Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
CHRIS KENNY: What we are going to do now is cross to Perth where the weather is always good, to catch up with the Finance Minister, Mathias Cormann. And thanks for joining us Mathias.
MATHIAS CORMANN: Good evening Chris.
CHRIS KENNY: I want to ask you firstly about the proposed Royal Commission into banking. Of course the one that Labor is promising to conduct if it should win government. You’re opposing this, resisting this. What harm could it possibly do if we are constantly told what a strong financial sector we have got, strong financial institutions. Surely they could withstand a bit of robust questioning in a Royal Commission.
MATHIAS CORMANN: We have had several inquiries in recent years. We have had several Senate inquiries. We had the Financial Systems Inquiry. This is just Bill Shorten recklessly playing politics with a very significant and central part of our economy. The truth is, not that long ago Labor voted with the Coalition against moves by the Greens to set up a Royal Commission into the banking system. As we now get closer to an election, Bill Shorten is following the lead of the Greens in taking quite reckless action. Our banks are very well regulated. We have ASIC. We have APRA. We have the Reserve Bank. ASIC, if there are instances of wrongful behaviour, takes action. They are able to investigate. They have the same powers as a Royal Commission. They are able to prosecute and take action. There is no need for this. There have been enough inquiries ... interrupted
CHRIS KENNY: I think that is a reasonable argument and it is one that I agree with. That there is no demonstrated need. That you have these authorities. But my question is to this argument that it would somehow damage the banking sector. That seems fallacious to me. We have such strong, well regulated banks and financial institutions. How could the idea of a Royal Commission or the reality of it actually do it any harm?
MATHIAS CORMANN: There is no need to do it, because where ever there is something that happens that is wrong ... interrupted
CHRIS KENNY: There is no need to do it. There is no need to suggest that it would do harm though is there? That is overreach. It wouldn’t do any damage.
MATHIAS CORMANN: Why would you incur the expense for something that does not actually make any difference. What Bill Shorten is doing right now is suggesting that somehow there is a systemic problem with our banking system. That is very damaging indeed. The person seeking to become the Prime Minister of Australia has such little confidence in the integrity of our banking system that he says that we need to set up a Royal Commission. The truth is that we have had enough inquiries. These inquiries have come up with a series of recommendations, including the Financial Systems Inquiry. The chair of that Financial Systems Inquiry, David Murray, came out very strongly saying that there was absolutely no need for a Royal Commission. We agree with him.
CHRIS KENNY: Alright I just want to move onto the Budget now. I know you are not going to give away any secrets. It is always hard to get any of this information out of you Minister. But I just want to get the setting of the Budget here. We have seen a strong return to what has been a consistent theme from the Coalition under Tony Abbott, Joe Hockey, Malcolm Turnbull and Scott Morrison and that is that the Budget has a spending problem, not a revenue problem. Now does that mean that you are going to be delivering a Budget, effectively in an extended election campaign that restrains spending, that cuts back on Government spending?
MATHIAS CORMANN: We continue to implement our strategy to ensure our Budget is on a strong foundation for the future. When we came into Government, we inherited an unsustainable, unaffordable, unfunded spending growth trajectory. We have worked very hard to get that under control. We are now on an improving trajectory in terms of the Budget position. Spending as a share of GDP is now on a downward trajectory, where when we came into Government ... interrupted
CHRIS KENNY: It is still extraordinarily high though isn’t it, just to pick you up on that. Spending as a share of GDP is still at 25.9 per cent. That is almost at the 26 per cent it was during the stimulus year of 2009-10.
MATHIAS CORMANN: When we came into Government we were heading for spending as a share of GDP of 26.5 per cent by 2023-24 and rising. In fact, the Intergenerational Report showed it would go in excess of 30 per cent if we did not change Labor’s policy settings. Now we are on a downward trajectory when it comes to spending as a share of GDP. From 25.9 per cent this year to 25.3 per cent over the forward estimates. We have some more work to do, but we are now heading in the right direction. Overall, the Budget will be about jobs and growth. It will be about making sure that we continue to successfully transition from resource investment and construction driven growth to broader drivers of growth. Across the board, what we have been looking at is opportunities to ensure that we back Australians through that transition.
CHRIS KENNY: Whether you agree with it or disagree with it, the Labor party has more policy out there when it comes to its budgetary plans, its fiscal plans. They’ve essentially got a range of tax increases that they are going to propose to underpin these higher levels of spending. They’re going to increase taxes on superannuation, on smoking, on real estate investments. They are also going to bring back a price on carbon. Can you give us that counterpoint? Can you promise that this Budget will not contain any tax increases?
MATHIAS CORMANN: I completely reject the proposition that Labor has more policy out there. You are right, Labor has all sorts of tax increases out there, to the tune of more than $100 billion over the next decade. Our policy is contained in our Budgets so far and in our Budget update just before Christmas. There will be another instalment now in the Budget that will be delivered on the 3rd of May. That will be our four year economic plan for stronger growth and more jobs. It will reflect all of the policy decisions that the Government has made since we came into Government. The proposition that we somehow do not have policy out there is just completely false. Our policy decisions are all reflected in our Budget. Our Budget is our economic plan to help ensure that Australia transitions from resource driven growth to broader drivers of growth as successfully as possible.
CHRIS KENNY: Can you give us a guarantee though that there will be no tax increases in the Budget?
MATHIAS CORMANN: Our focus is very much on making our tax system more growth friendly. That means that we want to raise the necessary revenue for Government in a way that is more efficient, less distorting, to raise the revenue in a better way without increasing the overall tax burden. That is what we have said for some time. That has been our focus as we have been putting this Budget together.
CHRIS KENNY: What I want to do now, we’ve heard from yourself, Scott Morrison, Malcolm Turnbull for quite a while that we need to have this tax debate. Everything is on the table, it hasn’t gone particularly well so far, and it seems like we are going to have to wait until the Budget to see what exactly you are proposing on tax. I want to show you a snippet of ... interrupted
MATHIAS CORMANN: The Budget is only just over three weeks away. So not much longer to wait Chris.
CHRIS KENNY: Yeah, yeah, yeah. Not much longer, just over three weeks, but it is only a couple of months out from an election most likely. I want to show you an ad that is fresh off the presses from the Labor party and it is an ad you won’t have seen yet but it gives you a taste of the attack that is coming your way, have a look at this.
PRIME MINISTER: Never been a more exciting time to be an Australian.
VOICEOVER: Let’s have a look at his ideas so far. He’s wanted to increase the GST to 15 per cent, boom. Okay. Introduce a new state income tax that would see eight different tax systems that allow states to increase their own income taxes, boom. And, he wants to cut all federal funding for public schools, boom. Welcome to the...
PRIME MINISTER: Ideas boom.
VOICEOVER: Boom. On second thought Malcolm, perhaps keep your ideas to yourself.
CHRIS KENNY: There’s the ideas boom. Labor’s spin on it. Mathias Cormann, I know you have ruled those things out but they have been talked about. Doesn’t this just underline the need to get out there with your tax policy to tell us what you’re planning to do?
MATHIAS CORMANN: We don’t make any apologies at all for seriously considering what are serious issues. When it comes to our tax system, our focus all the way through has been on how we can make our tax system more growth friendly, so we can transition as successfully as possible from resource 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 delivered tax cuts for small business in last year’s Budget. That is why in this year’s Budget there will be a series of additional measures to strengthen growth on the back of making our tax system more growth friendly... interrupted
CHRIS KENNY: To cut taxes? To cut taxes, we know Labor is going to increase taxes, are you going to cut them then?
MATHIAS CORMANN: Labor will increase taxes by more than $100 billion over the next decade, which will be very bad for growth ... interruputed
CHRIS KENNY: We know that, but I think you almost told us then you are going to reduce some taxes.
MATHIAS CORMANN: What I said to you is that we would raise the necessary revenue for Government in a better way. That our ambition is to raise taxes more efficiently and in a way that facilitates stronger growth without increasing the overall tax burden.
CHRIS KENNY: Just on that, another point that seems to have been forgotten along the way is that the Government was always telling us that whatever you propose on taxation reform will have to go to an election first. That you’d seek the peoples’ mandate for any significant changes to the tax system. Does that meant hat we are going to have a tax package that is actually already factored into the Budget? Or is it going to be kept separate from the Budget process, the actual, your proposed tax changes?
MATHIAS CORMANN: Let us just wait and see what is in the Budget on the 3rd of May. Once the Budget has been released, people sometime in the second half of this year will have the opportunity to pass judgement on what is in the Budget. You would expect that in the ordinary course of events, after the election if the Government receives a mandate, which we will be working towards, we would be implementing that by getting the legislation passed through the Parliament.
CHRIS KENNY: I just want to get your thoughts Mathias Cormann on the Arrium issue, the steelworks in Whyalla. I know it’s not directly your area of responsibility but there has been mixed signals coming out from the Government about whether the Australian Government or even State Governments should mandate the purchase of Australian steel in government projects. Can you clarify for us that this would be in breach of Australia’s free trade agreements, and therefore that Labor can’t actually do that?
MATHIAS CORMANN: I do not think that there has been mixed messages from the Government. As far as the Government is concerned, we want to see all Australian businesses compete for business that is available in Australia, including steelmaking businesses. Arrium has faced some particular challenges in recent time with low commodity prices, with an oversupply of steel. Christopher Pyne as the Industry Minister is working with Arrium and the banks and other stakeholders, to assess how the Australian Government can best support their ongoing operation in the most appropriate way... Interrupted
CHRIS KENNY: But would it be in breach? Would it actually be in breach of our free trade agreements to mandate the purchase of Australian steel?
MATHIAS CORMANN: We do have obligations under our free trade agreements, which are very important for our economic success, which are very important for the success of Australian exporting businesses into key markets around the world. You can not flat out mandate the use of a particular product just because it is made in Australia. Having said that, we are very focussed as a Government on ensuring that Australian businesses can be as competitive as possible. That is why emissions intensive and trade exposed businesses like Arrium have been exempted for example from, 100 per cent exempted from the requirements of the Renewable Energy Target. That is why we have been giving additional powers to the anti-dumping commission, to ensure that businesses like that are protected from unfair dumping from other parts of the world. We do have to work consistent with the requirements in our various free trade agreements because those free trade agreements help Australia to be the successful trading nation that we are.
CHRIS KENNY: Mathias Cormann thanks again for your time, always a pleasure to have you on Viewpoint.
MATHIAS CORMANN: Always good to talk to you.