Senator the Hon Mathias Cormann
Minister for Finance
DAVID LIPSON: G’day welcome to the program. Great to have your company this morning. The Federal Government will call on the States to open up health and education services to greater competition, as it pushes ahead with plans for sweeping economic reforms. It follows a largely positively received meeting of business, unions and Government on Thursday. To unpack all of this the Finance Minister, Mathias Cormann joins me now from Melbourne. Senator Cormann thanks for your time as always.
MATHIAS CORMANN: Good to be here.
DAVID LIPSON: What do you need the States to do?
MATHIAS CORMANN: We need the States and Territories to join in with the Commonwealth and to join in with the business, community and union leaders around the country to focus on making Australia more competitive, more productive and more innovative so that we can strengthen growth and strengthen opportunities for people across Australia to get ahead.
DAVID LIPSON: The Harper Review into competition did come up with a whole range of areas where competition can be improved and as a result productivity. When it comes to health and education specifically, it said a diversity of providers should be encouraged, while taking care not to crowd out community and volunteer services. How can we apply that recommendation first of all to health?
MATHIAS CORMANN: Firstly, its pretty self explanatory. A diversity of providers competing with each other, ever looking to deliver better value in terms of the quality of the service and in terms of the cost of the service. That is good for patients and it is good for our country as a whole. We do have a growing demand for services, in particular in the health space, in the context of an aging population. We do have limited resources. We have got to make sure that the limited resources made available by taxpayers stretch as far as possible. That they deliver the best possible quality healthcare at the best possible price so that we can make sure that over the long term people across Australia can continue to have timely and affordable access to world class healthcare in a way that is also affordable for taxpayers.
DAVID LIPSON: So specifically are we talking about the delivery of supplies and equipment and that sort of thing. Or more broadly across health, is it the whole thing?
MATHIAS CORMANN: I’m not going to get into the weeds of all of this. There is a body of work to be done. The Treasurer has put the Harper Review on the agenda for the next meeting with State and Territory Treasurers. There will be a meeting led by the Prime Minister of the Council of Australian Governments, which will engage with business, community and union leaders that we met with earlier this week. The principle is this, all of us at all levels of Government in Australia have a job to do to ensure that Australia is the most competitive we can be, that we are the most productive we can be so that we can reach our full potential when it comes to strengthening growth and strengthening opportunity for people across Australia to get ahead and strengthen the opportunity for us to keep lifting our living standards.
DAVID LIPSON: Okay. What about in education. This is another area where productivity can be improved and competition according to the Harper Review. We see that the Government of course has delayed its plans to implement the deregulation of university fees until 2017 at the earliest. Would deregulation of fees though, would that be, you’d imagine a pretty good way of opening up competition.
MATHIAS CORMANN: That is the whole purpose. Stronger competition delivers better outcomes for people who access any particular service. When it comes to higher education, we want our universities to be the best in the world. We want students across Australia to have access to the best possible university education here in Australia. Right now, our universities and many of them are exceptionally good universities, but many of them, they are competing on a world stage with one arm tied behind their back. What we want to ensure is that they have the best possible opportunity to be the most successful they can be. Deregulation is an important part of this. It really is all about making sure that students in Australia can have access to world class university education here in Australia. Education also is our third most important export service. So it is a very important export earner for Australia. So we’ve got to ensure that we continue to operate at a world class level. That is where increased competition, deregulation, that is where that comes in.
DAVID LIPSON: You’ve convinced the universities that this is a good idea. But how do you convince the students and the families that’s really what matters here. One suggestion today is that a trial of deregulated fees at selected universities could come in. Or perhaps a choice for certain universities to opt out.
MATHIAS CORMANN: Senator Birmingham, sensibly and pragmatically, decided to delay the implementation of these higher education reforms by one year. Given that we are now in October 2015, January 2016 was no longer a realistic implementation timetable. That means he now has more time to conduct further consultations. That means that he has got more time to engage with parents and with students to explain what it is that we’re trying to achieve and to adjust as appropriate the reform package that is on the table. That is a process that he will take forward from here. I’m hopeful that in the not too distant future we will be able to reach a good landing point in relation to this very, very important reform, which former Education Minister, Christopher Pyne initiated.
DAVID LIPSON: I understand one of the other suggestions that was put to the meeting on Thursday in Canberra was for a youth award rate when it come to payments to IR, it would sit actually between minimum wage and Newstart. Would that be something that the Government would consider?
MATHIAS CORMANN: We had a very broad ranging discussion on Thursday. It was a very open, a very constructive, a very positive discussion. The Government did not put any proposals on the table ourselves. Having said that, we also promised that we would not, we undertook that we would not be taking anything off the table until we had properly fleshed all of these issues out further, in close consultation with the people represented at that meeting. The broad consensus was that we needed to work together to achieve stronger growth. That we needed to work together to ensure that Australia was more productive, more competitive and more innovative. There were a whole range of specific issues that were touched on but without any specific landing point on any of them. That is a matter that we will continue to explore and pursue. All of these issues that were raised during that meeting will be explored and further engaged on over the next few weeks and months.
DAVID LIPSON: Yeah, because that specific proposal of course, business would be very happy to see something like that but the unions you would imagine would be vehemently opposed.
MATHIAS CORMANN: As I said, there were a range of issues that were put on the table. There was a broad consensus, in fact there was unanimity around the objective that we ought to achieve, around stronger growth, more productivity, more competitiveness and innovation. Incidentally, there was unanimity around the need to balance the budget over time. We’ve got a good strong foundation to build on and in terms of the specifics there is some more work to be done.
DAVID LIPSON: Yeah well on balancing the budget, there is this push to cut spending which is currently at 26 per cent of GDP. If you got it down to 24 per cent, which is the ideal considered by many, it would be a huge challenge, but what would the economy look like if you were able to achieve that?
MATHIAS CORMANN: The best way to reduce Government expenditure as a share of GDP is to strengthen economic growth. Because the larger the economy, at the same level of Government expenditure, it goes down as a proportion of the economy. The first point is that really our overarching objective should continue to be to strengthen economic growth into the future. That is what we dedicate ourselves to as a Government. That’s what we dedicate ourselves to in terms of working together with all leaders and everyone across the community. In terms of expenditure growth moving forward, we do have to ensure that expenditure is affordable and sustainable within the size of the economy that we are able to achieve. There is a body of work to be done there. We did make some significant progress over the past two years in relation to this. There is more work to be done. We will continue to press ahead on that front.
DAVID LIPSON: Because a few days ago the Treasurer said that we don’t have a revenue problem, we’ve really only got a spending problem. He hasn’t repeated that since then but is there room in this broad economic reform that the Government is pushing for, for an increase in revenue?
MATHIAS CORMANN: The thing is, if the economy strengthens then revenue will grow. If we’ve got strong economic growth ...interrupted
DAVID LIPSON: But beyond just growth?
MATHIAS CORMANN: But this is the important point. The conversation in relation to tax ought to be a conversation about how we can raise the necessary revenue for Government in a better way, in a more efficient less distorting way in the economy. In a way that encourages people to work more, to save more and to invest more. Not to increase the overall tax burden in the economy. If we were to increase the overall tax burden in the economy it would make it more difficult for us to strengthen economic growth moving forward. So the key is ...interrupted
DAVID LIPSON: The GST would do that pretty well though wouldn’t it?
MATHIAS CORMANN: Not necessarily. Not that I would want you to take away here that this is necessarily the path the Government would go down in the future. But if you have a conversation around improving the tax mix, then you can do that without increasing the overall tax burden in the economy. The key here is to ensure that we raise the necessary revenue to fund the important services and benefits provided by Government in the most efficient, least distorting way possible in the economy. That is the conversation that we are currently engaged in. On the expenditure side, 26 per cent Government expenditure as a share of GDP is too high. It is high by historical standards and it is too high full stop. There is more work to be done to bring that back to a more normal, more traditional level. On average throughout the Howard Government years it was about 24 per cent as a share of GDP. Former Prime Minister Keating as Treasurer, claimed as one of his big achievements that he was able to reduce government expenditure as a share of GDP down to 24 per cent. That is something over the long term in a realistic timetable that we should again aspire to, but I hasten to add the best way to achieve this is to strengthen economic growth.
DAVID LIPSON: Someone who has been critical of the push or the leaving on the table if you would like of any increase to the GST has been the former Prime Minister, Tony Abbott. He has spoken out a couple of times this week. He has also been critical or said he has been disappointed at the Government’s delaying of the higher education reforms. These sort of interventions by the former PM, although of course he has got a full right to do it, is this helpful to the Government?
MATHIAS CORMANN: It is certainly not unhelpful. I thought that those two interviews that Tony Abbott did this past week were very measured, they were very constructive and they were very positive. We had a very significant transition from Tony Abbott to Malcolm Turnbull in the Prime Ministership just over two weeks ago. Tony Abbott should be able to explain events and the way he sees things from his point of view. I think that the community should be giving Tony Abbott the necessary space to explain his perspective on what he tried to achieve as Prime Minister and what his Government tried to achieve in his time in Government and how he has experienced events unfold two or so weeks ago. I don’t think there is any problem with that at all.
DAVID LIPSON: Peter Reith suggests that Tony Abbott should take a holiday. There are rumblings around today that he could be offered the High Commissioner position in the UK. What do you think of that? Would he be a good fit there?
MATHIAS CORMANN: Firstly, I’m not going to give Tony Abbott any gratuitous advice. Secondly, I’m not aware of any such proposition. Let me say, I’d be very, very surprised if Tony Abbott had any interest whatsoever in being an Ambassador or a High Commissioner somewhere overseas. I’d be very, very surprised.
DAVID LIPSON: Yeah okay, interesting. Just finally, you’re in Melbourne, clearly you are planning on watching if not attending the Grand Final. The West Coast Eagles, your team there. How are they going to go?
MATHIAS CORMANN: I hope they are going to win. I hope they are going to make it less stressful for us than in 2006 where they won just by one point. I’d like to think they are going to come out firing and they will take a lead all the way through the match and win by at least 15 points.
DAVID LIPSON: Mathias Cormann that 2006 match I believe was against the Swans, my team. We wish you all the best today, thanks so much for joining us.
MATHIAS CORMANN: Thank you.