Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
Date: Tuesday, 3 May 2016
PAUL MURRAY: The Finance Minister is Mathias Cormann, he joins us now from our Canberra studio. Congratulations on your third Budget sir.
MATHIAS CORMANN: Good evening Paul.
PAUL MURRAY: Now I have been critical of the, particularly the company tax stuff, where the headline is that there will be a small business tax cut, a redefinition of small business and then slowly but surely, there will be a 25 per cent tax rate for all companies, big, small and medium. But that’s 10 years away, that’s four elections away. Put simply, why do we believe you about 10 years from now, but we shouldn’t have believed Wayne Swan about four years from now?
MATHIAS CORMANN: Our Budget is a plan for jobs and growth and this tax cut for small and medium size business, and ultimately for all businesses across Australia, builds on what we started in last year’s Budget. A more competitive corporate tax rate helps attract investment, it helps increase productivity, it helps create more jobs and it helps over time to lift real wages. What we’ve laid out in our Budget, in a very open and transparent fashion, is our strategy when it comes to making our company tax rate more competitive internationally, getting ourselves into the middle of the pack of OECD countries again. We are not making any apologies for prioritising small and medium sized businesses. They do employ 70 per cent of all Australians, they do generate most of the employment growth, but over time, in order to attract more capital investment in order to strengthen growth and create more jobs, to increase living standards across Australia and to secure our successful transition from resource investment driven growth to broader drivers of growth in a strong and diversified economy, we do have to have a more competitive corporate tax rate. That is the 10 year enterprise tax plan that Scott Morrison has laid out in his Budget tonight.
PAUL MURRAY: But Minister, again, taking the talking points to task here, the idea of jobs and growth, jobs and growth, growth is eventually what brings down the Budget deficit. Growth is eventually what means the economy grows, the country does better. But the unemployment rate, as predicted, does not dramatically fall. So if it’s about jobs and growth, is it about a few jobs and an awful lot more growth for people who have a job? Because that seems to be a double edged sword in your own figures.
MATHIAS CORMANN: Employment growth is actually much higher than it was when we came into Government. When we came into Government the economy was weakening, it was growing at about 2 per cent in the 12 months leading up to the election. It is now growing at about 3 per cent. The unemployment rate is well below what had previously been anticipated at 5.7 per cent. 442,000 new jobs have been created in the time that we have been in Government. Our plan for jobs and growth in this Budget, very much builds on the progress that we have made over the last two and a half years. It is an overall economic plan and making our tax system more growth friendly is part of that, our 10 year enterprise tax plan is part of that, our innovation agenda is part of that, our ambitious export trade agreement agenda is part of that, our infrastructure investment agenda is part of that. This is an overall economic plan to help secure our successful transition from record resource investment driven growth to broader drivers of growth. Indeed the services sector, which is responsible for much of the employment growth, it’s more labour intensive. Free trade agreements and the like are very much helping our exporting businesses in the services sector be more competitive internationally.
PAUL MURRAY: The Budget deficit this year was close to $40 billion and the next year it will go down, within a few years time it gets down to $6 billion. The thing is though, about halfway through is when magically we start pulling $10 billion off. The chunks get bigger and bigger and bigger. Why would that be happening at all? Why can’t the dramatic cuts happen in the years you control, which is this year and next year, rather than the years you hope for which is years three and four?
MATHIAS CORMANN: The Budget is always a four year plan and what we see in the Budget is an improving Budget position every year over the forward estimates. As you say, the deficit this year is about 2.2 per cent as a share of GDP and it reduces to about 0.3 per cent or $6 billion in the final year of the forward estimates.
PAUL MURRAY: $37 billion is still massive sir, I mean $37 billion is still massive.
MATHIAS CORMANN: Well 2.2 per cent as a share of GDP, it is an improving trajectory moving forward... interrupted
PAUL MURRAY: You know normal people don’t talk about positions of GDP, they talk about the size of the raw number. The size of the raw number is massive.
MATHIAS CORMANN: Well 2.2 per cent as a share of GDP does matter as an indicator but…interrupted
PAUL MURRAY: I know it does, but most people don’t talk, you know that, when you go home to Western Australia and they sit around a BBQ, are you talking about percentages of GDP or raw numbers? The raw number is $37 billion.
MATHIAS CORMANN: When I go back to Western Australia what people want to know is that we have a plan for jobs and growth and that we have a plan to help secure our successful transition from resource investment driven growth to broader drivers of growth. When it comes to the Budget position, the important point Paul is that we are improving the Budget position as a result of the decisions that we have made and we are improving the Budget position on the spending side of the Budget. Wherever we have been required to spend more, we have more than paid for that by spending reductions in other parts of the Budget. We have not increased the overall tax burden in the economy which would have harmed growth and jobs because you are right, stronger growth will help us get the Budget back into balance because stronger growth will lead to increased revenue. To contrast with what Labor is proposing to do, they want to increase taxes by about $100 billion over the next decade but spend it all, and more. That is the worst thing that you could do if you want to ensure that growth keeps going, that growth keeps strengthening and that more jobs are going to be created.
PAUL MURRAY: Alright sir I know you have to run, so two quick questions here. Superannuation, big changes to happen there, I want to zero in on one specifically. What does a $1.6 million cap actually mean? Does that mean that there will be no tax incentives for people who have more than that amount? Does it mean that you are capped and that is the amount of money that you can pull out of your super for the rest of your life? What exactly is that number?
MATHIAS CORMANN: $1.6 million is the amount an individual Australian is allowed to transfer into their retirement income account at a zero per cent tax rate on that income. As you know, the income in the retirement phase is completely tax free and there’s no cap. We are limiting that to $1.6 million per individual. To the extent that you’ve got more money in superannuation, you are able to put the remainder into your accumulation fund where it is taxed at 15 per cent, or you can make other choices. But we think it’s reasonable and in terms of making sure that tax concessions for superannuation are appropriately well targeted, are fit for purpose, are focused on encouraging people to save more who need to get themselves in a position where they can replace or supplement their age pension, we believe that is an appropriate limitation to put in place.
PAUL MURRAY: When Peter Costello famously introduced the baby bonus, he said that we should have one for ourselves and one for the country. Would your attitude to smokers, have one for yourself and have one for the country because it’s a lot of money you want to get off people who occasionally don’t mind a smoke.
MATHIAS CORMANN: The smokers of Australia help to support our plan for jobs and growth. Hopefully a whole number of them are going to stop that bad habit which is not good for their health.
PAUL MURRAY: Let’s hope they all do, yourself and I included and if so, the Budget will be in quite a bit of trouble. Thank you very much Senator, all the best to you.
MATHIAS CORMANN: Good to talk to you Paul.