Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
SABRA LANE: Politicians often say they want to have conversations with voters about controversial policies but then they use all sorts of technical jargon which effectively sidelines most of us from that discussion. The Treasurer, Scott Morrison, today said revenue measures would be part of his first Budget. To most economists, revenue measures means tax hikes. Mr Morrison says those revenue measures will be redeployed, or allocated somewhere else to cut someone else's tax burden. It came as the ratings agency Moodys issued an explosive warning, saying that if taxes don't rise, the Government won't make any meaningful progress on returning to surplus, which could threaten the nation's AAA credit rating. To discuss these matters, I was joined earlier by the Finance Minister, Mathias Cormann, from Perth. Mathias Cormann, thanks for talking to 7.30.
MATHIAS CORMANN: Good evening Sabra.
SABRA LANE: Will the Budget be lifting taxes?
MATHIAS CORMANN: No, the objective of the Government is to strengthen growth and to create more jobs. Our focus is on controlling expenditure and our focus is on improving the way that we raise the necessary revenue for Government. So what we have said for some time is that we are focused on making our tax system more growth friendly, which will involve a look at how we can raise the necessary revenue for Government in a way that is better. It is Labor which wants to increase taxes to spend more. We want to raise revenue in a way that is better, without increasing the overall tax burden in the economy.
SABRA LANE: You're talking about raising revenue there. Mr Morrison did say there will be revenue measures in the Budget that the revenue, or money, will be used to ease other tax burdens to foster employment and jobs. In plain English, what does that mean?
MATHIAS CORMANN: In plain English, it is an entirely unremarkable statement that the Treasurer made. Every Budget has got measures on the expenditure side and on the revenue side of the Budget. A tax reduction is a revenue measure in the Budget. What we have said, what the Treasurer has said, what the Prime Minister has said and what I've said is that we are focused on how our tax system can raise the necessary revenue for Government in a better way, without increasing the overall tax burden. That will involve looking at adjustments that can be made in order to ensure that the right incentives are provided for people to work, to save and to invest. Labor wants to tax more and to tax badly. They want to increase tax on investments, by increasing capital gains tax. They want to hit families and the economy by making ill-thought out changes to negative gearing, which would lower the value of property. They want to drive up the cost of ... interrupted
SABRA LANE: But you're also possibly looking at taking one of their ideas. It's been reported late today that the Government has agreed to lift the excise on tobacco.
MATHIAS CORMANN: I'm not going to comment on measures that may or may not be in the Budget on the 3rd of May. The Budget will be delivered on the 3rd of May. There is always a lot of speculation in the lead up to any Budget. Let's just wait and see what will be in the Budget on the 3rd of May.
SABRA LANE: But it sounds like the approaching election campaign could be the Coalition's tax changes won't be as much as theirs?
MATHIAS CORMANN: Our focus is on stronger growth and more jobs. Our focus is on taxing better, without increasing the overall tax burden. Labor has already promised more than $100 billion in new taxes to fund more spending. Even that $100 billion in new taxes is unlikely to be enough to fund all their spending promises. So under Labor, there will be increases in debt as well as increases in taxes. Under the Coalition ... interrupted
SABRA LANE: Let's talk about your Government, and let's talk about what Moodys is saying about the Government today. It says, given the limited cuts that you've been able to put in place and without tax hikes, that the Government is unlikely to make any meaningful impact on returning the Budget to surplus within five years. What is your response to that?
MATHIAS CORMANN: Our Budget position is projected to improve year on year, both the underlying cash balance, the current deficit, is projected to reduce both as a share of GDP and in dollar terms every year of the forward estimates. There will be an update of the numbers in this year's Budget on the 3rd of May. Our focus has been on making sure that we keep expenditure under control by paying for any additional spending on higher priority areas by reductions in expenditure in other parts of the Budget. Our focus has been on improving our tax system to raise the necessary revenue for Government in a better, more efficient, less distorting way in the economy so we can generate stronger revenue on the back of stronger growth, instead of on the back of higher taxes.
SABRA LANE: Moodys is also indicating that Government debt will continue to go up, that it is rising to 38 per cent of gross domestic product by 2018, and that rising debt could affect our AAA credit rating.
MATHIAS CORMANN: When we came into Government we inherited a deteriorating trajectory, we inherited a very bad spending growth trajectory. We have been... interrupted
SABRA LANE: But I’m still pointing out that things are not that flash.
MATHIAS CORMANN: Things are better than they would have been if Labor's policy settings had remained in place. We are now in a stronger position than we would have been if we had not made many of the changes that we have made. Furthermore, Bill Shorten already has made more than $50 billion of unfunded spending promises over the current forward estimates. So the Budget right now would be $50 billion worse off if Bill Shorten was Prime Minister today than under the Coalition. We have a clear plan, a plan for stronger growth and more jobs. A plan to transition ... interrupted
SABRA LANE: Do you have a clear plan? I mean, you floated the idea of a GST change. That's been ditched. You've raised the idea of sharing income tax collection with the States. That's been ditched. You've hinted at negative gearing changes. That was ditched when Labor announced its policy. You've also explored streamlining tax returns. That's been ditched.
MATHIAS CORMANN: We have a clear plan. Our clear plan is reflected in the Budget. The next four years of our plan will be in the Budget delivered on the 3rd of May. There are always a lot of conversations in the lead up to any Budget about possible alternative options on how the revenue mix can be improved, how the expenditure mix can be improved. Any adjustments that the Government has decided to make to our plan will be reflected in the Budget. People will see that our focus has been on facilitating the most successful possible transition from resource investment and construction driven growth to broader drivers of growth and to a diversified new economy.
SABRA LANE: Finance Minister, thanks for talking to 7.30 tonight.
MATHIAS CORMANN: Always good to talk to you.