Sky News – The Latest with Laura Jayes

Senator the Hon Mathias Cormann
Minister for Finance






Election timing, GST, Tax Reform, Gonski funding

LAURA JAYES: The Finance Minister Mathias Cormann joins me now on The Latest. Minister thanks so much for your time.

MATHIAS CORMANN: Good to be here.

LAURA JAYES: Is the Government really going to go to a double dissolution or is it just an idle threat?

MATHIAS CORMANN: As the Prime Minister has said consistently, we have got a lot of work to do and our intention is to run our full term. In the ordinary course of events the next election is due in August, September, October on that timetable. But of course ... interrupted

LAURA JAYES: But he told party room today that yes, expect an election in the third quarter or the fourth quarter of the year but he also said a double dissolution is a live option. You can’t do both, you know the constitution well, you know that you would have to call it before the 11th of May, that doesn’t make sense does it. 

MATHIAS CORMANN: A double dissolution election is still an option. It is the prerogative of the Prime Minister to make the judgement in the national interest on whether the circumstances are there to justify such a course of action. But that is not our intention. It is not what we’re planning for. What we are planning for is to continue to provide good and stable Government. In the ordinary course of events you would expect the election to be called in the next six or so months.  

LAURA JAYES: Ok we will see about that. Also looking at this tax package, of course voters would expect to see a full tax reform package on the table. At the moment we are not seeing – the Treasurer is being a bit coy, you have as well about whether there is going to be a green and white paper process, is there or isn’t there? 

MATHIAS CORMANN: We’re not being coy. We had a very good conversation as a country over the past few months and indeed it has been a very useful conversation from the Government’s point of view. Our focus and our commitment is to pursue policies that deliver stronger growth and more jobs. As part of that focus we are committed to ensure that our tax system is as growth friendly as possible. We have done a body of work over the last two and a half years in relation to this. There is more work to be done as part of a second term agenda. What we have said very clearly is that between now and the election we will be releasing very clearly the policies that we would want to implement in a second term, to improve our tax system, to improve the tax mix, to ensure that our tax system is as growth friendly as possible. The precise form that that announcement will take is a matter for the Treasurer. But our commitment is that people across Australia are going to be very, very clear on what we are proposing to do to improve the tax system and how we propose to strengthen growth and create more jobs. 

LAURA JAYES: There’s a lot of conversation going on around the GST at the moment. Of course the Government isn’t ruling it in or ruling it out, but is it time we saw some modelling looking at the GST and how it might affect those things you were talking about, jobs and growth?

MATHIAS CORMANN: There has been very extensive conversations for some months now. Various stakeholders and various experts and the States and Territories have put proposals on the table, have put modelling on the table. From the Government’s point of view we have not made a decision to increase the rate of the GST. What we are focussed on is strengthening growth and creating more jobs and we ... interrupted

LAURA JAYES: But to colour that conversation, is it fair enough that we see some modelling so voters in the lead up to the election can make an educated view on this and vote in a way that they are fully informed? 

MATHIAS CORMANN: Once we decide the best way forward all of the information that is relevant to ensure that voters can make an informed judgement will be publicly released. We are yet to get to that point. The Government hasn’t reached a landing point yet but as soon as we do relevant announcements will be made and relevant information will be released. 

LAURA JAYES: Tony Shepherd was the head of the commission of audit under the Abbott Government. I’ve spoken to him in recent weeks and his view is you cannot really do broad scale tax reform, the kind that is needed and is necessary without looking at an increase in the GST, is that a fair comment?

MATHIAS CORMANN: Our focus is on strengthening growth and creating more jobs. In order to achieve that we do want to deliver if at all possible, material cuts in personal income tax. We would like to deliver a reduction in the company tax rate to make us more competitive internationally. You can’t give yourself the fiscal room to do that just by controlling expenditure better. There is a need to look at whether there are other ways, more efficient ways to raise the same revenue in a better way that is less distorting in the economy and less detracting of future economic growth opportunities.

LAURA JAYES: Is there any alternative then to the GST or is the GST the most efficient way to do it? Because it has been pointed out by economists –and you’d agree here – that the GST is, or that bracket creep is far more regressive than the GST.

MATHIAS CORMANN: We are concerned about what is happening with personal income tax and the fact that middle income earners are getting into the higher income tax brackets. We are very keen to ensure that people have the right incentives to work, save and invest, because that is going to be the engine for growth moving forward. On top of what we do in innovation and with infrastructure, in terms of our free trade agenda and so on. It is important that we have the right tax mix that least distorts economic growth opportunities into the future. 

LAURA JAYES: An increase in the GST would of course as you say, a revenue stream is needed, that would provide that. It is about $30 billion a year. Without that do we risk doing piecemeal tax reform, which could create more harm than good?

MATHIAS CORMANN: For us this is a continuation. When we came into Government, we said we would get rid of the mining tax and the carbon tax and deliver a tax cut for small business in order to start the process of making our tax system more growth friendly. We have delivered on that. The next step is to finalise our program for a second term of the Turnbull Government. Between now and the election we will announce how we propose to do that. But currently we are working through all of the potential scenarios. In the end we will make judgements on the best way forward. 

LAURA JAYES: But your view as a Finance Minister, you don’t want to see just tinkering around the edges in terms of tax reform. This is the time electorally and necessary in an economic sense to look at the structural deficit and broad scale tax reform. Wouldn’t that be right?

MATHIAS CORMANN: I want as Finance Minister, and the same for the Treasurer, the Prime Minister and the Cabinet as a whole, we want Australia to be on the strongest possible economic and fiscal foundation for the future. We want to ensure that Australia is as resilient as possible to deal with any challenges and global economic headwinds coming our way. But we also want to be in the best possible position to take advantage of opportunities that present themselves to us. In particular being part of the Asia Pacific where most of the economic growth will be generated for years and indeed decades to come. Having the right tax mix, having a growth friendly tax system is part of that, but this is only one part of a broader conversation about our plan for stronger growth and more jobs.  

LAURA JAYES: Just finally, I saw a story dropped late this afternoon on the Sydney Morning Herald, about the talking points that were leaked today and looking at the Gonski school reforms. Is the Government, as this article suggests willing to renege further on the Gonski funding that has been committed?

MATHIAS CORMANN: No. In the lead up to the last election, we said very clearly that we would commit to the first four years of the so-called Gonski funding. In fact, coming into Government, we did better than that. Bill Shorten as Education Minister had ripped $1.2 billion away from schools in Western Australia, Queensland and the Northern Territory. We put that $1.2 billion back. So we actually provided more funding to schools over the first four years …interrupted

LAURA JAYES: But Christopher Pyne before the last election did commit. He said there was not a cigarette paper of difference between Liberal and Labor’s policy and the funding of years five and six for Gonski. Is there an indication now that the Government is looking to not commit to those out years?

MATHIAS CORMANN: In the lead up to the last election, our commitment was always very clear. We were committed to Gonski for the first four years. What Labor did in the lead up to the last election, quite dishonestly as they did in many other areas, they locked in spending, an unaffordable, unsustainable and unfunded spending growth trajectory in the period beyond…interrupted

LAURA JAYES: Is Gonski affordable as it is with what money you’ve committed?

MATHIAS CORMANN: We’ve made judgments on what is realistic, what is sustainable and what is affordable. The formula that we’ve put into the trajectory beyond 2018 is essentially CPI plus a growth factor for enrolment growth purposes. That is the number that is currently reflected in the Budget and that reflects the Government’s policy position. 

LAURA JAYES: And that’s not going to change?

MATHIAS CORMANN: As with anything, if any Minister wants to suggest changes that have a negative impact on the Budget bottom line, they would have to find other areas in their portfolio to pay for it through offsetting savings in other areas of their portfolio. 

LAURA JAYES: Finance Minister Mathias Cormann, thanks so much for joining us. 

MATHIAS CORMANN: Always good to talk to you. 


Senator the Hon Mathias Cormann, Minister for Finance, Perth