, it is by making sure that the banks are adequately and well regulated. The Financial Systems Inquiry has had a lot to say about this. The banks in recent times have been required to increase their capital reserves to ensure that there is a appropriate security and safety when it comes to the banks' viability into the future. This tax that Labor proposed, initiated and banked in their last Budget update, was always just a grab for cash. Labor in Government was always spending too much. They were always on the backfoot. They were always facing Budget deterioration after Budget deterioration. It was another grab for cash targeting people’s bank accounts and savings. We made a very clear decision that we are not going to proceed with this Labor tax on people's bank accounts.

JAMES GLENDAY: Okay Minister, on another issue, one of your colleagues Peter Dutton said yesterday that Fairfax media is engaged in a bit of a holy war against the Government. Do you agree? Are the media out to get and bring down the Coalition Government?

MATHIAS CORMANN: I'm not a commentator. I'm focussed every single day on my job, which is to help build a stronger more prosperous economy, to help put Australia on a stronger economic and fiscal foundation for the future. That’s what I’m focussed on ... interrupted

JAMES GLENDAY: Have you been annoyed by those regular high level leaks from your Government?

MATHIAS CORMANN: You can ask the question whatever way you want. I'm focussed on my job, which is as part of the economic team to work with the Prime Minister, the Treasurer, my Cabinet colleagues and all of my Parliamentary colleagues in the Coalition, on strengthening growth, creating more jobs and making sure we get the Budget back into good shape.

JAMES GLENDAY: Okay, you've been working hard at the moment in the WA seat of Canning ahead of this month's by-election. Your party holding this seat by about 11 per cent. What would be an acceptable swing against the Government in WA?

MATHIAS CORMANN: We have an outstanding candidate representing the Liberal Party here in Canning in Andrew Hastie. He has got some big shoes to fill because Don Randall was a very effective and very highly regarded local Member of Parliament. Andrew Hastie is working hard to win the trust of the people of Canning, to represent them in the Federal Parliament. We are working on winning.

JAMES GLENDAY: Alright, Mathias Cormann thank you very much for joining Capital Hill.

MATHIAS CORMANN: Always good to talk to you.


Senator the Hon Mathias Cormann, Minister for Finance, Perth