Senator the Hon Mathias Cormann
Minister for Finance
KIM LANDERS: It’s been a rocky start to the year with global sharemarket turmoil, falling oil prices and a slowdown in Chinese economic growth. They are some of the issues being wrestled with at the World Economic Forum’s annual meeting in Switzerland where heads of state, central bankers and chief executives and billionaire investors meet to talk about economic and foreign policy. Finance Minister Mathias Cormann is one of those people at Davos and he joins us on the line. Minister good morning.
MATHIAS CORMANN: Good morning.
KIM LANDERS: Global sharemarkets plunged to their lowest level in two and a half years. The price of crude oil has tumbled to a thirteen year low. How is all of this going to affect the Australian economy?
MATHIAS CORMANN: Our focus always is on the economic fundamentals. Australia as an open trading economy is exposed to what happens in global markets and in the global economy. We are focussing on those things that we can control, those things where we can make a direct difference to our performance. That is what we have been doing over the last two and a half years, focussed on making Australia as competitive and as resilient as we possibly can by reducing ... interrupted
KIM LANDERS: One of the areas you can control is controlling expenditure for example. Does this environment increase the pressure to control expenditure even further in the May Budget?
MATHIAS CORMANN: We are doing a whole range of things. We are focussing on strengthening growth by making our economy more competitive internationally. That is why we are focussing on reforms to make our tax system more growth friendly. That is why we have been focussing on an ambitious deregulation agenda to reduce the cost of doing business in Australia. That is why we focussed on an ambitious free trade agenda helping our exporting businesses get better access to key markets in our region, like China, South Korea and Japan. That is why we are pursuing an ambitious innovation agenda and an ambitious infrastructure investment program. All things to assist the transition in our economy from resource investment driven growth to broader drivers of economic activity and growth.
KIM LANDERS: On the expenditure side of things though, does this mean that the Government is going to have to look at other areas to tighten the belt in the May Budget?
MATHIAS CORMANN: We do have a key focus on getting our Budget on the strongest possible foundation for the future. That does involve a very strong focus on controlling expenditure. In every Budget and Budget update so far, we have taken steps to make sure that expenditure is under control. One of the disciplines that we have imposed on ourselves is to ensure that any policy decision that involves spending on higher priority areas is offset by expenditure reductions in other areas. If you look at the Budget trajectory as updated in the Mid-Year Economic and Fiscal Outlook before Christmas, we continue on an improving trajectory over the next four years, with the projection of ... interrupted
KIM LANDERS: You mention that Mid-Year Economic and Fiscal Outlook released in mid-December, that showed that GDP is forecast to fall to 2.5 per cent this financial year and then be at 2.75 per cent in 2016-17. Does this international environment that we’re seeing now change that?
MATHIAS CORMANN: The outcome in the Chinese economy as reported the other day at 6.9 per cent growth is broadly in line with our assumptions in the Mid-Year Economic and Fiscal Outlook. In fact, our assumption for 2015 was slightly less at 6.75 per cent. Our forecast in MYEFO for 2016 and 2017 is for 6.5 per cent and 6.25 per cent growth in China respectively. So really, the announcements that were made the other day about the outcomes for Chinese growth in 2015 are broadly in line with expectations. The IMF in October last year said that they anticipated 6.8 per cent growth. So yes, China has grown very strongly over the last decade. The size of the Chinese economy is more than double what it was about a decade ago. But, they are working their way through a transition from infrastructure investment driven growth to domestic consumption and services driven growth. That was always a transition that was going to have challenges along the way. But we, ...interrupted
KIM LANDERS: On the revenue side of things if I could ask you, how long is the Government going to allow speculation to go on about whether or not the GST is going to be raised to 15 per cent?
MATHIAS CORMANN: Our focus is very much on how we can make our tax system more growth friendly, to support our broader strategy to strengthen growth and create more jobs in the Australian economy. Since we came into Government on that front we’ve done a series of things, we got rid of the mining tax and the carbon tax, we reduced company tax for small business, we... interrupted
KIM LANDERS: But on the GST Minister, I asked about the GST specifically, why not rule out any increase in the GST now?
MATHIAS CORMANN: Because we think it is very important for the Australian community and for the Government with State and Territory Governments and other business and community stakeholders to have an open conversation about how our tax system can be further improved, to make it more growth friendly, so that it can facilitate stronger growth, so that the revenue for Government is raised in the most efficient, least distorting way in the economy. We understand that Bill Shorten is in a bit of a panic. He thinks that he needs to go into this rule out, rule out, rule out game going around Australia... interrupted
KIM LANDERS: Well why don’t you rule it out then? So you’re ruling it in basically, you’re saying it is still on the table.
MATHIAS CORMANN: The Australian Government has not made a decision on the best way forward when it comes to how we can improve our tax mix moving forward. What we have said and what we continue to do is engage in a conversation with the Australian people. Before the next election we will reach a landing point. We will make a decision about the best way forward and we will put that to the Australian people at the next election and hope to get their trust and their mandate to implement any reforms to improve our tax system after the next election.
KIM LANDERS: Okay. On another matter there are reports today that the Cabinet Secretary Arthur Sinodinos will not have any finding of corruption made against him by the New South Wales Independent Commission against Corruption. Is that welcome news?
MATHIAS CORMANN: Arthur Sinodinos is a friend and valued colleague who is making a tremendous contribution to our Government. It is very difficult for me to comment on something that hasn’t actually officially been released. I might just say though that Arthur was only ever questioned as a witness, participated as a witness, in that process. He was never a target of that investigation as such. So these matters no doubt will be publicly revealed in the not too distant future hopefully.
KIM LANDERS: If I can ask you about Liberal Party pre-selection in NSW, there is quite a bit of wrangling going on. Are you concerned about the infighting between moderates and conservatives in the NSW Branch?
MATHIAS CORMANN: Pre-selections come around in the lead up to every election. All of us as Members of Parliament are part of it. Part of the process is that we have to put our hand up and get the confidence of our Party again to represent them at the election and then of course get the confidence of the people in our respective seats.
KIM LANDERS: But should people like Bronwyn Bishop and Philip Ruddock, Bill Heffernan, Tony Abbott be making way for new talent?
MATHIAS CORMANN: Look these are entirely matters for the individual members concerned as to whether they want to put themselves forward and ultimately these are matters for the Liberal Party in NSW to work through. The general point I would make is that it is important for us to continue to be the broad church with a strong conservative and a strong small ‘l’ liberal tradition both represented in our party, because that is the proven formula that helps ensure that we are the most successful we possibly can be.
KIM LANDERS: All right Minister we are out of time. Thank you very much for joining us on the line from Davos.
MATHIAS CORMANN: Always good to talk to you.
KIM LANDERS: And that is the Finance Minister Mathias Cormann.