Sky News – PM Agenda

Senator the Hon Mathias Cormann
Minister for Finance






Budget, Credit ratings

DAVID SPEERS: In the meantime, I want to look at the Budget bottom line. Something we've been well focused on for a number of years now, but is it getting any better? With me now the Finance Minister Mathias Cormann, joining us from Perth this afternoon. Thank you very much for your time. I want to start with some analysis from David Uren in The Australian today. He's looked at the first few months of the Monthly Statements that are made public, for this financial year. They show that far from revenue actually growing as was forecast in the May Budget, it's been falling. In fact it is lower than the same period of last year. Is that your view as well? Are you concerned that we are actually not going to see an improvement in the Budget bottom line?

: That is not actually quite right. The Monthly Financial Statements that have been released, have been released by me and the Secretary of the Finance department. So they are my updates. You've got to be a bit careful with the conclusions you draw from three months of data. But what the Monthly Financial Statements and the updates from the first three months of this financial year show is that we are actually tracking about $3 billion better than expected at Budget time. That is because of both lower than anticipated expenditure at this point in time and because of higher than anticipated revenue at this point in time. If you put that in the context also of the Final Budget Outcome for 2014-15, which was released at the end of September, that came in about $3 billion better than anticipated at Budget time. So... interrupted

DAVID SPEERS: Was that largely because of the Reserve Bank's fairly health contribution?

MATHIAS CORMANN: No. The better than expected budget outcome for 2014-15 had nothing to do with that what so ever. That was because principally expenditure was lower than anticipated and revenue continued to track consistent with expectations. In the 2015-16 financial year, it is true that there is a dividend payment from the Reserve Bank. That is reflected in those figures. But this is swings and roundabouts. At any one point in time, there are always different moving parts in the Budget. There is an official update twice a year. The next Budget update will be the half yearly Budget update, the Mid-Year Economic and Fiscal Outlook, in the middle of December. The other update is at Budget time.

DAVID SPEERS: Alright, to ask specifically then, about tax revenue, the revenue you're getting from personal income tax and company tax, is that where it's meant to be for the first few months of this financial year?

: In the end, the level of revenue from personal income tax and company tax in particular is to a large degree a function of the economic growth numbers and also what is happening in relation to wages growth in particular. Now ... interrupted

DAVID SPEERS: But is it where it should be, is it where are you forecasted with it?

MATHIAS CORMANN: The next official update in relation to this, will be the Mid-Year Economic and Fiscal Outlook in December and the reason we are releasing it then ...interrupted

DAVID SPEERS: But based on the three months that we've got though, I mean you've made that public, is that where it should be, is it lower than it was last year?

MATHIAS CORMANN: The important point here is that the time that we will make our next update is in December and that is for a reason. That is because the third quarter National Accounts data is due to come out on the 2nd of December. That will give us important information in terms of the economic parameters moving forward, the economic growth numbers moving forward which is all important. You can't draw conclusions on what the expected revenue outcome, tax revenue outcome for the year is going to be based on three months of monthly data.

DAVID SPEERS: Alright, let me put to you this question about the credit rating, AAA at the moment, but Standard & Poors the ratings agency did warn back in May after the budget that quote "it could lower the ratings if Australia's budget performance does not improve". I appreciate you don't want to judge on three months, but are you still confident we will hold onto our AAA credit rating?

MATHIAS CORMANN: The AAA credit rating is important and yes we are confident. Yes, we do have a plan to get the budget back to balance as soon as possible and also in a way that is economically responsible. If you look at the budget projections over the current forward estimates period, we are bringing down the size of the deficit both in dollar terms and as a share of GDP. If you look at the actual performance, the most recent release in terms of actual budget performance was the Final Budget Outcome for 2014-15, which came in $3 billion better than anticipated. We are continuing to make progress implementing our plan for stronger growth and to repair the Budget. We are making progress in getting legislation through the Senate. In terms of all of the measures impacting the Budget bottom line ...interrupted

DAVID SPEERS: There are some measures though you haven't been able to get through, in health, in higher education, I know in your family payments package has now been put forward. That money is going to a new childcare spend. Can we afford new spending at all at the moment?

MATHIAS CORMANN: Wherever we want to invest in higher priority areas of expenditure, focussed on strengthening growth, focussing on improving productivity, focussing on improving workforce participation so that we can strengthen growth, what we have said is that it has to be offset by spending reductions in comparatively lower priority areas. I would just say though, since we came into Government in September 2013, we have been able to implement about 80 per cent of all of the measures to improve the budget bottom line. Yes, there are some areas where the conversation is ongoing, there are other areas where we have had to recalibrate, but we are making progress. We are certainly in a much stronger position than we would have been if we had kept the policy settings in place that were put in place by the previous government.

DAVID SPEERS: Finance Minister we're going to have to cut it short there because your boss the Prime Minister is speaking. We'll have to go there live but thank you very much for joining us this afternoon.


Senator the Hon Mathias Cormann, Minister for Finance, Perth