Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Date: Thursday, 14 April 2016
PATRICIA KARVELAS: There has been some mildly positive economic news for the Government today with Australia’s unemployment rate taking a surprise step downwards to 5.7 per cent. But at the same time, Malcolm Turnbull’s Budget team has been warned it better shape up if it wants to hold on to the nation’s AAA credit rating. It won’t be enough to cut spending according to the ratings agency Moody’s, taxes need to go up too. And out of nowhere, the Government seems to be on the same page. Mathias Cormann is the Federal Finance Minister and the Deputy Leader of the Government in the Senate, welcome back to RN Drive.
MATHIAS CORMANN: Good to be back.
PATRICIA KARVELAS: Here’s Scott Morrison speaking to the media just a few hours ago.
SCOTT MORRISON: Our plan is to consolidate the Budget by being disciplined, by ensuring the Government lives within its means. It’s not to say there won’t be revenue measures in the Budget, of course there’ll be revenue measures in the Budget. But what we’re saying is where we will apply those revenue measures, is to reducing the tax burden in other parts of the economy and wherever possible, to continue to drive down the deficit. [EXCERPT ENDS]
PATRICIA KARVELAS: Of course there will be revenue measures in the Budget – we’re talking tax hikes aren’t we?
MATHIAS CORMANN: That is a complete misinterpretation of what the Treasurer has actually said. The Treasurer and I... interrupted
PATRICIA KARVELAS: We just played him.
MATHIAS CORMANN: You are putting an interpretation on what he said which is wrong. In every Budget there are always revenue measures. If you look at interviews that I have given in recent weeks and months, I have been saying ad nauseam that the Government is focussed on making our tax system more growth friendly, that we are looking at raising the necessary revenue for Government in a better way that less detracts from our economic growth opportunities. When we flag that there will be revenue measures in the Budget, as there are in every Budget for a very long time, the interpretation that some seem to have put on that is quite wrong. Labor has an approach where they want to tax more to spend more. They want to tax more in a bad way, such as by increasing capital gains tax, which will reduce investment, such as their ill thought out changes to negative gearing. Our approach is that we want to tax better and without increasing the overall tax burden in the economy, which is incidentally a point that the Treasurer made very clearly in that same interview.
PATRICIA KARVELAS: But do you accept Moody’s view to quote their senior vice president that quote, ‘without such measures, limited spending cuts are unlikely to meaningfully advance to Government’s aim of balanced finances by the fiscal year ending June 2021 and Government debt will likely continue to climb, a credit negative for Australia’. Do you accept that?
MATHIAS CORMANN: Firstly, we are very focussed on making sure that our Budget is in the strongest possible position. The Government is committed to responsible Budget management in a way which protects our AAA credit rating. The point to make, and the Treasurer made that point very explicitly incidentally in the doorstop that you have quoted from, we don’t take that sort of comment as a licence to increase taxes. We believe that people across Australia will be relieved that we don’t take that sort of comment as a licence to increase taxes. We want to increase revenue for Government on the back of stronger growth, not on the back of higher taxes. Labor’s plan for higher taxes to spend more will hurt the economy, will damage growth and will damage job creation. That is not our approach.
PATRICIA KARVELAS: But Mathias Cormann just zooming back out, you do agree that Government debt is putting our AAA credit rating at risk don’t you?
MATHIAS CORMANN: We inherited a deteriorating Budget position from the previous Labor government. When we came into Government the economy was weakening, it is now stronger. The unemployment rate was rising, unemployment is now lower than what had been anticipated when we came into Government. Our Budget position when we came into Government was rapidly deteriorating on the back of a very unsustainable, unfunded, unaffordable spending growth trajectory. We have been working to get spending growth under control. We are now in a stronger position than what we were. If you look at the Budget position, as per our most recent Budget update, our Budget position is on an improving trajectory. We are on an improving trajectory when it comes to our underlying cash balance both as a share of GDP as well as in dollar terms. Our focus is on controlling expenditure, on continuing to bring down Government expenditure as a share of GDP. In the Budget we will continue to pursue the strategy that we have now pursued for some time.
PATRICIAL KARVELAS: You refer to Labor’s debt, but debt as a proportion of GDP has been on the rapid rise since 2007 and it’s been rising while you’ve been in Government.
MATHIAS CORMANN: This is my point. We inherited a spending…interrupted
PATRICIA KARVELAS: You inherited it, but then made it worse.
MATHIAS CORMANN: That is not true. That is actually demonstrably not true. What I was about to say before you interrupted me is that we inherited a spending growth trajectory far in excess of what the current situation is. We inherited a spending growth trajectory locked into legislation incidentally for most parts, of about 3.7 per cent above inflation. We’ve reduced that to below 2 per cent. Now yes, we inherited spending growth from the previous government. So we were on a preset trajectory. That trajectory continues to have an impact on the level of Government net debt, of course. There are projections which are there for all to see on when Government net debt is expected to peak. That situation is better than it would have been if we had persisted with the policy settings that we inherited from the previous Labor government. So we are now in a stronger position than we would have been if we had not made the efforts that we have made to deliver stronger growth and to get Budget spending under control.
PATRICIA KARVELAS: So do you reject Moody’s forecast that debt would rise to 38 per cent of GDP by 2018, and if it goes up from there, the AAA credit rating is under threat?
MATHIAS CORMANN: I’ll let Moody’s talk for themselves. Our Budget numbers will be released on the 3rd of May as part of our Budget. You wouldn’t expect me to release our Budget forecasts with you here today.
PATRICIA KARVELAS: I wouldn’t expect you, but I’m giving it a red hot go. On RN Drive, Mathias Cormann is the Federal Finance Minister joining us tonight. He’s also the Deputy Leader of the Government in the Senate. Just on steel, do you see any merit in Labor’s plan for Australia’s metals manufacturing industry. Bill Shorten is proposing it so that to use his words Australia doesn’t become the only advanced economy in the world to let our steel industry die.
MATHIAS CORMANN: Labor and Bill Shorten don’t have a plan. Bill Shorten today had to do an embarrassing back flip having promised last week that he would mandate the use of Australian steel for all Australian projects, he wasn’t able to hold that position. He’s run for the hills and he’s been trying to mask the fact that he had to back down from that irresponsible and unsustainable position. He’s been coming out today with a few slogans. The truth is that if Bill Shorten was really committed to the steel industry in Australia, he would come out today and rule out the reintroduction of a carbon tax. Labor continues to be committed to the reintroduction of a carbon tax. That is very bad for manufacturing industries like the steel industry. We are working very hard to support manufacturing industries across Australia in an appropriate way. We got rid of the carbon tax. We’ve exempted the emissions intensive trade exposed industries from the application of the Renewable Energy Target, a 100 per cent exemption. We have given additional powers to the Anti-Dumping Commission to deal with dumping from relevant overseas competitors. Bill Shorten, if he was genuinely committed to the steel industry in Australia, he would come out today and rule out once and for all, the re-introduction of a carbon tax if he ever were to be the Prime Minister of Australia.
PATRICIA KARVELAS: And just on the Government’s industrial relations agenda, which is all about what’s going to be happening next week. It seems you have the cross bench numbers to abolish the Road Safety Remuneration Tribunal, is that your understanding and will you prioritise it next week?
MATHIAS CORMANN: The Parliament is being called back to deal with the re-introduction of the Australian Building and Construction Commission, the re-establishment of the Australian Building and Construction Commission and also with the Registered Organisations Legislation, in order to ensure that unions are subject to the same corporate governance standards as corporations. Yes, we are committed to abolish the Road Safety Remuneration Tribunal, which is nothing more than a union attack on small business truckies. We are hopeful that we will be able to deal with all of these pieces of legislation. Our intention would be to pass all of them, but let’s see what happens.
PATRICIA KARVELAS: I spoke to Jacqui Lambie on this program last night and she said she wanted the Tribunal to be abolished as a priority ahead of the ABCC debate. Now suppose the Tribunal bill will need to start in the House of Representatives but you can do that fairly quickly and still prioritise in the Senate. Are you willing to pause the ABCC debate for it and ensure that you get that through given you’ve got the support now.
MATHIAS CORMANN: We will not be pausing the ABCC debate. The truth is, we’ve got three weeks that have been made available for the Senate to deal with the Australian Building and Construction Commission legislation, to deal with the Registered Organisations legislation and there is ample time to deal with the legislation to close down, to abolish the Road Safety and Remuneration Tribunal. We intend to deal with all of these important pieces of legislation. They all go to our commitment to successfully transition our economy from resource investment and construction driven growth to broader drivers of growth in a more diversified new economy. We call on all Senators, Labor, Greens, cross benchers, to support all of the legislation that we are putting forward next week to strengthen growth.
PATRICIA KARVELAS: Mathias Cormann, I know you’re saying you want both of them through but at this stage it’s just pragmatic isn’t it.
MATHIAS CORMANN: All three of them.
PATRICIA KARVELAS: All three of them that’s right, absolutely registered organisations as well, but at this stage, this is the one you’ve got support for so wouldn’t you put it first and help the truckies you say you care about.
MATHIAS CORMANN: I’m not going to get into Senate tactics with you here today. What I’m saying to you is that, and the Prime Minister announced that a few weeks ago now, the Parliament is being called back after prorogation for a very specific purpose. That purpose is to deal with the legislation to re-establish the Australian Building and Construction Commission, which is a very important piece of legislation in the context of our future economic success. We also intend to deal with the Registered Organisations legislation. Yes, we intend to deal with our Bill to abolish the Road Safety Remuneration Tribunal. We can chew gum and walk at the same time. We call on the Senate to support all three pieces of legislation in the national interest.
PATRICIA KARVELAS: Mathias Cormann, many thanks for your time.
MATHIAS CORMANN: Always good to talk to you.