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
RAFAEL EPSTEIN: Senator Mathias Cormann is the Deputy Leader of Malcolm Turnbull’s Government in the Senate. He is also the Finance Minister, Minister thank you for joining us.
MATHIAS CORMANN: Good evening.
RAFAEL EPSTEIN: Minister, you say that the Coalition is about lower taxes but next year taxes are going up. Tax receipts go from 23.5 per cent of the economy to 23.9 per cent of the economy in 2016-17, 23.5 to 23.9. If you are not about lower taxes, what do you stand for?
MATHIAS CORMANN: Well we are about lower taxes and indeed the policy decisions that we have made in this Budget actually slightly reduce the overall tax burden in the economy. Taxes as a share of GDP in each year of the forward estimates is lower than had been anticipated at this time last year in last year’s Budget.
RAFAEL EPSTEIN: Taxes as a proportion of the economy is going up? Isn’t it?
MATHIAS CORMANN: It is going up by less than had been previously anticipated and certainly the trajectory is below where it previously was because the policy decisions that we have made have actually reduced the overall tax burden in the economy. In fact, once you exclude the compliance measures, tax is actually reduced even in nominal terms by about $1.9 billion over the forward estimates.
RAFAEL EPSTEIN: Spending is going up as well isn’t it? Spending this financial year is 25.8 per cent of the economy, spending next financial year is exactly the same, in fact, spending will be 25 per cent of GDP four years from now, which is higher than the level you inherited. So if taxes are going up and spending is going up?
MATHIAS CORMANN: Well again that is wrong, if you look at the 2015-16 Budget the estimate for this year was actually for spending as a share of GDP to 25.9 per cent, it is slightly less at 25.8 per cent... interrupted
RAFAEL EPSTEIN: So you’re saying you are not not better than Labor, but your better than your own Budget last year?
MATHIAS CORMANN: If I can provide one answer to one question without interruption that would be really helpful. Spending as a share of GDP is expected to reduce to 25.2 per cent over the forward estimates and the very important point to remember is that the trajectory that we inherited from the previous Government was spending as a share of GDP going to 26.5 per cent within the decade and rising beyond. We have been able to stop that increase in trajectory at 25.8 per cent and we are now reducing it. So it was heading for 26.5 per cent within the decade and increasing further. The Intergenerational Report showed that it was headed for in excess of 30 per cent as a share of GDP. We have been able to stop the increase at 25.8 per cent and are now progressively bringing that down over the forward estimates to 25.2 per cent.
RAFAEL EPSTEIN: You’re saying that you are improving on the position presented by the Intergenerational Report. Putting aside the development of that, that assumed that Labor didn’t change anything. You have changed a tonne of things since the last election, is that really something to rely on?
MATHIAS CORMANN: Well in every Budget and every Budget update we have improved the position based on the policy decisions that we have made. There have been factors outside of our control that inevitably can happen. We have had additional global economic headwinds. We have had to deal with a significant fall in our terms of trade for much of our period in Government. The prices that were able to be achieved for our key commodity exports such as iron ore and coal went from a record peak in 2012 to significantly lower levels in more recent years and that has had a flow through effect on the revenue side of the Budget. But when you look at the policy decisions of the Government, both on the spending side and on the revenue side of the Budget, the overall effect of policy decisions of the Government have continued to improve the Budget bottom line, and has again done that in this Budget.
RAFAEL EPSTEIN: But they haven’t improved debt and deficit have they? Three years ago you said the Budget was a ‘debt and deficit disaster’. Debt was 11.4 per cent of the economy, that slice of the economy, it’s going to be 19.2 per cent under you. Debt as a fraction of the economy, is going to go up, that is the exact opposite of what you spoke about at the last election. That is the exact opposite as to how you portrayed yourselves.
MATHIAS CORMANN: Well as a result of the decisions that we have made, debt as a share of the economy is lower than it would have been if we stayed on Labor’s policy settings, if we had not reduced the spending growth trajectory that we had inherited, if we had not put funding for a range of programs on a more sustainable foundation for the future. Labor is trying to have the argument both ways. They are trying to say that we have cut too hard and that we are spending too much... interrupted
RAFAEL EPSTEIN: I’m not talking about what Labor is saying, I am just holding you to your rhetoric.
MATHIAS CORMANN: But that is the implication of your argument... interrupted
RAFAEL EPSTEIN: No it is not the implication.
MATHIAS CORMANN: It is absolutely the implication of your argument, because in your proposition you are ignoring the effect of spending decisions that Labor made in their last Budget over the medium term. That is what you are ignoring. The truth is... interrupted
RAFAEL EPSTEIN: It was your Government and people like you Mathias Cormann, who told me we had a debt and deficit disaster at 11.4 per cent. Debt is going to be at its highest level since the 1950’s, it is going to be higher than that bequeathed to John Howard by Paul Keating. That is the direct opposite of what you spoke about at the last election.
MATHIAS CORMANN: We are in a much stronger position than we would have been if we had not made the decisions on the spending and the revenue side of the Budget that we have made, because there are always things that happen outside of our control. The reason why we said we needed to get spending under control is because we could see what was happening in the global economy. We could see that revenue was going to come under pressure and that it wasn’t the right time to make pie in the sky, unfunded spending promises on things like Gonski and funding for state hospitals beyond what was reasonably affordable. Now we have put some additional funding on the table which is affordable, which is paid for by spending reductions in other parts of the Budget. Labor is not able to fund the pie in the sky spending promises that they have made and that we have rolled back.
RAFAEL EPSTEIN: Mathias Cormann I don’t expect many people listening to follow every number, so if you’re listening at home and just tuning in now and catching just a few minutes of this interview, what does the Budget give the average family?
MATHIAS CORMANN: The Budget is our plan for jobs and growth. The Budget is our plan to successfully transition our economy from a resource investment driven growth to broader drivers of growth. Really the focus here is on making sure that every family across Australia has the best possible opportunity to get ahead because our economy is on the strongest possible foundation for the future.
RAFAEL EPSTEIN: Are you worried about Labor’s negative gearing policy? The Prime Minister Malcolm Turnbull was talking to Jon Faine this morning and he suggested that Jon Faine who, like me, we are at the higher end of the income scale, that he should simply help out his kids. That was the way his kids could get a foot on the ladder. If people with wealthy parents can’t get a foot on the property ladder, does that imply that you should be doing something on negative gearing?
MATHIAS CORMANN: Labor’s negative gearing policy is a very bad policy for Australia. It would drive down the value of established homes for everyone, it would increase the cost of rental accommodation and in the new property market it would actually increase the concentration of investors in relation to new housing... interrupted
RAFAEL EPSTEIN: But aren’t you just saying that people need rich parents to get property?
MATHIAS CORMANN: Which would make access to new housing less affordable for young people. The truth is that the way to increase affordability of housing for young people is to increase the supply of housing. That is the answer. In relation to Labor’s negative gearing policy, Anthony Albanese was telling everyone today that this was not related to the housing affordability issue in any event. If Labor was genuinely concerned about housing affordability with their negative gearing policy, why did they abolish negative gearing in relation to investment in shares? Why did they abolish negative gearing in relation to investment in a small business or commercial property? This is just an ill-thought out Labor Party cash grab targeting people in middle Australia that are trying to get ahead.
RAFAEL EPSTEIN: I think the Grattan Institute also said there isn’t going to be much of an impact on housing affordability. Final question Finance Minister, are you looking forward to the campaign?
MATHIAS CORMANN: Of course, I am looking forward to putting our plans for the next three years to the Australian people and to be judged on our record and we submit ourselves to the judgement of the Australian people.
RAFAEL EPSTEIN: Thank you for your time.
MATHIAS CORMANN: Always good to talk to you.