Senator the Hon Mathias Cormann
Minister for Finance
GREG JENNETT: So a bit to talk about there. The Government obviously via the Prime Minister giving plenty of indications that it too is moving on negative gearing. The Finance Minister Mathias Cormann is on the team working on the Government's tax plans and he joins us now from Perth. Minister, negative gearing seemed untouchable by governments for so long yet now we have both parties going there. How advanced were the government's plans before Labor's announcement or are they right now?
MATHIAS CORMANN: Firstly I think there's a level of over interpretation here on what the Prime Minister has actually said. The Government has not made any decision at all to change negative gearing. What the Prime Minister said and what the position is, is that we're looking at all aspects of the tax system, which includes negative gearing. But where Labor is pursuing tax changes essentially focussed on ramping up the level of revenue in order to spend more, even though they're still dealing with a $50 billion Budget black hole, the Government is focussed on how we can ensure that we can deliver stronger growth and more jobs by making sure that our tax system is as growth friendly as it possibly can be. So Labor in Government spent too much, which meant they had to borrow too much, which meant they were forever casting around for more cash through increased taxes. Their focus now having made promises to the tune of nearly $50 billion beyond what the current Government has reflected in our Budget papers, they are still casting around for more cash by pushing up more taxes. Our focus is on how we can raise the necessary revenue for Government in a better, more efficient, less distorting way in the economy. How can we make sure that our economy is as competitive, as productivity and as innovative as possible by encouraging people to work more, save more and invest more.
GREG JENNETT: But the Prime Minister did more than just leave negative gearing options on the table. He actually actively criticised Labor and its plan for not achieving enough savings particularly in the early years over the forward estimates. It would be reasonable to assume wouldn't it that when the Government goes there you'd be targeting higher savings?
MATHIAS CORMANN: That is not reasonable to assume. You're quite right that the Prime Minister appropriately criticised Labor's bad policy when it comes to negative gearing. The point the Prime Minister made and the point that economic commentators appropriately made is that Labor's policy is very distorting. What we would say is that if you're going the look at making changes, improvements to the tax system, in order to ensure that the tax system overall is more efficient, less distorting, is the most growth friendly it possibly can be at the same time as continuing to focus on getting the Budget back into balance as soon as possible, given the damage that Labor has done to our structural Budget position over the medium to long-term during their period in Government, then you got to make these sorts of judgments in the context of what any particular policy approach might deliver and what the trade-offs are in terms of additional distortions that would be created in our economy. Labor's approach that they released on negative gearing doesn't raise much, but on the flipside creates a lot of distortions, which means it is highly undesirable.
GREG JENNETT: What work have you done on those distortions. What’s the scale of it that you foresee? It's going to what massive deflate house prices, is that the suggestion?
MATHIAS CORMANN: It will create distortions in terms of where investors channel their investment. It will have an impact on the price of housing. It will have an impact on the price of rental accommodation in particular, depending on whether you are in established or in new properties. Our focus as a country should be on how we can raise the necessary revenue for Government, to fund the important and necessary benefits and services provided by Government, as much as necessary and as little as possible, how can we raise that money in the best, most efficient, least distorting way. How can we ensure that the tax system doesn't hinder innovation, in fact encourages and incentivises innovation, make sure that we drive productivity improvements, that we are as competitive internationally as we can be. All of that in the context of a fiscal environment that is there for all the see, which is comparatively challenging given the bad trajectory, the bad forward trajectory that Labor left behind when they lost Government.
GREG JENNETT: You've spoken about distortions under Labor's model. What are other alternatives though, can you limit the number of properties that people could negatively gear or are you more attracted to the idea on caps on the total deductions that people can make?
MATHIAS CORMANN: Your question is based on the premise that we have made a decision to make a change to negative gearing which we haven't. What we are looking at is the tax system as a whole and we are considering all of the opportunities to make our tax system better. To make it more efficient, more growth friendly, in a way that is also fair. We have haven't made a decision on a particular way forward. When we have made a decision on a particular way forward, we will share that with you and with the Australian community at large.
GREG JENNETT: Retrospectivity, just to pick up a Bill Shorten point, again as a design principle, would you rule that out noting that no decisions been made obviously?
MATHIAS CORMANN: When it comes to our tax system, certainty and stability in policy settings is one factor. It is an appropriate design principle when it comes to changes to the tax system that they should not be retrospective. But again, there are a lot of assumptions here on what may or may not be done by the Government moving forward. The Government has not made a decision to make changes to negative gearing arrangements. The Government is focussed on policy reforms that will help us strengthen growth and create more jobs, that will help us be the most innovative, productive and competitive we can be. As we've said on a number of occasions now in good time before the next election indeed in time for the Budget, relevant announcements about improvements to our tax system that we decide to pursue will be put forward to the Australian people for their consideration.
GREG JENNETT: Just on that timing it is at Budget or before Budget?
MATHIAS CORMANN: In any Budget there is always a range of measures on the expenditure and on the revenue side of the Budget that is put forward. That creates a level of debate after the Budget is released. In good time before the election, we will be putting forward our economic growth agenda for a second term of the Turnbull Government. That will include what our intentions would be in a second term of a Turnbull Government in relation to improvements to our tax system.
GREG JENNETT: Alright, I do want to get so some other matters in your portfolio now because you have been confirmed in the reshuffle as the permanent Special Minister of State, congratulations and that means that you will also be the person responsible for any move on changing Senate voting laws. When do you intend to do that and have you completed negotiations with the crossbench?
MATHIAS CORMANN: I am due to be sworn in to that role on Thursday. I have been acting in the role for just over a month and a half. What I've done in recent weeks, taking into account the fact that there is a Committee of the Parliament which recommended certain changes, certain improvements to our electoral system as a result of what happened at the last election, I've been considering the issue. I have been consulting widely. The Government hasn't made a decision on the way forward. At this stage I've been talking to many of the parties represented in the Parliament, I have been talking to stakeholders and the interested experts outside the Parliament. In good time, before the next election, if changes were to be pursued, I would expect to make some relevant announcements.
GREG JENNETT: On the public record there are indications from the Greens, that they strongly favour something broadly described as the Senator Xenophon option. This is optional preferential above the line and a minimum number below the line. Six or 12 depending what type of election you're having. Are you attracted or open to that, because it's slightly different to the one the Parliamentary Committee came up with?
MATHIAS CORMANN: As part of the consultations that I have been engaged in, a number of parties and individual Members of Parliament have put their views to me. The Greens are on the record for a long time in terms of what their preferred approach is. I can confirm that the Greens have put their preferred approach to the Government in the way they have announced in recent days they have. The Government … interrupted
GREG JENNETT: What do you think about that?
MATHIAS CORMANN: The Government is considering the proposals and the suggestions that have been made by various parties. When we are in a position to make a decision on those we'll make an announcement.
GREG JENNETT: Is that likely by the end of March because some indications are circulating in that area?
MATHIAS CORMANN: There is always a lot of speculation, always a lot of commentary. Our position is as I've indicated. We are working our way through the issues and recommendations that were put forward in a unanimous fashion I might say, in a bipartisan fashion, by the Joint Standing Committee on Electoral Matters. We're considering those issues. We are consulting widely. Yes, we have been receiving various proposals from various parties and individual Members of Parliament. In due course we'll make a decision on the best way forward. When we've reached that position we'll make relevant announcements.
GREG JENNETT: Is moving on that in some way, Senate voting reform, a necessary precondition for going to the polls this year?
MATHIAS CORMANN: The timing of the election is entirely a matter for the Prime Minister. That is not a matter for me.
GREG JENNETT: No, but the concept of addressing it so that when people vote this year they're voting on new laws, new arrangements, no matter what they are, is changing them, that important?
MATHIAS CORMANN: The first point is that the Government will need to form a view as to how we as a Government want to respond to the unanimous recommendations that came from the Joint Standing Committee on Electoral Matters. Once we have decided on a preferred way forward from the Government's point of view, we would have to put that to the Parliament. Then the Parliament would have to pass judgment on whether the Parliament agrees with whatever landing point the Government has reached. If all of these things happen, if they happen before the election it would be before the election, it if it happens after the election it will be after the election.
GREG JENNETT: Alright, now just a bit of news emerging before our conversation today, Senator, and that is that Liberal colleague in Ian Macfarlane has announced he won't be recontesting in Groom. Do you think the tumult, the retirement phase that we've seen unravelling very quickly in the last week or so is over yet for the Government, are there more people still to declare that they're leaving?
MATHIAS CORMANN: I think that every year in the lead-up to an election a range of people have to form a view and have to make a judgment on whether they want to continue and go around for another three years. A number of people every time announce that they have decided to retire. Now, Ian Macfarlane has made a highly distinguished, outstanding contribution, as a long serving Cabinet Minister, in particular in the industry and resource portfolios. I'm sad to see him go, but I wish him very well.
GREG JENNETT: Mathias Cormann, for your thoughts on all of those subjects today, thank you, we'll leave it there.
MATHIAS CORMANN: Good to be here.