Senator the Hon Mathias Cormann
Minister for Finance
TOM CONNELL: Hello and welcome to Saturday Agenda. I'm Tom Connell filling in for David Lipson. Malcolm Turnbull has been in the top job for nearly a month and so far he is moving cautiously. It has become a familiar refrain that options are back on the table, but no major changes have been plucked out just yet. Labor though appears to be conscious though that it needs a new line of attack against a new opponent and in the last week in Parliament it settled on the Prime Minister's expenses. Questioning if it is appropriate for Malcolm Turnbull to be invested in funds that have interests in the Cayman Islands, which has of course a zero per cent tax rate. Labor though conceded all along that Malcolm Turnbull has done nothing illegal and that he pays tax in Australia and there was embarrassment when the Government responded by pointing out that many of the superannuation funds Labor MPs are invested in also have interests in the Caymans, including Bill Shorten who was once on the board of one of those funds, Australian Super. For more on this and the week that has been, I'm joined by Finance Minister Mathias Cormann from Perth. Minister thanks for your time today.
MATHIAS CORMANN: Good morning. Good to be here.
TOM CONNELL: Just on this issue of investments. I know that what Malcolm Turnbull has done is entirely legal. But do you think it would be an option for him to divest himself of any so called tax haven linked investments when the Government is obviously on the front foot in trying to really drive both tax transparency around the world and also making all companies pay their fair share?
MATHIAS CORMANN: Malcolm Turnbull has dealt with all of these issues extensively this week. The way he has managed his affairs is entirely appropriate. It is entirely consistent with the rules. It is very important to again note that he pays tax in Australia on all of his investment income from investments in the Cayman Islands. As you have indicated, there is actually nothing wrong in the way the Prime Minister is handling his personal affairs. As Minister for Communications he went out of his way to ensure that he did not have any conflicts here in Australia, which is why his investments are managed overseas. The Labor party and Bill Shorten in particular were looking quite shrill and desperate this week as they were pursuing this baseless personal attack against the Prime Minister. I don't think there is really anything else for us to say about this.
TOM CONNELL: What about what they do in the US. The Presidential candidates put their tax returns on the public record. Is that the sort of thing you think Australians would like to see?
MATHIAS CORMANN: I don't think that there is any suggestion by anyone that the Prime Minister has done anything else other than manage his personal affairs properly and consistently with all of the laws and all of the requirements that come with the offices we hold.
TOM CONNELL: Alright. Well into a bit of policy, because yesterday the Treasurer indicated the Harper Review on competition was back on the table, another one of those mantras of the new Government if you like, the new management. I'm interested in what elements of this might be explored. Reports today that it could be in the area of States open up health and social services to private providers.
MATHIAS CORMANN: In the end what we need to ensure is how the limited resources made available by taxpayers can provide the best possible services, the best possible safety net and can reach as far as possible. Wherever efficiencies can be achieved, wherever we can ensure that the taxpayer dollar can go further in delivering important services, including in health and education and in other areas then, we should keep an open mind and explore that.
TOM CONNELL: So that sort of option, the private provider aspect is very much a live option?
MATHIAS CORMANN: We have talked about this before. Wherever competition with and within the private sector can deliver better value for money, where it can deliver a better quality service at a lower cost and as such take pressure off the taxpayer then these are matters that we should explore. In health in particular, there are a lot of examples already where the private sector is significantly enhancing value for taxpayers in terms of the quality and the quantity of services being provided. We do face the challenge of an aging population. With an aging population comes a growing demand for healthcare services at a time when we are also dealing with a series of Budget challenges. So we have always got to look at ways to ensure that the limited taxpayers dollars available to us are spent to the best possible effect.
TOM CONNELL: You spoke there about the challenges of the Budget. I was interested in Scott Morrison talking yesterday about social housing. $11 billion spent total. Now that's Federal, States and Territories as well. But when he spoke at length about efficiencies and spending the money better, is he talking possibly as well about possibly spending less money. That there might not need to be $11 billion spent?
MATHIAS CORMANN: We always should look across all areas of Government at how we can spend the money made available by taxpayers better, more efficiently and more effectively. You have to assess what the need is in the community and how you can ensure that by appropriately prioritising Government expenditure you can meet that need. That is the conversation that always goes on within Government. How to appropriately prioritise expenditure of limited resources made available by taxpayers. To the extent that efficiencies and more effective expenditure can take some pressure off expenditure growth into the future, then yes, that is something that you would want to pursue.
TOM CONNELL: Because I was interested to hear him really express that figure as quite a big one obviously. Is that an indication perhaps that's too big a figure for the Government, the amount spent there at the moment?
MATHIAS CORMANN: What that is an indication of is that that is a very significant figure and we want to ensure that we get proper bang for our buck. We want to ensure that the money that is expended nationally delivers the best possible outcomes in that social housing space as we want Government expenditure in all areas to be as efficient and as effective as possible, because we do always want to treat taxpayers money with respect.
TOM CONNELL: Your department announced yesterday a $2.2 billion shortfall in tax revenue. Now that is that is to start of the financial year, the first two months. How big a concern is that for you that this is the start of a trend for this financial year and possibly longer?
MATHIAS CORMANN: You have always got to be very careful, and the statement I put out yesterday actually makes that point, to draw too many conclusions from two individual months out of a financial year. Because in particular at the beginning of a financial year, these numbers do bounce around a bit. In recent years, on the back of economic growth being a bit lower than anticipated, revenue has been coming in below expectations. The previous Labor government put certain revenue assumptions into the Budget and since we came into Government as a result of, in particular, significant falls in our terms of trade, significant falls in the price we can get for our key commodities on the global market, revenue has come in below expectations. Despite all of that, we continue to progress back on a believable path to surplus. Despite all of that, we continue to bring down the deficit both as a share of GDP and in dollar terms over the forward estimates, before getting back into surplus.
TOM CONNELL: Right, so you mention there the lower estimates that your Government has made in particular on commodity prices, despite all of that, there's the commodity prices, there's lower wages, there's still so far $2.2 billion in deficit. If you do find that come for example, MYEFO, that figure is continuing that trend has emerged, to maintain that path to a surplus you just spoke about, will you chase some savings?
MATHIAS CORMANN: What we always do is wherever there is a need for expenditure on comparatively higher priority areas the rule that we have imposed on ourselves, the discipline we have imposed on ourselves is that we will offset that by a reduction in expenditure on comparatively lower priority areas of expenditure. That is a process we are going through as we speak. In terms of the broader settings for the Budget, what I would say is that we are actually quite optimistic about where we are at. In Australia, despite the biggest fall in our terms of trade in about fifty years, our economy continues to grow. We are in our twenty-fifth year of continuous growth, when other commodity based economies around the world like Canada and Brazil are in recession. So we just focus on pressing ahead with implementing our plan for stronger growth, more jobs and we will continue to repair the Budget as part of that plan.
TOM CONNELL: So just briefly does this mean that MYEFO will seek to recoup any losses in revenue that we are seeing so far if they do continue.
MATHIAS CORMANN: You do have to make a difference here in relation to those adjustments that take place, if they take place, as a result of changes in parameters as opposed to those reductions or increases on the expenditure or the revenue side as a result of policy decisions. Wherever the Government makes a policy decision, which leads to an increase in expenditure on a higher priority area, we will offset that by savings, by spending reductions, in other areas. That is a discipline that we have imposed on ourselves. That is a discipline that we have stuck to in our period in Government. I am not going to pre-empt what the outcome of what the Mid-Year Economic and Fiscal Outlook is going to be, here on your program today. The reason we are planning to release the Mid-Year Economic and Fiscal Outlook in December is because we want to be able to assess, review and feed into the Mid-Year Economic and Fiscal Outlook the National Accounts data for the third quarter. Once that information becomes available we will have a clearer picture.
TOM CONNELL: So there will be no net increases in spending, I understand that you find the savings there. But in short, you're saying you won't make your mind up yet on what might happen if revenue is below what is expected, you're not making that call yet?
MATHIAS CORMANN: What I'm saying is whether it is on the revenue side or on the expenditure side, where you've got a series of demand driven programs and for example, there are demand driven programs in the social services space, the unemployment benefits, the age pension, childcare benefits, whatever, they are all demand driven programs. So whether it's on the expenditure side or on the revenue side, there's a difference between variations that happen because of parameter variations on one side, or variations that happen as a result of policy decisions that you make. Wherever we make a policy decision that has an effect on the underlying cash balance, we will offset that with decisions to make sure the effect is budget neutral.
TOM CONNELL: Okay, just moving on as well, if I can just get you on medical cannabis, this is something that Sussan Ley is saying that by the end of the year she hopes to be able to legalise the growing of medical cannabis. Your thoughts on that and the bigger issue, should the Federal Government approach the legalised use and access of medical cannabis?
MATHIAS CORMANN: The Health Minister Sussan Ley will have some more to say about this later today. This is squarely in her area of responsibility. There is a proposal of course which has been endorsed by the government. It involves appropriate safeguards and licensing arrangements through the Health Department but I will leave Sussan Ley to explain all of the detail in relation to that and what all of those safeguards and what the framework for all of that is going to be.
TOM CONNELL: Just finally Minister, a big issue obviously for Australians, housing, and a lot of talk over recent days that perhaps the heat is coming out of Sydney and Melbourne. Your thoughts on where things are at and what sort of impacts we might see in the next few months in this environment?
MATHIAS CORMANN: Sorry, say that again, I just couldn't hear you.
TOM CONNELL: So Minister just the final thing, housing, it's obviously a very big issue for many Australians and it appears as though the heat could be coming out of Sydney and Melbourne. There's obviously the impact of the rate increase from Westpac and perhaps others to follow. What's your thoughts on what sort of impacts we might be seeing in the next few months and where the housing market is at?
MATHIAS CORMANN: The housing market like any market is driven by supply and demand. If supply exceeds demand, prices come down. If demand exceeds supply, prices go up. Generally when prices are high you'll find that there will be a supply response into the market which will help to balance the market. Obviously there are policy issues in relation to all of this, State governments in particular have an influence on the level of supply. When you have a very strong demand for housing and supply doesn't come onto the market as efficiently as it should and as it could, then there is price pressure in the system. What we are seeing in the market in Sydney and Melbourne now as you are indicating is that perhaps the market is starting to balance itself out again a bit more.
TOM CONNELL: Finance Minister Mathias Cormann, thanks for your time as ever.
MATHIAS CORMANN: Always good to talk to you.