ABC 774 - Drive

Senator the Hon Mathias Cormann
Minister for Finance
Special Minister of State






Senate voting reform, tax reform, negative gearing

RAFAEL EPSTEIN: It is a change that looks like going through. It will have a massive impact on people like Clive Palmer’s party if they were to run substantially again. Ricky Muir who received 0.5 per cent of the vote but won a Senate seat in Victoria nonetheless. Senator Mathias Cormann is the Special Minister of State on these issues. He is also of course the Finance Minister in Malcolm Turnbull’s Government. Minister, good afternoon.

MATHIAS CORMANN: Good afternoon.

RAFAEL EPSTEIN: Do these changes advantage you over the Labor party, or over other parties?

MATHIAS CORMANN: No. The purpose of these changes is to empower the voter to have their preferences reflected in the result of an election. We are here responding to the recommendations of a cross party Committee of the Parliament, which looked into the conduct of the last election. In particular, the conduct of the last Senate election. Which identified a range of issues and which unanimously made a series of recommendations on how the system could and should be improved. That is a committee made up of Labor, Greens, Coalition Members of Parliament, it looked at all of these issues very carefully and made a series of recommendations on how the system could and should be improved. Today we responded to those recommendations after some further consultation with parties represented in the Parliament.

RAFAEL EPSTEIN: But it also makes either a double dissolution election or a normal election far more appealing because you have been able to get what you want from the crossbench.

MATHIAS CORMANN: I don’t agree with that. The result at the next election, as the result at every election should be, is going to be determined by the Australian people. All parties putting themselves forward will put their policies for consideration by the Australian people. People will pass judgement. What we are seeking to do here today, responding to a unanimous report by a Committee of the Parliament, a cross-party Committee of the Parliament is to ensure that voters’ wishes are properly reflected in the outcome when it comes to Senate elections. Because if you look at the current system, the way it currently operates, at the last election, 97 per cent of people across Australia have voted above the line in the Senate. All you can do when voting above the line at present is vote one. At that point in time, every one of those voters loses control of what happens with their preferences. These preferences are directed according to decisions made by individual political parties as a result of negotiations behind closed doors in backrooms across Australia. Some parties lodge as many as three different group voting tickets, sending voters’ preferences in three different directions. So it is very hard under a system like that for individual voters to have a clear understanding of what happens with their vote after it has been exhausted in the context of their first preference above the line. What we are proposing to do here, is to say to people, if you want to vote above the line, the guidance on the ballot paper will be to number at least six boxes. People can number every single box above the line if that is what they wish to do and express their preferences that way. If people number less than six boxes, that vote would still be counted as formal.

RAFAEL EPSTEIN: But isn’t that the key point Senator? Because you could just put one, or because you might just number say one to six with minor parties, there will be a greater number of votes that are exhausted, which means in effect they are not counted. More votes will end up not contributing to the final result.

MATHIAS CORMANN: That is not right. Every single vote will be counted. Of course and absolutely it will be the case that if somebody decides to just vote one, or vote one and two, that is their decision. It is up to the individual voter to determine. What is happening under the current system, is that 97 per cent at the last election of all people across Australia voting for the Senate, voted above the line. All they could do if they voted above the line is vote one. As soon as they vote one above the line under the current system people lose control as to what happens with their preferences. Those preferences are then directed in a series of different directions, potentially given that a number of parties lodge a number of different group voting tickets. It is nigh on impossible for your average voter to determine what happens with their preferences after they have voted one above the line. We think that is entirely undesirable. Our message to voters is, we want you, the voter, to determine what happens to your vote and where the preferences are directed and allocated and the election result should reflect the decisions and preferences of the voters at the time of the election.   

RAFAEL EPSTEIN: Does it make a double dissolution a more appealing proposition for the Government?

MATHIAS CORMANN: The short answer is no. The timing of the election and the form of an election is a matter for the Prime Minister. These reforms are important reforms that stand on their own two feet. We believe that these are important reforms on their own merit. You have got to remember, again, these reforms have been recommended by a Joint Standing Committee of the Parliament which looked at these issues very, very carefully. In good time before the next election we need to ensure that these reforms are bedded down and in place.

RAFAEL EPSTEIN: 1300 222 774. The Federal Government is going to change your voting in the Senate. It looks like they’ll have the support of the Greens and Nick Xenophon so those changes should go through. 1 to 6 above the line and getting rid of those group voting tickets. With your Finance Minister hat on Mathias Cormann, could I ask you, the Prime Minister today took another tax option off the table, saying there will be no changes to Capital Gains Tax. Was that a decision made by Cabinet?

MATHIAS CORMANN: All of the announcements that we make are decisions that were properly considered through our internal processes.

RAFAEL EPSTEIN: But a consideration is different to a decision.

MATHIAS CORMANN: I’m not going to talk about what specifically goes through Cabinet where and when. Cabinet confidentiality is a very important part of our system…interrupted

RAFAEL EPSTEIN: Well we know the result, we don’t need to know if the entire Cabinet actually made a decision …interrupted

MATHIAS CORMANN: What the Government is doing right now is working in an orderly and methodical fashion through a whole range of options to improve our tax system. Our focus is on wanting to ensure that our tax system is as growth friendly as possible, so we can drive the strongest possible economic growth and the strongest possible job creation in the context of some global economic headwinds, but also some global economic opportunities coming our way. When the Prime Minister came into his position in September last year, he made very clear that he had an open mind and would carefully consider all of the various options that had been put on the table by people across the community over a period of time. That is the process that we are currently working through and as we make judgements and form conclusions about what is sensible and what is not sensible, you will see more of these announcements coming through.

RAFAEL EPSTEIN: I’ll leave that to your Cabinet colleagues to decide if they’re happy with that decision. Can I just ask you about Labor’s negative gearing and Capital Gains Tax policy? Is the Government’s argument that there’s a lower growth in house prices as a result, or that there’s falling house prices?

MATHIAS CORMANN: Firstly, Labor’s approach to tax and it’s the same approach they had when they last were in Government, is to tax more, to spend more and forever play catch up with the excessive levels of borrowing that they incurred during their period of government. We’re still working our way through the deficit position that we inherited from the previous Labor government. The country is still digesting Labor’s last spending spree. Right now Labor’s proposed approach is to tax more, to spend more, which will detract from economic growth opportunities for the future.

RAFAEL EPSTEIN: But does he smash the housing market because that’s very different to a slight slowing of the growth?

MATHIAS CORMANN: What we’ve said in relation to Labor’s very ill thought out policy on negative gearing so-called, is that it will distort the market. It will have different impacts on different parts of the market. It will certainly push up…interrupted

RAFAEL EPSTEIN: The Prime Minister said smash the residential housing market today?

MATHIAS CORMANN: Again, if you can let me finish my answer. It will have different impacts on different parts of the market. In relation to rental accommodation, it will drive up the cost of rentals. It will have a negative effect on the value of established properties across Australia. There’s no two ways about it. These are matters that Labor have not properly considered and I’m sure that people across Australia will be very concerned with what Labor is proposing here.

RAFAEL EPSTEIN: If you say it is going to smash the housing market, does that not mean you think the only thing fuelling house growth is a tax minimisation scheme?

MATHIAS CORMANN: It’s not a tax minimisation scheme. I completely reject that characterisation… interrupted

RAFAEL EPSTEIN: But your argument is still essentially the only thing fuelling growth is negative gearing, there are no other fundamentals driving the growth?

MATHIAS CORMANN: Again, you have asked me a question. If you could let me answer it I would very much appreciate it. What is colloquially described as negative gearing is the principle that you can deduct from your gross income costs incurred including the interest costs on any debt incurred in generating that income, to determine your taxable income. That is what is colloquially referred to as negative gearing. Right now there is a significant proportion of the rental market that is supplied by private investors. If it is less attractive for private investors because of a significant change to taxation arrangements to provide private rental accommodation, reduced supply with the same levels of demand will lead to increased costs for rentals. That is a basic dynamic in the marketplace as it would play out. By the same token if you make it less attractive for investors to invest in the private property market in the residential property market, then if you take a big chunk of investment out of any market then that will have a negative impact on prices in that market. These are the sort of distortions that we have pointed to right from the word go when Labor announced what we believe is a very ill-thought out, bad policy that they have put forward because they are always desperate for more cash. You have to remember, they have already made more than $50 billion in spending promises that are not funded.

RAFAEL EPSTEIN: Senator, I don’t think you have actually answered my initial question, the Prime Minister on Friday and today says that that policy will smash the residential housing market. If that is the case, the only thing fuelling the growth, the only thing substantially fuelling the growth is negative gearing. Doesn’t matter what you call negative gearing, The Prime Minister’s argument is that it is the major driver of house growth.

MATHIAS CORMANN: I actually directly answered your question. What I said is that if you make it less attractive for private investors currently providing private rental accommodation in the Australian property market and you reduce the level of investment in the residential property market, that will have a negative effect on property values. On the flip side it will drive up the cost of rental accommodation because there will be fewer private rental properties available for rent. That is the basic market dynamic at work.

RAFAEL EPSTEIN: Quick question on polls Minister, they are both going not in your direction. Is that a problem for the Coalition, the major newspaper polls?

MATHIAS CORMANN: From where I sit we do the best we can every day to put Australia on the strongest possible economic foundation for the future. There is still a little while to go until the next election. We will have a bit of work to do between now and then to ensure that we can receive the trust and the confidence of the Australian people at the next election.

RAFAEL EPSTEIN: Thank you for your time.

MATHIAS CORMANN: Good to talk to you.


Senator the Hon Mathias Cormann, Minister for Finance and the Public Service, Perth