Senator the Hon Mathias Cormann
Minister for Finance
ROSS GREENWOOD: Welcome back to Money News, good to be with you. As you’re aware there was this summit today with the Prime Minister Malcolm Turnbull. We did earlier on in the program speak with Jennifer Westacott, the chief executive of the Business Council of Australia who was there today. Also in attendance, the Treasurer Scott Morrison, the Assistant Treasurer Kelly O’Dwyer was present. But the whole point about this is it comes down to where you see the economy right now. I just want to play you one grab from earlier this week when the incoming Treasurer Scott Morrison spoke about how he saw the state of the economy right now.
SCOTT MORRISON [EXCERPT]: We have a spending problem, not a revenue problem.
ROSS GREENWOOD: We have a spending problem, not a revenue problem. Alright, the man in charge of the Australian spending. Not so much the revenue but he’s probably got a hand on that as well, but certainly the spending, is our Finance Minister Mathias Cormann, who is on the line right now. Many thanks for your time Mathias.
MATHIAS CORMANN: Good evening. Good to be here.
ROSS GREENWOOD: Does Australia have a spending problem or a revenue problem?
MATHIAS CORMANN: Of course I agree with the Treasurer. The Australian Government has a spending not a revenue problem. Just to correct your introduction slightly, that reference by the Treasurer was not about the state of the economy. It was about the state of our Budget. When we came into Government, the Budget position that we inherited was rapidly deteriorating on the back of unsustainable spending growth that had been locked in by the previous Labor government. In particular, for the period beyond their time in office. That is still what we are dealing with today.
ROSS GREENWOOD: Sure I understand, but if Australia’s economy right now is only growing at two per cent per year which it is, quite clearly it’s below trend growth. There is not enough profits being made by companies and as a result there’s not enough tax coming into your coffers. So therefore it would appear to be a revenue problem as well as a spending problem.
MATHIAS CORMANN: Sure, but you’ve got to look at what drives what. We all agree that Australia needs stronger growth. That we need to be more productive, more competitive, more innovative to drive stronger growth. Stronger growth will increase the level of revenue. When we say we have a spending rather than a revenue problem, what we are talking about is that we don’t believe that we can fix the Budget position by making decisions to increase the overall tax burden on the economy. Because, if we were to make decisions to increase the overall tax burden in the economy, it would actually have the effect to slow down growth, which ultimately would not help with increasing the level of revenue in a sustainable way either. So ...interrupted
ROSS GREENWOOD: Would it be fair to say that Australia also has a political problem, because the real issue is if you go back to your 2014 Budget which even the former Prime Minister Tony Abbott today suggested was a brave Budget with brave reforms in it which clearly couldn’t be sold to the Australian public, then in that case we’ve got a political problem.
MATHIAS CORMANN: The thing is we actually have made a lot of progress over the last two years. Yes our first Budget as a Government was, with the benefit of hindsight, too ambitious. We tried to do too much at once. But having said that though, since we came into Government, 80 per cent of the Budget repair measures that we’ve imitated in our various Budgets and Budget updates have actually been implemented. We have been able to implement about $85 billion worth of improvements to the Budget bottom line over the relevant forward estimates period. So we are now in a stronger, more resilient position than we would have been if we had not taken those actions.
ROSS GREENWOOD: I agree with that but that may be seen by some to have been the low hanging fruit that could get through the Parliament, of course the tough decisions, GST, superannuation reform, education reform today was shelved, the higher education reform, penalty rates again pushed out behind the next election. The question is whether this is all realising the reality of the position inside our Parliament right now, that there are certain things, certain measures that you might want as a Finance Minister that simply can’t get through.
MATHIAS CORMANN: The key is to continue to make progress heading in the right direction. If you look at where we came from when we came into Government in September 2013, the economy was weakening, unemployment was rising, the Budget position was deteriorating. You talk about below trend growth now, the Australian economy actually continues to grow. When other commodity based economies facing similar challenges to ours in the world economy, Canada, Brazil and others are actually in recession our economy continues to grow. Over the past two years we have been working to improve our international competitiveness, take some burdens out of the economy that had been put there by the previous Labor Government. That’s why we got rid of the carbon tax and the mining tax. That’s why we reduced company tax for small business. That’s why we’ve been focussing on reducing red tape costs for business. That’s why we’ve been pursuing an ambitious free trade agenda. That’s why we’ve been focussing on this record infrastructure investment program. But today’s meeting was a very important next step. It was a very positive, a very open, a very constructive meeting with community, business and union leaders that had participated in the National Reform Summit. There was a very broad consensus that we needed to all work together on getting stronger growth, getting Australia to be more productive, more innovative and more competitive. There will now be further conversations on how that can best be achieved moving forward and how we can continue to make progress.
ROSS GREENWOOD: Right, I was just going to take you on one thing. I’ve got no time to really ask the question. That idea, that ambition you’ve got to try and get the spending to 24 per cent of GDP, realistic or not? I need a yes or no answer pretty much I’ve got to say Mathias Cormann.
MATHIAS CORMANN: Realistic over a reasonable and realistic timeframe. Over the current forward estimates we are projected to go to 25.3 per cent as a share of GDP, 24 per cent was the average under the Howard Government, 24 per cent was the achievement that former, then Treasurer Paul Keating claimed... interrupted
ROSS GREENWOOD: I’ve got to go Mathias, I apologise but I know where you’re heading to. You’re saying you need the time, I can hear that.