Senator the Hon Mathias Cormann
Minister for Finance
SANDY ALIOSI: As we’re reporting the Treasurer will deliver his mid financial year Budget assessment today. Amid warnings that falling revenue and rising demand for government services is putting increasing pressure on deficit forecasts. With Scott Morrison at the MYEFO release, will be the Finance Minister, Mathias Cormann who joins us now and he’s speaking to Marius Benson.
MARIUS BENSON: Mathias Cormann good morning.
MATHIAS CORMANN: Good morning Marius.
MARIUS BENSON: Firstly, thanks very much for getting up so early in Perth. It’s not even ten to four there and we all know that the reason’s everyone is in Perth is that there is a baby Cormann due within a day. So it’s a pretty hectic time for you. Many thanks.
MATHIAS CORMANN: No worries.
MARIUS BENSON: Enough of humanity let’s get to MYEFO. There are predictions of an horrendous set of figures today. You know what the figures are. Is horrendous the right word?
MATHIAS CORMANN: The specific numbers will be released later today. The Government’s focus has been on strengthening growth, creating more jobs and getting the Budget back on a more sustainable foundation for the future in a sensible fashion. So we have focused on growth and we have focused on controlling expenditure. The Budget update today will certainly show that the Government has been successful in controlling expenditure to the extent that we have been able to offset any increases in payments with savings in other parts of the Budget. Expenditure overall is down.
MARIUS BENSON: But in fact you point to growth there and expenditure. Let me go to growth. Growth forecasts in May, 2.75 per cent, they’re down to 2.5 per cent now, so you’ve failed that one. Expenditure, expenditure is running above forecasts.
MATHIAS CORMANN: When it comes to economic growth, we have been confronted with a series of global economic headwinds. Everybody knows that the iron ore price, in the period that we’ve been in Government has gone from about $120 a tonne to about $48 a tonne at Budget time. Since the Budget the price for iron ore, our key export earner, our key commodity export, has fallen further. So yes, that does have flow on implications. But all things considered the Australian economy is actually transitioning very well from predominantly resource investment driven growth to broader drivers of economic activity. Certainly the Mid-Year Economic and Fiscal Outlook will show that today. On the upside, our economy continues to grow. We’ve had a very strong third quarter of growth by international standards. Employment growth is very strong. More than 300,000 jobs have been created this calendar year alone. Certainly the unemployment rate is below what was previously forecast. So there are a lot of encouraging signs. The Australian economy is transitioning quite well in the context of both record low interest rates, the lower value of the Australian Dollar and a lot of the policy initiatives, a lot of the policy reforms pursued by the Government, such as the Innovation Statement released last week.
MARIUS BENSON: You have to find savings, about $5 billion in savings in four years by most estimates, in terms of compensating for increased Government spending. That’s really not much in a context of a $450 billion annual budget. Just over a billion dollars a year.
MATHIAS CORMANN: We’ve certainly been circumspect before we enter into new spending commitments, which have to be fully offset and which have been fully offset. One of the spending decisions, $1.1 billion in additional funding for Roads to Recovery was linked to a negotiation in the Senate where that was a condition of passing fuel excise related legislation through the Parliament. That’s certainly been fully offset. There is an additional level of expenditure related to 12,000 additional Syrian refugees being welcomed into Australia. That is an expenditure that was in our judgment unavoidable. There is a sizeable additional investment in drugs on the Pharmaceutical Benefits Scheme related to cancer treatment predominantly. These are expenditures that are incurred by Government from time to time. The specific numbers as I said earlier will be revealed in the Mid-Year Economic and Fiscal Outlook released later today, but we have been able to improve the budget bottom line by the overall effect of policy decisions. We have been able to improve the budget bottom line by offsetting any spending increase since the Budget with spending reductions. Overall spending will be lower in this budget update than what was anticipated at budget time.
MARIUS BENSON: Some of those spending reductions have seen the foreign aid budget hit since you took office. Will you be hitting the foreign aid budget today?
MATHIAS CORMANN: All the specifics are going to be revealed in the Mid-Year Economic and Fiscal Outlook today. But we have been previously on the record to say that we have taken the level of savings that we think are appropriate out of the foreign aid budget in earlier Budgets and Budget updates. So there won’t be any further decisions in relation to that today.
MARIUS BENSON: Ok foreign aid is safe. The Fin Review is pointing to health and welfare as targeted areas for savings?
MATHIAS CORMANN: Again, the specifics will be released later today but the significant focus today, the significant focus in the Mid-Year Economic and Fiscal Outlook has been on integrity measures. Making sure that wherever we can avoid duplication and waste we eliminate duplication and waste. Wherever we can ensure that in the welfare space funding is appropriately directed to those who are actually entitled to it and who are most in need of getting that support, then that is something that we should always be focussed on. So we’ve made a real concerted effort to improve the integrity of payments and the integrity of the welfare payment system and also to ensure that spending is as efficient and as effective as possible.
MARIUS BENSON: Mathias Cormann can I conclude with a general question, you’ve been there two years plus, two and a half Budgets effectively for the Coalition, the economic management always the ace in the deck for the Coalition but you stand condemned by your own standards. You said Labor created a debt and deficit disaster, debt and deficit are worse. You said that you would provide a healthier economy, growth is below trend, wages are barely keeping up with inflation. You stand condemned by your own standards.
MATHIAS CORMANN: I completely reject that. We inheriteded a deteriorating trajectory and we also faced a series of additional global economic headwinds and external challenges. In the circumstances, what we have been able to do, is put Australia on a stronger foundation for the future. The trajectory when it comes to the Budget is now an improving trajectory with spending as a share of GDP projected to fall. That is what it showed at Budget and there will obviously be an update to that today. The underlying cash balance is improving over the forward estimates. All of the indicators show that we are now heading in the right direction, that we are successfully making the transition from resource investment driven growth to broader drivers of growth. And all of the indicators show that we are making progress and heading in the right direction when it comes to putting the Budget on a better foundation for the future.
MARIUS BENSON: Mathias Cormann many thanks for speaking with NewsRadio so early from Perth.
MATHIAS CORMANN: Always good to talk to you.