Senator the Hon Mathias Cormann
Minister for Finance
DAVID LIPSON: G’day there. Great to have your company this morning. Days out from international climate talks in Paris observers are decidedly positive about the prospect of a meaningful agreement to tackle climate change. Malcolm Turnbull will take to the meeting Tony Abbott’s target of a 26-28 per cent reduction in emissions by 2030. But Bill Shorten is crashing the party in Paris, with an aspirational reduction target if we could call it that of 45 per cent. Joining me now, the Finance Minister, Senator Mathias Cormann, thanks very much for your company.
MATHIAS CORMAN: Good to be here.
DAVID LIPSON: Australia’s efforts on climate change are largely irrelevant really without a global agreement. So what is the Government hoping for in Paris?
MATHIAS CORMANN: You’re right, to reduce global greenhouse gas emissions there has to be effective global action. There has to be effectively coordinated global action. Australia is taking an appropriately ambitious, fair but also responsible and achievable target to Paris. We are proposing a further reduction in Australian emissions of 26-28 per cent on 2005 levels, which effectively doubles our emissions reductions target, which will see emissions on a per capita basis reduce by half and which will see emissions intensity in the economy in Australia, emissions per unit of GDP, reduce by two thirds. We are taking an appropriately ambitious, but responsible and achievable target to Paris. The Government has got a plan on how to achieve that target. Because Australia is already on track to meet and exceed the Kyoto targets that we committed ourselves to.
DAVID LIPSON: Yeah that’s right, the five per cent reduction by 2020. We saw Greg Hunt this week pointing out that Australia will, or is at least on track to beat that five per cent reduction target. But that is somewhat misleading because Australia is allowed to bring forward some of the earlier cuts, pre-2012. What was asked this week in Parliament several times and wasn’t answered by the Government is will emissions in 2020 be higher than they are today?
MATHIAS CORMANN: They will be lower than they would have been. We are working in with the commitments that we made in ... interrupted
DAVID LIPSON: Higher than they are today?
MATHIAS CORMANN: Our economy has grown. We are working in with the commitments that we’ve made in the context of the Kyoto agreement. These emissions reduction targets are tracked according to internationally agreed methodology. I know Bill Shorten yesterday in desperation to get himself a headline and insert himself into this issue so he could justify being away from Parliament next week and attach himself to events in Paris next week. He clearly is not very keen to be in Parliament next week. He went out with a draft suggestion that Labor is considering a 45 per cent emissions reduction target. There is no substance behind it. There is no policy behind it. There is no plan on how to achieve it. Indeed, contrary to the headlines, Labor actually hasn’t committed to that target. They have just put it out there as a suggestion. Now, if Labor were to go down that path, it would be terrible for Australia for that target to be implemented. It would seriously hurt growth and jobs. The only plan that we know that Labor keeps coming up with in order to achieve this irresponsible objective, is a carbon tax. We’re going to have a re-run of Labor’s, ‘there will be no carbon tax under any government I lead’ proposition only to do the exact opposite if Labor were to be successful, which hopefully they won’t be.
DAVID LIPSON: Okay so that’s Labor’s policy. I want to stick with the Government’s because the reason I was pointing out that emissions will in fact be higher in 2020 than they are today is that the Government actually has a lot of work to do if it is to turn things around and achieve those targets that you’ve set, 26-28 per cent reductions by 2030. Now how will the Government do that because, yes you say that Labor is going to do it an emissions trading scheme or carbon taxes as you put it, but you know, there’s no way to abate emissions without a burden on the economy. You can’t do it without a cost. So how will you do it?
MATHIAS CORMANN: There will be a cost. We have been quite transparent about that. We already have a whole range of policies in place, for example the Emissions Reduction Fund, which has conducted several auctions to reduce emissions in the least cost way, by asking for bids from businesses and people around Australia to put forward proposals on how they can reduce emissions in Australia at the lowest possible cost. That program will continue and the Minister for the Environment Greg Hunt will have more to say about these matters in the coming weeks and months.
DAVID LIPSON: What about international permits? Because the Government, or the Coalition in the past has been very much against them. It seems the rhetoric has softened significantly. We heard John Connor from the Climate Institute yesterday saying if the Government was to adopt international permits, well then, you could actually achieve the 45 per cent reduction that Labor is talking about, if you put international permits on top of your current target.
MATHIAS CORMANN: You are well and truly going outside my area of responsibility now. I’m very happy to let Greg Hunt explain these sorts of matters on behalf of the Government.
DAVID LIPSON: That’s fair enough. I suppose this is all brought into context by what we saw this week with the Treasury and a largely unnoticed tweak by the Treasury which in some ways sort of eclipsed the big numbers that we are talking about here. Downgrading growth projections so that they would, according to the forecast, stabilise at 3 per cent growth, sorry, stabilise not at 3 per cent growth, but at 2.75 per cent. Now this is expected to cost according to PwC about $50 billion over five years. I suppose the question to you is, was it a mistake for the Government and for Joe Hockey and the economic team just in May this year to put those 3 per cent growth projections in place?
MATHIAS CORMANN: Your characterisation of what Treasury did is wrong. Treasury didn’t downgrade growth forecasts. Treasury made a consequential change to some modelling assumptions as a result of a change to a technical assumption in the final two years of the forward estimates period. Nigel Ray as the Deputy Secretary of Treasury with responsibility for macro-economic matters explained that in some detail. The next opportunity for economic growth forecasts and projections to be reviewed will be the Mid-Year Economic and Fiscal Outlook. The reason we are intending to release that in the middle of December is because we will wait for the third quarter National Accounts to come out and that will happen on the second of December. That will give us some further indication in terms of where the economy is actually at. The first two quarters this year, the economy grew by 1.1 per cent which by international standards is, given that we are a commodity based economy, having had to deal with the biggest falls in our terms of trade in about 50 years, is actually a very good performance.
DAVID LIPSON: As you say, the assumption has changed though, so were the assumptions in May clearly wrong?
MATHIAS CORMANN: No. What has happened is there is a technical assumption in the out-years, in the final two years of the forward estimates, that we will return to effectively full employment. The technical term is that we would return to the NAIRU, the Non-Accelerating Inflation Rate of Unemployment, about five percent and because of lower population growth on the back of lower immigration numbers, the economic growth number required to hit that technical assumption number is now lower. Treasury has adjusted that number so that we continue to hit effectively what is a number set by way of a technical assumption. This is not a forecast of what Treasury thinks will happen. In terms of forecasts, growth forecasts for the purpose of the Mid-Year Economic and Fiscal Outlook, that is a matter that will be worked through in the context of our half yearly budget update.
DAVID LIPSON: I want to get your thoughts on Jay Weatherill’s suggestion this week of yes, 15 per cent GST where the Commonwealth keeps the windfall, the additional five per cent, but then gives the States one fifth of revenue from income tax. I know you’re not going to rule anything in or out at this stage, but as a principle, what does the Government think of that?
MATHIAS CORMANN: What the Government thinks is that it is very good on Jay Weatherill to engage positively and constructively in this debate about how our tax system can be improved. The Government’s objective is to deliver stronger growth and more and better jobs. As part of that conversation we are looking at how we can make our tax system more growth friendly. How we can encourage people to work more, save more and invest more so we can strengthen growth, strengthen investment flows and in the process create more and better jobs. Unlike Bill Shorten and unlike the Labor Party at a Federal level, Jay Weatherill is part of the conversation and good on him.
DAVID LIPSON: I know the story in The Australian newspaper today that suggests that Labor will put Malcolm Turnbull’s role in the 2001 collapse of HIH under the microscope. Considering that the Coalition thought it was appropriate for Bill Shorten to face scrutiny over his union past at a Royal Commission no less, is it appropriate for Malcolm Turnbull to be subjected to scrutiny over his past in the business world?
MATHIAS CORMANN: Labor is quite pathetic about all of this. In relation to the specific matter, this has been subject to inquiries at the time. In fact there was a Royal Commission into the collapse of HIH and Malcolm Turnbull’s role as part of that and Goldman Sach’s role for that matter as part of that, was fully investigated and there was absolutely no evidence of any wrongdoing whatsoever. Labor under the Rudd and Gillard Governments with Wayne Swan as Treasurer have always disliked successful people. They still dislike successful people. They have been trying to run a pretty transparent political smear against Malcolm Turnbull because he was successful in the past. We are not surprised that they will continue to do that. It is rather disappointing. In the Coalition we understand that for Australia to be as successful as we can be, we need individual Australians and individual businesses in Australia to be as successful as they can be. We encourage and celebrate success, because there should be more of it and more people across Australia, we hope, will be successful in the future and have the best possible opportunity to get ahead.
DAVID LIPSON: Finance Minister Mathias Cormann, great to speak to you today. Thanks for that.
MATHIAS CORMANN: Always good to talk to you.