Senator the Hon Mathias Cormann
Minister for Finance
Date: Monday, 8 February 2016
KRISTINA KENEALLY: Now welcome to To the Point and today it is all about tax reform, GST, negative gearing. Peter our guest today is right on point on all those ... interrupted
PETER VAN ONSELEN: Yes, Mathias Cormann. Senator Mathias Cormann, he’s the Finance Minister. We should get straight to it shouldn’t we.
KRISTINA KENEALLY: We should indeed.
PETER VAN ONSELEN: He joins us live from Parliament House. No Senate Question Time, it is Estimates, but he joins us there nonetheless. Thanks for your company.
MATHIAS CORMANN: Good to be here.
PETER VAN ONSELEN: I want to get to some of the policy particulars in this debate, but my first question is more of a psychological one if I can. How do you do it? How do you go from throwing your lot in, loyally, with Tony Abbott and Joe Hockey and ruling out negative gearing and ruling out changes to super, defending their economic record. Then now having to do it with Scott Morrison and Malcolm Turnbull, when Malcolm Turnbull as part of his challenge announced that the economic record of Tony Abbott and the previous incarnation of the Government was a terrible one.
MATHIAS CORMANN: The business that I am involved in is a team game. This is never about any of us as individuals. This is always about what we can achieve for Australia as part of a team. I was very grateful to the former Prime Minister Tony Abbott for putting his confidence in me in appointing me as the Minister for Finance. I am very grateful to Malcolm Turnbull as our new Prime Minister, or relatively new Prime Minister, for having put his confidence in me to continue in that role moving forward.
PETER VAN ONSELEN: And don’t get me wrong I can understand why he’s done that. You are respected on both sides of the Parliament. You are loyal to the leader including with a change of leader, the king is dead, long live the king, that principle. I am more just asking, the brutality of modern politics, we’ve seen this same question have to be asked to senior Labor figures during their period in government. It is just such an awkward situation. We will get to the policies now the ruling out of negative gearing and super. You have given some quite precise quotes on both. But I am guessing, am I wrong, that with the change of leader they are now both back on the table?
MATHIAS CORMANN: We are having a conversation on grounds that have been very clearly articulated since September last year. That is that we are considering every opportunity to improve our tax system with an open mind. There is a lot of continuity between what we have been doing as a Government since September 2013 and what we are doing moving forward. The most important focus of our government ever since we were elected in September 2013 was to pursue policies to strengthen growth, create more jobs and to create more opportunity for people to get ahead. That is why, on coming into government in September 2013, we scrapped the mining tax and the carbon tax, because they were a drag on investment and growth. We pursued company tax cuts for small business. We pursued an ambitious deregulation agenda. We pursued an ambitious free trade agenda. We have pursued an ambitious infrastructure investment agenda. That has been complemented under the leadership of Malcolm Turnbull with an ambitious innovation agenda. But the overarching focus all the way through has been on strengthening growth and creating more jobs. That continues to be our focus.
PETER VAN ONSELEN: But despite that, I have got to ask this though, because you go through all the achievements during the Abbott period, yet this quote from Malcolm Turnbull was that the former Prime Minister has quote ‘not been capable of providing the economic leadership our nation needs’. That is what he said. What’s changed?
MATHIAS CORMANN: I’m very happy for you to go through all the history Peter. I am focused on the future. These are all debates and discussions that took place in August, September last year. I will leave analysts and commentators like yourself to dissect all of the entrails of this.
PETER VAN ONSELEN: But what’s changed? And what is likely to change?
MATHIAS CORMANN: The future is as I have just indicated. The Government is totally focused on how we can strengthen growth, create more jobs. At the heart of this, moving forward, we have added an ambitious innovation agenda, which the Prime Minister and Christopher Pyne announced before Christmas. We are doing work now on how we can make our tax system more growth friendly moving forward. We continue to focus on the overarching goals, strong and successful economy, the strongest possible economic and fiscal foundation for the future and a strong and secure Australia in terms of our national security.
KRISTINA KENEALLY: Minister, those are very nice words but if we go back to estimates last year you said that we would have a tax white paper. Tony Abbott promised coming into Government we would have a tax white paper. We are now two and a half years into this Coalition Government. Five months into the reign of Malcolm Turnbull. When is your Government going to give some certainty to business about the future of the tax system in Australia?
MATHIAS CORMANN: I know that Labor last week has been very interested in the stationery and the process. What we have said very clearly is that the Government is committed to announcing our economic reform agenda that we would seek to implement after the next election in good time before the election... interrupted
KRISTINA KENEALLY: But Minister, 12 months ago you said that you would have a green paper out now, that you would have a white paper out before the election. You’ve changed your tune already, so why isn’t it fair that the Opposition ask questions about the process? Because the process as you’ve described it, simply is not happening.
MATHIAS CORMANN: Kristina, I’m not sure where you were in September last year, but we did have a change in leadership in September last year. We had a new Prime Minister and a new Treasurer come in, in the middle of September last year. The Government ... interrupted
KRISTINA KENEALLY: But we didn’t have a change of Government, it’s still the same people around the Cabinet table, you’re still the Finance Minister.
MATHIAS CORMANN: I think this is quite juvenile. We can go round and round in circles. I think that what people around Australia are interested in, is what the Government is going to do to strengthen growth and to strengthen job creation and to ensure that Australia is on the strongest possible economic and fiscal foundation for the future. What we have said very clearly is that we will be making relevant announcements in good time before the next election ... interrupted
KRISTINA KENEALLY: But that’s what I asked you, when are you going to tell people that? That is what I have asked you, when are you going to tell the people that?
MATHIAS CORMANN: What I have said to you is that in good time before the next election - and if you let me finish my sentence - there is going to be a Budget in about three months from now. The second Tuesday in May we will be releasing our Budget. That will be the blue print, the economic and fiscal blue print of the Government for the next four years. I think you can reasonably expect that between now and Budget time the Government will make a series of decisions on what is in and what is not in the Budget. In the Budget you will see a whole series of decisions reflected as you always do, on the expenditure side of the Budget and on the revenue side of the Budget. People will be able to pass judgement in good time before the next election whether they support our economic reform agenda or whether they support the negative and destructive approach of Bill Shorten.
PETER VAN ONSELEN: But my issue Minister, is on the one hand you rely on the change of Prime Minister as a reason for there having been adjustments, but then when I ask what they are in relation to what Malcolm Turnbull said where he said that Abbott ‘had not been capable of providing the economic leadership our nation needs’, there’s not a lot of meat on the bone of what it actually covers? Not yet anyway.
MATHIAS CORMANN: I don’t rely on it, it is just a statement of fact. There was a change in leadership in September. That is just a statement of fact. The decisions that are made collectively by the Cabinet and by the Coalition party room as a team are now the decisions that come from the Turnbull Government rather than the Abbott Government. That is just a statement of fact. As I have indicated, our focus is entirely on how we can put Australia on the strongest possible economic and fiscal foundation for the future. People are not really particularly interested on whether that is going to be on some white paper, on some pink paper, or blue paper, they just want to know. They will find out in good time before the next election. Certainly, the next instalment of our economic blue print will of course be delivered in the Budget in May.
PETER VAN ONSELEN: You’re right in the eye of the storm though. The economy is front and centre in the election campaign. You are there with the previous regime. You are there with the new Treasurer and the new Prime Minister as well. After the criticism of what was done wrong before, what observations have you seen that show you what has changed from what happened before?
MATHIAS CORMANN: There has been a lot of continuity. What we are doing as the Turnbull Government now is build on the progress that has been made and the achievements that have been made by the Abbott Government. On coming into Government, we were very mindful of the fact that our economy was an economy in transition from resource investment and construction driven growth to broader drivers of economic activity and growth. Our economy was weakening, unemployment was rising, the previous Labor government had put more and more lead into our saddlebag, making us less competitive internationally at a time when we needed to be more competitive internationally. So …interrupted
PETER VAN ONSELEN: But hang on. The argument from Malcolm Turnbull was that we need continuity on the economic front, the argument was that the previous Prime Minister had ‘not been capable of providing the economic leadership our nation needs’. Now you are the Finance Minister, then and now, you must have seen a big change because that was a big statement from Malcolm. I’m just wondering what has changed?
KRISTINA KENEALLY: Minister, hasn’t the change been that you have ruled out superannuation, adverse changes to superannuation, you ruled out changes to the GST, you ruled out changes to negative gearing now your Government seems to have thrown all of that back on the table? Isn’t that the change?
MATHIAS CORMANN: So a couple of things. What we have been focused on since we have come into Government as a team with both Malcolm Turnbull and Scott Morrison as senior ministers within the Government, we have been focused on making Australia more competitive internationally. Taking costs out of our economy and taking some of these burdens that Labor put into our saddle bag out of our saddle bag. That has involved a range of things. Making our tax system more growth friendly, to start off with that involved scrapping the mining tax and the carbon tax and reducing company tax for small business. It has involved an ambitious deregulation agenda. It has involved a whole range of other things. Moving forward what we have decided to do under the leadership of Malcolm Turnbull is to have a very open conversation in relation to how our tax system can be further improved moving forward. Our objective continues to be what it was before and that was to make our tax system more growth friendly. That continues to be to ensure that the necessary revenue to fund the important and necessary services of Government is raised in the most efficient, least distorting way possible in the economy. That is a conversation that has been ongoing now since September or thereabouts. It has been very important the way that conversation has been conducted. Yesterday, the Prime Minister was very candid in the way that he took the Australian people into his confidence on what was on his mind and on our mind as a Government as we consider some of these issues. We will be making some decisions now about the best way forward.
KRISTINA KENEALLY: Can I ask on your reflections on these conversations and your reflections on this process, do you think it is possible to have significant tax reform without making any changes to the GST?
MATHIAS CORMANN: It will be a matter for commentators to assess how significant …interrupted
KRISTINA KENEALLY: No. No. You are the Finance Minister, surely you must have a view as to whether or not we can have major tax reform in Australia right now without doing anything to the GST?
MATHIAS CORMANN: My view is that we need to do the best we can to make our tax system more growth friendly. Right now we are considering a whole range of issues. As I said the Prime Minister very candidly explored some of these issues in his Insiders interview yesterday. Right now we haven’t reached a landing point in relation to these issues. We haven’t made a decision. As a team we continue to explore these issues. If we were all persuaded as a team on the best way forward we would have reached a decision point already and we would have made some announcements. We are not yet in that position but we expect to be in that position in time for the Budget. Certainly we expect to make relevant announcements in good time before the next election.
PETER VAN ONSELEN: Arthur Sinodinos told Paul Kelly and I yesterday on Australian Agenda that without GST reform you can’t make serious inroads into company tax cuts, into income tax cuts, I should say. Do you agree with that?
MATHIAS CORMANN: Our objective is to make material reductions, to pursue material reductions in personal income tax in order to ensure that we can address bracket creep. We certainly don’t want to see ... interrupted
PETER VAN ONSELEN: But he said you can’t do that without GST reform.
MATHIAS CORMANN: Let’s see where the Government lands. Our objective is to pursue tax cuts to address bracket creep to ensure that middle-income earners don’t end up in the highest tax brackets. But in the end you have to make a judgement on what is economically desirable and what is ultimately achievable.
KRISTINA KENEALLY: So how much money does the Government need to tackle bracket creep?
MATHIAS CORMANN: These are all issues that are currently being worked through. They will be reflected as appropriate in the Budget.
KRISTINA KENEALLY: Let me back up a bit then and ask this, given that wage growth is sluggish, given that inflation is low, why is bracket creep right now a priority for the Government.
MATHIAS CORMANN: If you look at what is happening in the market place it is the case that middle-income earners are progressively getting into the higher income tax brackets. The objective of the Government is to ensure that people across Australia have the right incentives to work, to save and to invest because that helps us maximise economic growth opportunities moving forward. In the end you have got to weigh up all of the different trade-offs of a pretty challenging fiscal environment. That is the work that we are currently doing.
KRISTINA KENEALLY: Can I also ask you about the States because the State Premiers have been very concerned about holes in their budgets for health and education. Given that the Treasurer Scott Morrison this morning made very clear that he’s not interested in increasing the GST to fund State spending. What would you say, what would you advise those State Premiers who have got significant holes in their Budgets thanks to decisions taken by your Government in 2014?
MATHIAS CORMANN: I don’t agree that it is thanks to decisions of our Government. Our Government reversed unfunded and unaffordable promises, spending promises that were made by the previous Federal Labor Government just before they lost the last election when they knew that there were about to lose the last election. My advice to State and Territory Governments is the same as what we are forced to do at a Federal level, they have to ensure that their spending is as efficient and as effective as possible. They have to make judgements on how to manage necessary funding for their State and Territory schools and hospitals as they see fit.
KRISTINA KENEALLY: But Mike Baird, the Liberal Premier in New South Wales has made pretty clear that it’s a kick in the guts, the Commonwealth’s 2014 Budget was a kick in the guts to State Budgets. Are you suggesting that they can fill those funding gaps with just efficiency, or would you be comfortable to see them raise State taxes?
MATHIAS CORMANN: It’s entirely a matter for them. State and Territory Governments were very happy to …interrupted
KRISTINA KENEALLY: I’m sorry Minister, but on one hand your Government seems to be arguing that we can’t increase the tax take overall, but you don’t have a concern about State Governments increasing the tax take?
MATHIAS CORMANN: Certainly the Federal Government is totally committed to lower, simpler, fairer taxes. Most definitely we do not want to increase the tax burden on the Australian economy overall. In the end, State Governments have to take responsibility for their areas of responsibility. You mentioned State and Territory Governments complaining about what happened in relation to federal funding on various matters. They were happy to receive a promise of a pot of gold from a previous Federal Labor government which the previous Federal Labor government never properly funded. The previous Federal Labor government made a promise of a massive ramp up in expenditure not only beyond their period in office, but in the period beyond the published budget forward estimates period of their time in office. It was never believable. It was never realistic. We are continuing to increase funding incidentally for State and Territory schools and hospitals. Federal funding continues to increase, but it’s just increasing at a more realistic rate.
PETER VAN ONSELEN: Can I just ask you back on the issues of super and negative gearing, just as a clarification Senator Cormann. The litany of quotes that I have in my spare time of you ruling out changes in this term or the next in those two theatres it is right to say that the change of Prime Minister has opened those two policy areas back up to there possibly being some changes.
MATHIAS CORMANN: I’ve answered so many questions for five months now in relation to these matters. It’s good to see that by February, you are now also getting into this issue that came up in September last year. Clearly, the Prime Minister has made very clear that we are having an open conversation in relation to how the tax system can be improved with everything on the table.
PETER VAN ONSELEN: Can I ask you a question on that?
MATHIAS CORMANN: I don’t know what you’re trying to prove here. This is not actually a new point. I think I’ve actually had interviews with you at various times since then when we’ve gone through this.
PETER VAN ONSELEN: What I’m interested in I guess is whether you agree with changed taxing structures around super and negative gearing because you either, if you like, agree then with what was being done to promise not to make any changes, or you now think there’s good cause to change it, or you’re just being loyal I suppose and you think it’s a bad idea because rents go up for example when negative gearing gets cut, but you’re forced to go along with it because that’s what the first amongst equals Prime Minister wants.
MATHIAS CORMANN: It’s all very interesting listening to you there Peter. The truth is that I agree that we should have a look at all of these things. At some point in the next few weeks and months, we will be making some decisions. These decisions, if taken before the Budget, will be reflected in the Budget. Any decisions taken after Budget will be announced after the Budget. That is the usual process of Government.
KRISTINA KENEALLY: Finance Minister Mathias, we’re going to leave it there. Thank you, we should note that it’s your first time on To the Point, we hope it’s not your last. Thanks for coming on the show.
PETER VAN ONSELEN: Thanks for your company.
MATHIAS CORMANN: Always good to talk to you.