Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Date: Monday, 4 April 2016
ADAM SHAND: Now when the Prime Minister raised this issue last week before the Council of Australian Governments’ meeting that the Commonwealth would cede some tax powers to the States. I was pretty sceptical. I think the response from you was some what warmer than I certainly had for this proposal. And I thought it was a thought bubble. And it would go away. And it did go away the following day. Now the Prime Minister has hit back on this idea that it was a thought bubble, saying this idea of ceding income taxing powers to the States was actually discussed at COAG last December. Now this is a whole different approach. I’m wondering whether it could have been done in a more constructive way, quietly, behind the scenes. And maybe this could have got up because it has disappeared without a trace now. Let’s ask the Minister for Finance Mathias Cormann. He’s on the line. Good afternoon Mathias.
MATHIAS CORMANN: Good afternoon Adam. Good afternoon to your listeners.
ADAM SHAND: Yeah, thank you for your time. A lot of people are saying this is another disaster for your Government. That Malcolm Turnbull should have spoken to the Premiers more fully, developed a process, taken it publicly then when there was a chance for it to succeed. It has now disappeared and I think a lot of people thought it was actually a decent idea, including our Premier here in Western Australia.
MATHIAS CORMANN: I don’t agree and accept that this was a disaster. It is true, as you said in your introduction, it would have been preferable to have a conversation for longer in private, to flesh some of these issues out in more detail. But that was not to be, because after we started sharing some of our thoughts with State governments around Australia, the issue found itself onto the front pages of the newspapers. So the Prime Minister ... interrupted
ADAM SHAND: Well the Prime Minister put it there though, Mathias.
MATHIAS CORMANN: No. That is not quite right. It was actually on the front pages of the newspaper as a result of, I guess you would call it leaks, that went out after we started to talk to State governments. The Prime Minister was asked about it and provided fulsome answers and explanations in relation to his thinking. But look ... interrupted
ADAM SHAND: So are you saying that leak was negative to your, because most of these leaks, I have to say Mathias, tend to be self serving. That you condition the electorate prior to making an announcement. We see that with Budgets, year in year out now. But is it the case that possibly it backfired this time because the Premiers were the ones you really should have been speaking to rather than journalists.
MATHIAS CORMANN: We didn’t put it out there. We didn’t put it to journalists. We put it to the State and Territory governments as part of a long running process. As far as this proposal in relation to income tax sharing with the States was concerned, the way we saw it, the COAG meeting last Friday could have been and should have been the beginning of a longer conversation. This is not something that came out of nowhere either. The National Commission of Audit, which we initiated on coming into Government, made very clear recommendations in relation to this. This has been previously recommended by the Henry tax review, which was commissioned by the previous government. As soon as we started talking to some of the State government officials and some of the State Premiers, it very quickly ended up on the front page of the newspapers. It is true that from there on, the discussion took a life of its own.
ADAM SHAND: Now which ever way you want to spin it, this is a lost opportunity. The last in a string of lost opportunities in tax for your Government.
MATHIAS CORMANN: We are not giving up. Our focus, when it comes to tax, is on making our tax system more growth friendly. The reason we were keen to explore the income tax sharing proposal with State governments was one, to provide stronger incentives for State governments to pursue growth, by giving them a more direct stake in their future economic success. Giving State governments an opportunity to share income tax arrangements would have enabled them to access a revenue growth dividend as soon as they helped achieve stronger growth and stronger job creation, with more well paying jobs being created. Now ... interupted
ADAM SHAND: Sure.
MATHIAS CORMANN: Then there was also the issue of wanting to make the money flows between the Commonwealth and the State governments more efficient. This way hasn’t worked ... interrupted
ADAM SHAND: Yeah, I full accept the logic. In fact a lot of people support the logic.
MATHIAS CORMANN: So this way hasn’t worked. The point that I was about to make was that we don’t give up. We will persist. We are now looking at achieving similar outcomes in a different way. That is something that was agreed at the Council of Australian Governments meeting on Friday.
ADAM SHAND: It just seems that the Abbott Government and now the Turnbull Government has a problem with communicating its ideas. That this is too important an idea to simply fall off the table after a few minutes, or a few hours even at COAG. I’m heartened to hear you say that you are not going to give up. So how do you address it once you have withdrawn it and also I guess cop the public schlacking from the media having gone that route?
MATHIAS CORMANN: The easiest way not to cop a schlacking from the media as you put it is to do nothing. The truth is, for the last two and half years, we have done a lot. We have made a lot of progress. But some things, you’re right, haven’t been successful the first time around. So we persist. We keep going. We ultimately focus on what it is that we are trying to achieve. What we are trying to achieve is stronger growth, more jobs, more better paid jobs across Australia, as we work our way through a transition from resource investment and construction driven growth to broader drivers of growth. That is why we got rid of the mining tax and the carbon tax. That is why we reduced tax for small businesses in last year’s Budget. That is why we are pursuing an ambitious deregulation agenda. That is why we are pursuing an ambitious free trade agenda with free trade agreements with China, Japan, Korea and pursuing an opportunity with India now. That is why we are pursuing an ambitious infrastructure investment program. But you are right, not everything comes off every time.
ADAM SHAND: It’s funny you know, in all those important policy items, you have not mentioned once the issue of union corruption, and yet we are about to go, it seems, to a double dissolution based on that, when there are so many more big issues that this country faces. And yes it is important, I know you’re going to say it is important, but you didn’t even mention it in that list of priorities for your Government.
MATHIAS CORMANN: It is because you didn’t let me finish. There is so much that we are doing, and there is so much on our agenda. This is the next cab off the rank. It is part of a broader economic plan. It is part of a broader plan to help Australia transition from resource investment driven growth to broader drivers of growth. We have a construction industry across Australia which employs about a million people, which is responsible for too significant a proportion of industrial unrest across Australia. The level of lawlessness ... interrupted
ADAM SHAND: But do you really think that’s the issue that beats in the hearts of Australians as we go to the next election? I just think the failure of your Government so far, to present a real practical reform agenda, is very concerning to the electorate.
MATHIAS CORMANN: I’ve just taken you through our very comprehensive reform agenda. You said it was so long that I wasn’t able to even get to what is coming before the Senate in the next three weeks.
ADAM SHAND: Yeah, fair enough.
MATHIAS CORMANN: This is an important part of our overall agenda. There is a disagreement between the House of Representatives and the Senate. We don’t have the numbers in the Senate, and our Constitution provides for certain mechanisms to resolve deadlocks and we are pursuing that Constitutional opportunity.
ADAM SHAND: Just in conclusion, so on this issue of seeding some income tax powers to the States, this is not over, you’ll be back?
MATHIAS CORMANN: That particular proposal is off the table. But what we have said at the Council of Australian Government meeting is that we would now look more closely at some of the tied grants that are paid from the Commonwealth to the State governments. There is a lot of administration involved in Canberra, a lot of administration involved in various State capitals, in administrating money flows that we believe are not delivering a lot of value. We are looking at whether we can untie some of these tied grants and give States more freedom. We are also looking at linking the way that money flow is calculated to a share of income tax generated nationally. So there is more work being done.
ADAM SHAND: Alright, we’ll watch this space then. Thanks for your time.
MATHIAS CORMANN: Indeed, good to talk to you.