Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
Date: Wednesday, 4 May 2016
ROSS GREENWOOD: Let’s now start the program and go to our Finance Minister Mathias Cormann who was the man charged with really not only bringing this Budget into balance eventually, but then trying to find the cuts through our government spending that could make that achievable. Many thanks for your time Mathias.
MATHIAS CORMANN: Good evening Ross, good evening to your listeners.
ROSS GREENWOOD: Alright so the Budget process itself, are you happy with the way it’s gone with the expenditure cuts that you’ve been able to get out of it.
MATHIAS CORMANN: Yes, it’s been a very good process and we’ve been able to keep spending under control. Wherever there was a requirement to increase spending, we’ve more than paid for that by spending reductions in other parts of the Budget. We inherited when we came into Government a spending growth trajectory with spending as a share of GDP heading for 26.5 per cent within the decade and rising. We’ve been able to stop that increase at 25.8 per cent and we are reducing that to 25.2 per cent over the current forward estimates period.
ROSS GREENWOOD: So this is pretty much your job isn’t it? To try and get the expenditure down. Many people have said that Australia doesn’t have a revenue problem, it’s got a spending problem. The real problem is for you I would’ve thought is that the areas that are of greatest expenditure, health and also social welfare, they are areas that politically are very difficult to cut aren’t they.
MATHIAS CORMANN: We need to get Federal Government expenditure back to a more sustainable level as a share of the economy and that’s what we’ve been doing. We are on a trajectory now where Federal Government spending as a share of the economy is projected to reduce down to 25.2 per cent. Now there are two parts to this equation. One is to control expenditure growth and we are doing that, but the other part is to strengthen economic growth so that we can improve our capacity to afford the quality services that we expect.
ROSS GREENWOOD: So in the Budget you saw economic growth numbers pretty much going out into the distant future of around 3 per cent which is what it’s growing at at the moment. But the problem for Government has been in recent times at least, you have not been getting the taxation revenue through that really matches that economic growth. That is an issue unless companies start paying taxes, unless there is wages growth out there. You don’t really get a big uplift in the revenue that’s coming through for Government.
MATHIAS CORMANN: Our economy is an economy in transition. That is the reason why last night we released our plan for jobs and growth and our plan to continue the successful transition from record resource investment driven growth to broader drivers of growth in a stronger more diversified economy. Now you’re right, right now as we go through this transition, a range of factors are having an impact on the revenue side. One is that the terms of trade, the price we can get for our key commodity exports is much lower now than what it was only a few years ago. Two, wage inflation is relatively low compared to previous years and compared to what was previously anticipated. So that does have an impact on the revenue side of the Budget. The important point here though is that the way to strengthen revenue for Government is not by increasing the tax burden on the economy. In fact that would hurt economic growth and it would cost jobs and it would make it harder for us to raise the necessary revenue for Government. What we need to do is ensure that our tax system is as growth friendly as possible, that we raise the necessary revenue for Government in the best, most efficient way possible so that we can increase the level of revenue for Government on the back of stronger growth.
ROSS GREENWOOD: Okay, now go to one other area and that is the area of expenditure on the staff, on the public servants that the Federal Government has got. In 2006-07, according to your Budget there were 167,596 public servants. It reached a peak in 2011-12, which I presume would’ve been the Rudd years.
MATHIAS CORMANN: Labor, yes.
ROSS GREENWOOD: 182,500 in that year and now you’ve got them back by 15,000 back to that level of 167,155. Just tell me this, do you think the number of federal public servants can fall from here?
MATHIAS CORMANN: What we committed to do when we came into Government was that we would reduce the size of the public service back to the size of the last full year of the Howard period of Government. That is after population growth, that is a reduction in the size of the public service in real terms. We are always looking for opportunities to apply efficiencies. We’ve applied an additional efficiency dividend in this year’s Budget, which will help us achieve a further saving of about $1.9 billion over the forward estimates. But the key is to ensure that is done in a sensible fashion. We want to ensure that the Federal public service is effective and that it delivers high value, the best possible value for money for taxpayers.
ROSS GREENWOOD: Because here’s the impression, the people out there when I speak to them and you speak to them as well, don’t believe they get value for money out of our federal government. Now I know there’s a lot of services, it’s a big and unwieldy thing. The question is whether efficiency can be driven through our public service, whether it can be driven through our public institutions. Is that an easy thing? I mean, you’re the Finance Minister you often have to put these programs in place. Is there a culture where people actually are resistant or willing to make the changes?
MATHIAS CORMANN: We’ve made significant progress. As you’ve indicated, we’ve been able to reduce the size of the public service by more than 15,000 staffing positions. We’ve reduced the number of government bodies by several hundred. We are looking at ways always to ensure that federal government expenditure on administration is as efficient, as effective and as well targeted as possible. We do believe that there is further opportunity in the years ahead. We are running a series of functional and efficiency reviews where we properly assess whether functions that have previously been allocated to public service departments are still properly the responsibility of Government, or whether they could be performed better and more cost effectively by the private sector. There might well be some areas from time to time where on reflection it is not a high enough priority to continue to spend taxpayers’ money on. We are going through a rolling program of reviewing that right across the public service.
ROSS GREENWOOD: I’ll tell you what, one final question for you because I know you’ve got to go. Australia’s credit rating, the AAA credit rating, it is important to the country as a whole. Do you believe Australia can hold onto its AAA credit rating?
MATHIAS CORMANN: I’ll let the credit rating agencies make their own judgements and talk for themselves. What I would say is that the projected return to surplus is on the exact same timetable as what we announced before Christmas in our half yearly Budget Update. We continue to improve the Budget bottom line year on year both in dollar terms and as a share of GDP over each year of the forward estimates. And as I say, the return to surplus is on the exact same timetable as we previously publicly announced.
ROSS GREENWOOD: Yeah, Federal Finance Minister Mathias Cormann, always good to have you on the program and we appreciate it this evening.
MATHIAS CORMANN: Great to talk to you Ross.