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
GEOFF HUTCHISON: It was pointed out by Marius Benson on News Radio this morning that Mathias Cormann, the Finance Minister, is the only senior figure involved in the framing and selling of three Coalition Budgets who is still there. Tony Abbott and Joe Hockey’s economic opinions are not asked for much these days. So let’s have a yarn with another hard working Australian, Senator Cormann, good morning to you.
MATHIAS CORMANN: Good morning Geoff.
GEOFF HUTCHISON: Most opinion about the Budget seems to be Senator that it neither offends nor inspires, let’s get on with the election. Are you happy with that?
MATHIAS CORMANN: The Budget is our plan for jobs and growth. It’s a plan to secure our successful transition from resources investment driven growth to a more diversified strong economy. Western Australia is very much on the front line of our current economic transition and we are continuing our work to put the Budget on a sustainable foundation for the future by controlling expenditure and making sensible decisions, bringing the Budget back to surplus on the same timetable as we predicted and projected in our half yearly Budget Update before Christmas.
GEOFF HUTCHISON: I want to talk about Budget repair in a moment but let’s talk about the good news aspect of the Budget, the small business tax rate lowered to 27.5 per cent and the business with a turnover of up to $10 million can now be a beneficiary. That has been broadly welcomed. What do you think it will achieve?
MATHIAS CORMANN: This will mean that 870,000 businesses employing about 3.4 million Australians will have their tax rate reduced by 2.5 per cent and also get access to a whole range of other small business tax incentives, including small business depreciation, pooling provisions, simplified trading stock rules as well as the instant asset write off that we introduced in last year’s Budget. What will this achieve? Well most of the employment growth in our economy is generated by small and medium sized businesses. Small and medium sized businesses employ about 70 per cent of all Australians employed across Australia so this is very much part of our plan for more jobs and stronger growth.
GEOFF HUTCHISON: Good news for those in the middle income bracket if they want to buy a $6 Big Mac from Cannington as Shane observed this morning. Why is that group getting that $6 a week benefit, why them and not those who perhaps earn less getting nothing at this point?
MATHIAS CORMANN: What we’ve sought to do, and our instinct always is to keep taxes as low as possible, but what we wanted to ensure is that people who are full time average wage earners do not move into the second highest tax bracket. If we hadn’t made that change, the people on average full time wages would have ended up paying 37 per cent tax instead of the 32.5 per cent on their top marginal tax rate at present. We believe that as part of making sure that people have the right incentive to work more and to earn more that this was the best way to provide a tax cut that we could sensibly afford. When it comes to low income earners, remember that in our first Budget we abolished the carbon tax. There were income tax cuts that were targeted at people below $80,000 per year which became genuine tax cuts after we got rid of the carbon tax. For example, the tax free threshold was nearly tripled to $18,200 in the context of introducing a carbon tax, which of course we have abolished. We have also put in place measures to provide tax cuts to low income earners putting some of their money into superannuation through our compulsory superannuation scheme. We believe we got the balance but there is always more that we would like to do.
GEOFF HUTCHISON: Okay now you’ve upped the tax on superannuation for higher income earners, there’s also an increase in the tobacco excise that’s going to push the cost of a packet of smokes to $40 or so by the end of the decade. Tony Abbott called any tax on super a wealth tax, he called a tobacco tax a workers tax when Labor announced its intention to introduce the same thing. Can you explain why that’s not true now that the policy is yours?
MATHIAS CORMANN: The difference between our approach and Labor’s approach is that Labor wants to tax more to the tune of about $100 billion over the next decade to spend more, whereas we have invested all of the increased revenue from the tax increases into tax reductions in other parts of the economy. So what we’ve set out to do is to make our tax system more growth friendly in order to strengthen growth and create more jobs and our tax measures, our measures on the tax side of the Budget do not increase the overall tax burden. In fact they reduce the tax burden in the economy slightly, but we are raising the necessary revenue for government in a better, more efficient and we believe fairer way. That will help us generate stronger growth, whereas all of the additional taxes that Labor is proposing to spend more, will actually be a drag on growth and actually make it harder for us to attract investment and generate more jobs.
GEOFF HUTCHISON: We will no doubt talk about that probably from next Monday at some length. Just finally to the question of Budget repair. What happened to the Budget emergency that dominated your Government’s first Budget? I know that you seek to condemn the spending practices of the previous Government, but spending as a percentage of GDP is higher than it was and this your third Budget opportunity of Budget repair.
MATHIAS CORMANN: That is actually not right. When we came into Government, we inherited a spending growth trajectory taking us to 26.5 per cent spending as a share of GDP within the decade and rising. We stopped that rise. We’ve plateaued spending as a share of GDP at 25.8 per cent and are now bringing it down to 25.2 per cent over the forward estimates period.
GEOFF HUTCHISON: So the best you can say is that you’ve slowed the trajectory of where it might go?
MATHIAS CORMANN: That is what we’ve set out in Budget after Budget as our plan. In fact as I said to you right at the outset, our projected return to surplus is on the same timetable as what we’ve previously announced. So this is a plan that we’ve put forward for some time. We are controlling expenditure, we are reducing spending as a share of the economy, where under Labor it was increasing.
GEOFF HUTCHISON: Just pause Senator if you will. Our regional listeners, you are off to your morning programs. I beg your pardon, I’m sorry for the interruption. Please continue.
MATHIAS CORMANN: So what I was just saying is that we are controlling expenditure by bringing spending down as a share of the economy. Wherever we were required to spend more on a higher priority, we have more than paid for that by spending reductions in other parts of the Budget. We are heading in the right direction. Yes there is further work to be done, but this is certainly not the time to change direction.
GEOFF HUTCHISON: Thank you very much for talking to us today. Not the time to change the direction, I would suggest it’s also not the time to put anything in a Budget that’s going to scare anyone given that there is an election ahead.