Senator the Hon Mathias Cormann
Minister for Finance
VIRGINIA TRIOLI: Now it is an important day for the Federal Government with the new Treasurer Scott Morrison expected to reveal more bad economic news in the Mid Year Budget update. Joining us now from Perth is Finance Minister Mathias Cormann. Minister thank you for getting up early for us. Good morning.
MATHIAS CORMANN: Good morning. Good to be here.
VIRGINIA TRIOLI: If the deficit comes in between say $35 to $38 billion would that be described as a Budget emergency?
MATHIAS CORMANN: What you will see in the Budget update today is that the Government continues to make progress in putting Australia on a stronger economic and fiscal foundation for the future. Our economy is transitioning from significant resource investment driven growth to broader drivers of economic activity. When it comes to the Budget, what we were able to see at Budget time was that the Budget position was improving over the forward estimates and that we were getting back into balance at an appropriate speed. Since Budget time there have been some additional head winds. The price of iron ore has fallen further. Everybody knows that that does have flow on consequences. The Government’s focus has been on policies to strengthen growth such as the Innovation Statement released last week, but also on controlling expenditure. What the Budget update to be released today will show is that wherever we had to incur additional payments they have been more than offset by reductions in expenditure in other parts of the Budget and that overall expenditure in this Budget update is lower than what was forecast at Budget time.
VIRGINIA TRIOLI: Okay. Well look that is a good speech but it doesn’t actually answer my question which is whether that figure between $35 and $38 billion would be described as a Budget emergency. Let me ask it another way, if you were in opposition and the Labor government came back with that figure somewhere between $35 and $38 billion would that be acceptable to you?
MATHIAS CORMANN: We are on a credible path back to surplus, we are on a credible path ...interrupted
VIRGINIA TRIOLI: No, that is not my question. I am going to jump in there. Minister that is not my question and I am happy that you are on a credible path, that you believe that. But let’s get to that. We have had a lot of rhetoric over the years about what is acceptable and what is unacceptable when it comes to a deficit. If we hit that figure between $35 and $38 billion, if you were on the other side, would you stand up and say yeah fair enough good figure?
MATHIAS CORMANN: Virginia, I am quite happy for you to go into the politics and in to the commentary. I’ve got a responsibility as …interrupted
VIRGINIA TRIOLI: No, no, no that is not the politics Minister that is how you have played it.
MATHIAS CORMANN: That is exactly what you are doing.
VIRGINIA TRIOLI: That is how you have played it. You have played it very hard with strong rhetoric. So does the rhetoric apply to you?
MATHIAS CORMANN: Virginia, you can go into the politics and you can try and get me into the commentary. I’ve got a job to do ...interrupted
VIRGINIA TRIOLI: How about trying to get you to answer a question?
MATHIAS CORMANN: ... as part of the economic team and the job is to ensure that Australia is on the strongest possible economic and fiscal foundation for the future. That is what Scott Morrison and I have been doing. That is why we have been focussing on policies to strengthen growth. That is why we have been focussed on policies to strengthen employment creation. Incidentally, job creation has been very strong this past year, more than 300,000 new jobs created. The unemployment rate is now lower than had been previously forecast. When it comes to the Budget position, we are now on a credible path back to surplus, but we are doing it in a responsible fashion. So at various times you are going to face external challenges. You are going to face global economic head winds. The key is to ensure that Australia is in the most resilient position possible to deal with it and that we continue to make progress heading in the right direction and we are certainly doing that.
VIRGINIA TRIOLI: All right well let’s pick up your point there about being on a credible path to surplus. The May Budget forecast a return to surplus by the end of this decade. Is that still possible?
MATHIAS CORMANN: The specifics will be released in the half yearly budget update a little bit later today. Everybody knows that the price for our key commodity export, our biggest export earner, which is iron ore, has fallen further. At budget time we made our revenue forecast based on the assumption of a price of about $48 per tonne of iron ore, which was based on the average price over the previous four weeks. There have been some further reductions in the price for iron ore. Everybody knows that. Everybody knows that that has flow on consequences when it comes to the economy more generally and when it comes to revenue, company tax revenue in particular. Clearly you would expect to see some further reductions in revenue in this Mid-Year Economic and Fiscal Outlook. But the important point here is that these areas where we are in control, where we are able to control our decisions, the effect of policy decisions overall have improved the Budget bottom line. The effect of spending decisions overall have improved the Budget bottom line and expenditure will be lower in this Budget update than had previously been anticipated at Budget time.
VIRGINIA TRIOLI: Is that just a long way of saying no? That you won’t actually get that back in deficit [sic] by the end of the decade?
MATHIAS CORMANN: I have answered your question directly. I have said ...interrupted
VIRGINIA TRIOLI: Because I am sure our viewers would appreciate brevity this morning Minister.
MATHIAS CORMANN: What I said to you very directly is that the Mid-Year Economic and Fiscal Outlook will be released later today.
VIRGINIA TRIOLI: Well yes of course. We know that.
MATHIAS CORMANN: When you asked me to come on your show today you knew that I wouldn’t be able to give you the specific numbers. I was happy to talk to you generally about what we’ve been considering as we have been putting this half yearly budget update together.
VIRGINIA TRIOLI: Sure. Let’s reflect on something else. I mean I think this is important for us to consider this as well when you can’t go into specifics. And I know that this will be on top of mind for many of our viewers. The growth forecast from the last Budget were always too optimistic. I mean according to many commentators they thought that was just ridiculous. So are you reflecting now that perhaps we were at that time too optimistic about growth when clearly we were, and it was evident that we were coming to, if not the middle then the end of this particular cycle of the mining boom. On reflection do you think that’s possible?
MATHIAS CORMANN: Treasury has publicly indicated a few weeks ago that they have made some adjustments to some technical assumptions that they are using for the final two years of the forward estimates and the three year period beyond the forward estimates. That is all on the public record. I wouldn’t overstate the significance of a change in technical assumptions. But again when it comes to economic growth forecasts from time to time there are adjustments that are made depending on what happens in the global economy. But let me just also make this point again, the Australian economy is actually performing quite well given the external challenges that we have been facing. Given the most significant fall in our terms of trade in about 50 years. Given what has been happening to the price of iron ore and coal in particular. So in that context where other commodity based economies around the world are either in recession or struggling, the Australian economy continues to grow. Importantly, employment continues to grow and continues to grow quite strongly.
VIRGINIA TRIOLI: Mathias Cormann just a quick question on another matter. If Ian Macfarlane at the end of his summer break wants to walk back into the Liberal party room will you welcome him?
MATHIAS CORMANN: Of course. Ian Macfarlane has been a very significant contributor to the Liberal party over many years. He has been a senior Cabinet Minister. Of course.
VIRGINIA TRIOLI: So you don’t believe there should be any sort of retribution there? Or any of your fellow members who might feel badly about an attempted defection gone wrong and then him trying to return back into your arms?
MATHIAS CORMANN: Ian understandably was disappointed that he was no longer in the Cabinet after Malcolm Turnbull became Prime Minister. I understand it is difficult ... interrupted
VIRGINIA TRIOLI: Sure but is that the correct way to behave when you lose that position? I mean everyone, it is swings in roundabouts in politics.
MATHIAS CORMANN: I know that you are always very keen for me to get into the politics and into the commentary. As far as I’m concerned I’ve answered your question ... interrupted
VIRGINIA TRIOLI: I am just keen for a chat Minister.
MATHIAS CORMANN: I have answered your question. I would love it if Ian happily re-embraces his Liberal party family in the new year. But whatever his decision I of course wish him all the very best.
VIRGINIA TRIOLI: Okay. And speaking of family you’re up speaking to us this morning from Perth because your wife is expecting a baby and we wish you all the best with that. So can we chalk this up to a new kind of work-family flexibility where the Finance Minister can actually work from the city that he is in?
MATHIAS CORMANN: I am certainly very grateful to my good friend and colleague the Treasurer Scott Morrison, for having agreed to release the Mid-Year Economic and Fiscal Outlook from Perth. I am very grateful to the media for having accepted and gone along with that arrangement.
VIRGINIA TRIOLI: Of course we do. Family flexibility is everything. Good luck. I hope it all goes well.
MATHIAS CORMANN: Thank you.
VIRGINIA TRIOLI: Mathias Cormann there. And of course the Mid-Year Financial Economic update if I’ve got that right will be released a little later today.