Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
KRISTINA KENEALLY: Welcome to To the Point, I’m Kristina Keneally. Joining me instead of Peter van Onselen Laura Jayes, sitting in.
LAURA JAYES: Good to be here.
KRISTINA KENEALLY: The industrious Laura Jayes for the bludging Peter van Onselen. We are joined this afternoon by the hard working, because he is hard working, he was on Sky News last night, he is back again today, the Finance Minister, Mathias Cormann. Welcome to To The Point.
MATHIAS CORMANN: Good to be here.
KRISTINA KENEALLY: Our colleague Paul Murray is reporting that the Government has commissioned ads to promote a $16 billion improvement to the Budget bottom line. Can you confirm that?
MATHIAS CORMANN: I have read these reports in the papers today. You shouldn’t always believe everything you read in the newspapers ... interrupted
KRISTINA KENEALLY: I don’t, but I believe Paul Murray. I believe Paul Murray. Come on.
MATHIAS CORMANN: ... including of course from Paul Murray. I am not going to speculate on what is going to be in the Budget on the 3rd of May, but let me just say these reports are wrong. The first time I had heard of these particular propositions. They are not accurate.
LAURA JAYES: The ads themselves, because the lines I have and this is line by line, new and important changes are happening to Australia’s tax and super system. This will make the system fairer and continue driving economic growth. We need superannuation to be flexible enough. Everyone, particularly low income earners. That would be in line with what the Government wants to achieve, wouldn’t it?
MATHIAS CORMANN: Sounds like some good positive messages. But let me just say that I am not going to add to the pre-Budget speculation. What was reported in the media today, what Paul Murray talked about yesterday is not something that I am aware of. It is not something that is in our view accurate.
LAURA JAYES: Superannuation tax concessions though, more generally, clamping down on multinationals, and increasing the tobacco excise for example, they are all savings and measures that you could sell, that the Coalition Government could sell in the upcoming election campaign, speaking hypothetically of course.
MATHIAS CORMANN: We have long been working to ensure that multinationals pay their fair share of tax in Australia. You would have seen that in the last Budget and indeed in the last Budget update before Christmas, we made some announcements in relation to this. The context of this upcoming Budget, as we have said for some time, we are focussed on making sure that we continue to successfully transition from resource investment driven growth to broader drivers of growth in a diversified economy. As part of that, we want to ensure that our tax system is as growth friendly as possible.
LAURA JAYES: These are growth measures?
MATHIAS CORMANN: We are wanting to make sure that our tax system is as growth friendly as possible. In that context, as we have said for some time, we are reviewing the tax mix, we are reviewing whether the tax system can be improved to ensure we raise the necessary revenue for Government in the best possible way.
LAURA JAYES: So are you saying there won’t be significant cuts in this Budget? Because we have seen many economists say if you do cut too deeply, that is an inhibiter to growth. Are you of that view?
MATHIAS CORMANN: What I am saying is that the Budget will be delivered on the 3rd of May. In the meantime, our... interrupted
LAURA JAYES: But you’re talking about growth Minister.
MATHIAS CORMANN: Our focus very much is on making sure that the Australian economy continues to successfully transition from resource investment driven growth to broader drivers of growth. In that context, it is important that we continue to repair the Budget. You can expect the Government to work to keep spending under control, to get spending under control and to keep spending growth under control. You can expect the Government to continue to work to ensure our tax system is as growth friendly as possible.
KRISTINA KENEALLY: Can I come back to the $16 billion figure, I appreciate you are not going to confirm or deny, but let’s talk about what it represents. What’s out there is that it is going to be a $16 billion improvement across the forward estimates. Labor has announced $100 billion worth of savings and revenue measures across 10 years. Where do you think that figure needs to sit? What type of improvement to the Budget bottom line do we need to have across the forward estimates in order to stave off the threat of a credit downgrade?
MATHIAS CORMANN: Labor has announced $100 billion in additional taxes over the next decade to spend all of that money and more. What Labor has announced is to tax more to spend more and to go further into debt. That is bad for economic growth, which is why we are saying, our proposition, if you want to talk about the generic approach, our proposition is to tax better without increasing the overall tax burden, not to tax more to spend more. If you look at some of the individual taxes measures that Labor has put on the table, they will damage growth, they will damage investment, they will damage jobs. Their proposals in relation to negative gearing will drive house prices down, they will increase the cost of rent, they will reduce the level of investment in the housing sector. Their proposal to increase Capital Gains Tax by 50 per cent will reduce the level of investment, will have a negative impact on growth. Our focus when it comes to tax, is to tax better and to raise the necessary revenue for Government in a better less distorting way in the economy without increasing the overall tax burden in the economy.
KRISTINA KENEALLY: So you are going to tax better, presumably you are going to want to cut spending. It’s currently at 25.9 per cent of GDP, what figure would you like to see that at across the forward estimates? And to come back to that point, when you say you are going to tax better, does that mean you are going to be looking at, you are going to acknowledge we have a revenue problem and we are going to see increased taxation in this Budget?
MATHIAS CORMANN: We are not going to see an increase in the overall tax burden in this Budget. The extent to which we have a revenue challenge... interrupted
KRISTINA KENEALLY: So, even if you are going to increase something like a cigarette excise, there’s going to be an offset somewhere else?
MATHIAS CORMANN: The Budget will be delivered on the 3rd of May. The extent to which we have a revenue challenge, that is because economic growth needs to be stronger. We want to raise the revenue for Government on the back of stronger growth, not on the back of higher taxes, which actually is bad for growth. On the spending side, if you look at the most recent Budget update, the projections are for spending as a share of GDP to track down from 25.9 per cent this year to 25.3 per cent in the final year of the last forward estimates. Our focus continues to be on bringing spending growth as a share of GDP down year on year, and on improving the underlying cash balance year on year from the situation that we were in when we came into Government.
LAURA JAYES: How do you prioritise bringing the Budget back to surplus given that you have spoken about growth and how important it is for our transitioning economy? How important is it to get back to the surplus, do you want to see it in an 8 year timeline? Or are you willing to push that out further than what we saw at MYEFO?
MATHIAS CORMANN: Our focus is on getting back in to surplus as soon as possible in a way that is economically responsible. We have been very candid about that with the Australian people. As a country we have been facing additional economic headwinds that we have had to deal with, but in Australia our economy is actually growing comparatively strongly at 3 per cent, which is higher than the OECD average, which is higher than any of the G7 countries around the world. Our unemployment rate at 5.7 percent is below the OECD average and employment growth is quite strong. So we are heading in the right direction. What we are going to do in this Budget is essentially put forward our economic plan for the next four years to ensure that we continue to successfully transition from resource investment driven growth to broader drivers of growth.
KRISTINA KENEALLY: Alright, so how concerned are you about the Moody’s warning? Because they don’t seem to think that the track that we are on is sustainable to reach a return to a surplus in 2021 and the reports today that if Australia were going to lose its AAA credit rating, then New South Wales and Victoria would follow suit. I have got to say, as a former State Premier, I would be un-delighted if my state lost their credit rating because of the Commonwealth.
MATHIAS CORMANN: I don’t think that that is what Moody has said... interrupted
KRISTINA KENEALLY: But there are reports today that the sovereign could not have a lower credit rating than the States.
MATHIAS CORMANN: The Commonwealth is absolutely committed, the Federal Government is absolutely committed to continue with responsible Budget management. We are committed to continue down the path where we get the Budget back to balance as quickly as possible, in a way that is economically responsible. That’s what we believe the ratings agency will want to see. We are focussed on making sure that we maintain our AAA credit rating. We are making decisions accordingly. But the important point here is, people across Australia don’t want us to take this sort of report as a licence to just ramp up taxes. Labor wants to increase taxes by more than $100 billion over the next decade and spend all of the money that they intend to raise. That is not good for the economy, it is not good for growth, it is not good for jobs. We want to strengthen growth, we want to create more jobs.
LAURA JAYES: Minister how difficult has this process been? Because we’ve seen now successive governments, both Labor and the Coalition talk about need to get our spending under control. We saw that not being done under Rudd and Gillard, and some headway made under Abbott, but even Scott Morrison admitted that the savings that were made had already been spent. So when you go line by line through the Budget, they are not that obvious are they, the savings and the measures you that can announce. Has it been quite difficult to do that?
MATHIAS CORMANN: Firstly, the previous Government had several waves of increased spending including in the dying days of the previous Government when they made a series of unfunded, unaffordable spending promises in relation to State school and State hospitals and various other matters. When we came into Government the economy was weakening, unemployment was rising, the Budget position was rapidly deteriorating on the back of an unsustainable spending growth trajectory. We have been able to turn that situation around. The economy is now stronger, employment growth is stronger, the unemployment rate is lower than what had been anticipated. The Budget is now heading in the right direction on a more believable, credible path back to surplus. We over the last three years have made quite some progress. We have faced some additional challenges, global economic headwinds and additional challenges in the Senate. So we are not as far advanced as we would have liked to be, but we are in a much stronger position than we would have been had we not changed the policy settings that we inherited from Labor.
KRISTINA KENEALLY: Minister you are also the Special Minister of State, now I’m going to turn very quickly, yesterday in question time, Mark Dreyfus asked the Treasurer on your behalf if you would direct the AEC to report if the Free Enterprise Foundation has complied with all Commonwealth electoral laws. Will you do that?
MATHIAS CORMANN: Since I was asked this question yesterday on Sky, I looked at exactly what Mr Dreyfus has actually said in the House of Representatives. I don’t have the power to direct the Australian Electoral Commission. The Australian Electoral Commission in our system, in our democratic system acts independently, as it should. That is a very important feature of our democratic system, that it acts independent from political interference. If Mr Dreyfus has got genuine concerns, he should address them to the Electoral Commission and not just play politics.
LAURA JAYES: How much of a problem is this? Because as I understand it, the Electoral Commission won’t even consider this matter in releasing those funds until the 8th of June. We’ll be well into an election campaign by then, so is this hampering the Coalition’s ability to campaign?
MATHIAS CORMANN: You’re now raising a different issue. You are raising an issue at a State level in New South Wales. That is a matter for New South Wales processes to resolve... interrupted
KRISTINA KENEALLY: But its administration funding that keeps the New South Wales party office operating?
MATHIAS CORMANN: So if I may finish my answer. From a Liberal Party point of view and the Prime Minister, the Treasurer, myself, everyone, we have all said, we expect the Liberal Party organisation to comply with all relevant laws. We would expect that to happen.
LAURA JAYES: Can I ask you just one final question about ASIC, it is my understanding that the Government will announce new measures to beef up ASIC, which will mean a restoration of funding of about $100 million, moving to a user pay system, greater oversight over responsible lending. A huge emphasis there, financial advice, life insurance industry and it will also speed up two key recommendations in the Murray Review which looks at greater penalties and product intervention. I don’t expect you to confirm all of those issues here today, but does that sound about right? Would you be happy with those measures, hypothetically once again if they were implemented?
MATHIAS CORMANN: You are certainly right to suggest that a lot of work has been done by the Government to look at how we can strengthen and further improve the effectiveness of ASIC. We have had the Financial Systems Inquiry and the capability review into ASIC. The Government has been working through many of these issues. I’m certain that there will be relevant announcements by the responsible Minister very soon.
KRISTINA KENEALLY LAURA JAYES: Sounds like you are pretty pleased with that list though?
MATHIAS CORMANN:I’ll let you do the commentary.
LAURA JAYES: Finance Minister Mathias Cormann thanks so much for your time.
KRISTINA KENEALLY: Thank you.
MATHIAS CORMANN: Always good to talk to you.