Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
KIERAN GILBERT: Good morning and welcome to the program and our top story today, we are previewing the Prime Minister’s announcement. It is a major new national building project, basically overhauling the road, rail systems and it looks like it is going to be a big pillar of the upcoming Budget. The idea is to make it a maximum of thirty minutes to get to work, school or key services. The Turnbull scheme involves a major overhaul of how infrastructure is funded as well with private investors encouraged to buy Government bonds to help fund it. With me to discuss this idea and the other issues of the day, the Finance Minister Mathias Cormann. As we are just now a couple of days out from the Budget, Minister thanks very much for your time.
MATHIAS CORMANN: Good to be here.
KIERAN GILBERT: This idea, along with Angus Taylor, the Prime Minister to articulate the idea today, but it makes sense given we’ve got low interest rates. Record low interest rates for the Government to lock in this sort of infrastructure spending right now.
MATHIAS CORMANN: There is a significant need for investment in infrastructure. It is a very high priority for the Prime Minister to make our cities more liveable, to ensure that we have world class cities with better connectivity, less congestion, improved quality of life. The Commonwealth, the Federal Government is in a unique position to bring people together, to fulfil a coordinating function, involving the State and Territory and local governments, but also business and investors. The Prime Minister will have some more to say about all this later today.
KIERAN GILBERT: And the good thing I suppose with all of this infrastructure idea is that you boost the value of different areas along train routes. It is good in terms of opening up access to new housing. It has got flow on effects.
MATHIAS CORMANN: Indeed. What we are keen to do, given Budget positions at Federal and State levels are quite constrained, we need to explore creative financing options, leveraging private sector investment, looking at how we can best use our balance sheet. At the moment, investment in infrastructure is essentially Budget funded by providing grants. If you are able to come up with better, more innovative financing options, leveraging your balance sheet and bringing private sector investment into play, you would be pursuing a return from that investment through various methods.
KIERAN GILBERT: So, in terms of where this sits on a Budget, does it add to the Government’s deficit and debt...
MATHIAS CORMANN: At the moment ... interrupted
KIERAN GILBERT: ... infrastructure spend, given we are loaning via bonds to private investors?
MATHIAS CORMANN: We haven’t made decisions yet on how we ultimately would allocate investments to specific projects. What we are doing here today, is to give ourselves the tool to come up with the best approach. What we are keen to do is to ensure that there is increased investment into needed infrastructure in our cities, to make our cities genuinely world class cities, smart cities. As part of that we want to look at vehicles that can attract private sector and other investments, State and Territory government investment to ensure that it is all coordinated in one direction.
KIERAN GILBERT: But we will obviously get all the detail in the Budget and in terms of the Budget bottom line, there has been so much made of debt and deficit, I am just wondering how this fits in with that, given it is still going to be a form of debt isn’t it? To fund it.
MATHIAS CORMANN: Firstly, there are a couple of things that shouldn’t be mixed up. When we came into Government we inherited a situation where because of spending decisions by the previous government on day-to-day expenditure, we were borrowing and incurring increased levels of debt because of consumption, rather than because of investment into infrastructure. What we are looking at right now, if we invest in infrastructure, it is done from the Budget bottom line. It is done by way of grants. What we are exploring is if there are better ways, given the fiscally constrained position of Federal and State governments for that matter, whether there are better ways where the Government can actually achieve a return and get some of that money back with a return. That is what we are essentially talking about.
KIERAN GILBERT: So it’s a net positive in the end? You’ve outlaid the money over 20, 30 years but there is a gain on it, I think from reading some of the numbers around here, if you can get a three per cent per annum gain, that that is going to be viable.
MATHIAS CORMANN: If you borrow in order to invest, then are able to recoup the money with a return, that is preferable to, in our judgement to borrowing in order to just spend.
KIERAN GILBERT: Plus the productivity gains.
MATHIAS CORMANN: That is exactly right. The economic growth effect, the jobs growth effect. This is part of a broader economic plan to strengthen growth and create more jobs. But we are also making sure, looking at making sure that our Budget position is sustainable for the future.
KIERAN GILBERT: Labor says that, it believes that this is their idea. Anthony Albanese gave a speech on this back in 2014 at the Press Club, talking about the idea of 30 minute cities to commute, to get to school, that sort of thing all within 30 minutes. As I understand it that is going to be a theme with the Prime Minister’s speech.
MATHIAS CORMANN: This has been a high priority, a high personal priority for the Prime Minister for a very long time. If this is one of the initiatives of the Government that Labor comes in behind and supports, we welcome that. This is something that we are committed to. This is something the Prime Minister will flesh out in some more detail later today. If instead of their usual negativity Labor comes in behind it, that’s great.
KIERAN GILBERT: I want to ask you about the comments made by Tony Abbott last night on the Bolt Report, he spoke about one of his regrets, getting rid of the debt ceiling. Let’s play it for our viewers again.
TONY ABBOTT: I think the single biggest mistake was abolishing the debt ceiling back in late 2013. If the debt ceiling had remained in place, the Labor Party and the Greens would have been forced to look at this problem of excessive government spending. This remains one of the fundamental challenges for Government. Yes we love to spend money and on important things we have to spend money, but we have got to raise the revenue to pay for it and if we want to get taxes down, if we want to increase incentive, obviously we have got to try to get spending under much better control than it is right now.
KIERAN GILBERT: So Minister, there you have Tony Abbott last night on the Bolt Report with a reminder to you of the task at hand? Do you welcome that?
MATHIAS CORMANN: Tony Abbott is right. When we came into Government we inherited an unsustainable, unfunded, unaffordable spending growth trajectory from Labor. We have been working very hard to turn that situation around, to get the Budget on a sustainable foundation for the future. The way we have done that is by bringing down over the forward estimates spending as a share of the economy. That is our focus in the Budget to be delivered next week. Also, wherever we have been required to incur spending on new priorities, we have paid for that by spending reductions in other parts of the Budget. He is also right when he says that Labor and the Greens have not been prepared to confront the consequences of their bad management ... interrupted
KIERAN GILBERT: Can you reassure him that you are going to continue with that approach on Tuesday?
MATHIAS CORMANN: The Government continues to be focussed, firstly on generating stronger growth and job creation, but also on making sure that the Budget is on a strong and sustainable foundation for the future. Controlling expenditure is clearly an important part of that.
KIERAN GILBERT: What about on defence spending, because it would have been cheaper would it not, if some of the build of the subs was in France? That was what DCNS, the company suggested.
MATHIAS CORMANN: That was a very significant decision, which came at the end of a competitive evaluation process, which very thoroughly and very rigorously assessed the various options. The National Security Committee of the Cabinet, endorsed by the Cabinet, made a decision in relation to an Australian build, 12 submarines out of South Australia through the partnership with DCNS. That is a very significant decision that not only delivers significant defence benefits, but also delivers benefits to the national economy, not just in South Australia incidentally, to the national economy. The advice that we had from Defence and the basis for the Government’s decision is that it is in our national interest to have a long term sovereign capability when it comes to submarine sustainment and operations.
KIERAN GILBERT: Last night the Defence Minister wouldn’t confirm that it was a Defence recommendation to have a total Australian build yet Mr Pyne from Adelaide earlier in the week said it was a recommendation. A bit of confusion around that?
MATHIAS CORMANN: No confusion. The Defence Minister is of course right in saying that she can’t comment on specific recommendations that have been put to the National Security Committee of the Cabinet. There are rules around that and Marise is entirely right in relation to that... interrupted
KIERAN GILBERT: So Mr Pyne was wrong then?
MATHIAS CORMANN: What I can say and what the Government has said very clearly, is that the Government’s decision when it comes to the submarine procurement was based on advice from Defence that it was in our national interest to have a long term capability, a long term sovereign capability, in relation to submarine operations and sustainment. This is a significant investment, it was good news for South Australia but it was good news for the defence industry nationally including indeed in Western Australia, New South Wales, Victoria and Queensland.
KIERAN GILBERT: Finally, I want to ask you a final question in relation to the Manus Island standoff. Are you comfortable with the fact that you’ve got upwards of 450 asylum seekers, they are genuine refugees, more than 450 genuine refugees as part of that 850 number, the majority of them have been found to be genuine refugees. It’s not fair, and it’s not legal for them to remain in limbo there is it?
MATHIAS CORMANN: A couple of points, firstly as the Prime Minister has indicated very clearly, none of the people that have arrived illegally by boat will be resettled in Australia. None of the people on Manus Island will be resettled in Australia. Those who have been found to be genuine refugees have been offered resettlement in PNG.
KIERAN GILBERT: They didn’t arrive illegally then did they, because under international law you are allowed to seek asylum, so they didn’t arrive illegally, the 450.
MATHIAS CORMANN: They are in PNG. They are on Manus Island and those that have been found to be genuine refugees have the opportunity to resettle in PNG. The Commonwealth continues to work closely with the PNG government. The Prime Minister last night spoke to the Prime Minister of PNG Peter O’Neil. We are working with the PNG Government on how we can best support them in dealing with this ... interrupted
KIERAN GILBERT: Is it about more money? Is that what they want?
MATHIAS CORMANN: I’m not going to pre-empt how these discussions are going to proceed, but the discussions are underway.
KIERAN GILBERT: Minister thanks for your time. We’ll talk to you next week during the Budget week.
MATHIAS CORMANN: Always good to talk to you.