Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
MICHAEL BRISSENDEN: For more on today’s Budget I am joined live in our Parliament House studio by the Finance Minister Mathias Cormann. Senator Cormann, good morning.
MATHIAS CORMANN: Good morning.
MICHAEL BRISSENDEN: Scott Morrison has said fairness is always the intention when preparing the Budget. What’s fair about giving tax cuts to those earning more than $80,000 a year when the average wage is around $60,000?
MATHIAS CORMANN: Let us see the specifics in the Budget tonight. The Budget is our plan for jobs and growth. The Budget is our plan to secure a successful transition from resource investment driven growth to broader drivers of economic growth in a diversified and strong economy. The Budget is our plan to live within our means, to ensure the Budget is on a sustainable foundation for the future.
MICHAEL BRISSENDEN: Ok, but will it be fair? No one will be able to label it unfair like the 2014 Budget?
MATHIAS CORMANN: We’ve set out to ensure that the Budget is fair. Ultimately it will be up to commentators and analysts to make their comments and observations.
MICHAEL BRISSENDEN: There are reports you will be cutting the company tax rate for small businesses from 28 to 27.5 per cent and for medium businesses. How do you sell a cut in company tax regardless of what it is exactly, but there will be some cut to company tax we understand, how do you sell that cut to voters when many of them won’t be seeing tax relief?
MATHIAS CORMANN: Again, the specifics will be in the Budget tonight. But what we have set out to do is to ensure that we can continue to successfully transition from resource investment driven growth to broader drivers of growth in a diversified economy. What we want to ensure is that more jobs are created across the economy so that everyone has the best possible opportunity to get ahead. We want to ensure that our growth remains strong. In that context, one of the things that we focussed on is making our tax system as growth friendly as possible. The Treasurer tonight will lay out all the different parts of our plan of which making our tax system more growth friendly so it can contribute to stronger growth and more jobs is a significant part of.
MICHAEL BRISSENDEN: And you see company tax clearly as a way of increasing jobs potential?
MATHIAS CORMANN: It is always part of an overall economic plan. It comes together with an ambitious innovation agenda. It comes together with our defence industry plan. It comes together with our ambitious infrastructure investment program. It comes together with our very ambitious free trade agenda. So this is one part of an overall economic plan, which is designed to secure a successful economic transition from record resource investment driven growth to broader drivers of growth in a diversified economy.
MICHAEL BRISSENDEN: Do we still have a deficit problem?
MATHIAS CORMANN: What the Budget will show is that the deficit is coming down year on year both in dollar terms and as a share of GDP. The Government has continued to focus on controlling expenditure. Wherever we have been required to spend more money, we have paid for that, more than paid for that, by spending reductions in other parts of the Budget. What you will see, is that spending as a share of the economy will continue to come down over the forward estimates. What we have done, is to work to get the Budget back into balance, based on spending restraint, controlling expenditure, not based on increasing the overall tax burden in the economy, which would be bad for economic growth and jobs.
MICHAEL BRISSENDEN: But we still have, we’ve had a deficit now for what, eight years, it’s still more than 2 per cent of GDP, something like 2.4 per cent or something like that. There’s no sign that it is going down quickly. This talk a couple of years ago of a deficit and Budget crisis seems to have disappeared.
MATHIAS CORMANN: You are quite right that where Labor in 2007 inherited a strong economy and a strong Budget, when we came into Government in 2013, we inherited a weakening economy and a deteriorating Budget position with spending out of control ... interrupted
MICHAEL BRISSENDEN: I guess my point is that that is it not...
MATHIAS CORMANN: My point is that what we have done over the last two and a half years is work very hard to turn the situation around that we inherited. To get spending under control, to strengthen growth and create more jobs. What I will put to you and what the Treasurer will outline tonight is that we’ve made significant progress. We’re now heading in the right direction. Yes there is more work to be done. Yes there is further work to be done, but this is not the time to change direction. This is not the time to undermine our successful economic transition by things like a $100 billion tax increase, which Labor is promising over the next decade. Increased taxes at that level just to spend more will hurt economic growth, where what we need is policies to strengthen growth and create more jobs.
MICHAEL BRISSENDEN: But as I say the 2 per cent of GDP figure hasn’t really shifted much. It was 2.7, it’s now 2.4, 2.3, who knows what it’s going to be tonight but it will be around that figure again.
MATHIAS CORMANN: What you will see is that over the forward estimates, the deficit is reducing year on year in a steady fashion, in a responsible fashion. That we are doing it on the basis of controlling expenditure, not on the basis of increasing the overall tax burden in the Australian economy.
MICHAEL BRISSENDEN: But it hasn’t shifted much. My point is, won’t some government eventually have to increase taxes and reduce spending, to do this?
MATHIAS CORMANN: The way to increase revenue in a good way is by strengthening growth, because stronger economic growth also delivers a revenue dividend for Government. If we were to increase taxes the way that the Labor Party is proposing to do, if we were to go down the path of $100 billion in additional taxes over the next decade, that would hurt economic growth, it would make it harder for people across Australia to be successful and it would make it harder for Government to actually raise more revenue. We’ve seen now with this Labor policy on the tobacco excise a $20 billion hole in their costings.
MICHAEL BRISSENDEN: Okay, let’s talk about that because they relied on Parliamentary Budget Office costings.
MATHIAS CORMANN: That is not quite right.
MICHAEL BRISSENDEN: That’s what they say they’ve relied on. They have to rely on that, they don’t have the Treasury at their disposal, they are the Opposition, you relied on the Parliamentary Budget Office when you were in Opposition, its fair that they can rely on those figures isn’t it?
MATHIAS CORMANN: The Parliamentary Budget Office earlier this year actually revealed that Labor hadn’t used the most recently available information. That is for starters. Secondly, the outcomes when it comes to revenue forecasting exercises, whether it’s the Parliamentary Budget Office or anybody else depends on the assumptions and the instructions that you feed into it... interrupted
MICHAEL BRISSENDEN: Of course, of course and...
MATHIAS CORMANN: ... and Labor has never revealed what their assumptions or their instructions were and they should actually do that. They should release that information. We will be releasing our information in the Budget papers tonight. Treasury officials will be available for scrutiny on Friday in Senate Estimates. Labor should come clean. What are the assumptions they have used? We already know that they’ve used outdated information. Now we hear that they will use our revenue forecasts. That means that there is another $20 billion black hole in Labor’s costings on top of a $50 billion black hole already.
MICHAEL BRISSENDEN: But if you looked at the costings and the forward estimates assumptions from 4 years ago, they would be entirely different now than when they were first made. Every costing and everything shifts over time and people and governments adjust.
MATHIAS CORMANN: I can see that you are doing your best to talk away a $20 billion black hole in a costing, which estimated $47.7 billion worth of revenue. That is nearly half. Nothing shifts by nearly 50 per cent in just six months.
MICHAEL BRISSENDEN: Okay, Senator Cormann we’ll leave it there.
MATHIAS CORMANN: Always good to talk to you.