Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
MARIUS BENSON: Mathias Cormann, good morning.
MATHIAS CORMANN: Good morning Marius.
MARIUS BENSON: It’s a remarkable thing but it is only two years since the first Abbott – Hockey Budget and you are the sole survivor in a senior economic capacity in the Government from that time.
MATHIAS CORMANN: This is my third Budget, you are right.
MARIUS BENSON: And the third Budget, I mean the Government claims consistency in its Budget approaches, but in fact there has been this wild gyration. That first Budget two years ago was in response to a Budget crisis, a debt and deficit disaster. The opposite was the approach in 2015 last year, and now you have a mix of approach with one eye on the election clearly. So you’re just all over the shop.
MATHIAS CORMANN: I completely disagree with that characterisation. The Budget is our plan for jobs and growth and it is our plan to secure our transition from resource investment driven growth to broader drivers of growth in a diversified economy. It is also our plan to live within our means by getting the Budget onto a sustainable foundation for the future. If you look at the numbers, the Budget position is improving year to year. The deficit is improving both in dollar terms and as a share of GDP and we are doing it on the back of controlling expenditure, by making sure that expenditure as a share of the economy continues to track down, when what we inherited on coming into Government in 2013 was increasing spending as a share of GDP trajectory.
MARIUS BENSON: But in fact when you talk about things improving, you are talking about the prospect, you are not talking about the reality you’ve delivered over the past three years, because when you say you are living within your means, in fact the deficit is much worse, Labor says it has tripled.
MATHIAS CORMANN: Labor’s characterisation is false. Labor right now has got a Budget black hole of more than $50 billion to which earlier this week another $20 billion black hole was added because of an error in their tobacco excise costings. Going back to what we’ve done, the policy decisions of the Government improved the Budget bottom line. So to the extent that there is a variation it’s because of circumstances outside of our control. We have faced additional global economic headwinds. Everyone knows that…interrupted
MARIUS BENSON: Can I interrupt you there and say what might be in some listeners minds. Excuses, excuses, excuses. You watched Labor dealing with the Global Financial Crisis and you said that was no excuse for a better economic performance not being delivered. You’re now pointing to circumstances beyond your control as the reasons you haven’t delivered what you promised to deliver, in terms of everything really. Debt, deficit, spending, tax.
MATHIAS CORMANN: That is quite wrong Marius. When we came into Government we inherited a weakening economy, rising unemployment and a Budget position that was rapidly deteriorating on the back of an unsustainable spending growth trajectory. Now the economy is growing at 3 per cent. When we came into Government it was growing at 2 per cent in the previous 12 months. Employment growth is stronger. The unemployment rate at 5.7 per cent is well below what was anticipated at the time and spending growth has been brought under control. Instead of growing at more than 3.7 per cent above inflation, we’ve brought it down to below 2 per cent. Spending as a share of GDP, instead of heading for 26.5 per cent as what was predicted at the time, we have been able to halt the increase and we’ve been able to turn that trajectory around and are now on track to reduce it to 25.2 per cent and the Budget position is now on a credible path back to surplus.
MARIUS BENSON: Well spending, just the one that you isolated there, you said that you’re on track to reduce to 25.2 per cent. It’s 25.9 per cent, when you came in it was 25.6 per cent. You came in promising we will reduce spending, you have increased spending. You came in saying we will reduce tax, tax is now a higher proportion of the GDP than when you came in. You came in saying we will reduce the deficit, the deficit is up. You said you would reduce debt which was a killer, and debt is not only up, it’s still rising and will continue to rise.
MATHIAS CORMANN: You completely ignore the spending growth trajectory that we inherited from Labor... interrupted
MARIUS BENSON: I was concentrating on what you’ve actually delivered than what you’re promising.
MATHIAS CORMANN: Let me tell you exactly what we’ve delivered. Spending is lower than it would have been if we had not changed Labor’s policy settings as I’ve just indicated to you. You might remember that Labor before the last election, as they were about to lose the last election, locked in spending growth, in particular in years 5 and 6 outside of the published forward estimates at the time of the last election. We’ve been able to halt the growth in spending as a share of GDP which we inherited, which was taking us according to the National Commission of Audit to 26.5 per cent by 2023-24. We have been able to halt the increase, we’ve been able to turn that around and we are now heading for 25.2 per cent spending as a share of GDP. As a result of Budget decisions taken in this Budget, we are bringing spending down as a share of GDP to 25.2 per cent. The final point is that we are projected to go back to surplus in the exact same timetable as we predicted in our half yearly Budget update before Christmas.
MARIUS BENSON: When people hear you say there’s 3 per cent growth, which is entirely accurate, are they entitled to say ‘well what’s growing, it’s not my pay packet’ because wages are going nowhere, they have been flat lining for five years pretty much. Wages are going nowhere on your watch.
MATHIAS CORMANN: Low wage inflation and low inflation generally is one of the factors in helping us secure a successful transition from resources investment driven growth to broader drivers of growth. 3 per cent growth is double the growth rate of Canada, it is higher than any of the G7 economies like the United States, the United Kingdom you name it. It is well above the OECD average and given the particular challenges that we’ve faced as a trading nation with prices for our key commodity exports falling to the extent that they have in recent years, the Australian economy has actually performed exceptionally well. There is more work to do and that is why we’ve got our plan for jobs and growth. That is why we are working to make our tax system more growth friendly. That is why we are rolling out our innovation and science program. That is why we are rolling out our defence plan for local high tech manufacturing. That is why we’re pushing ahead with our export trade deals to generate new business opportunities. That is why we are so focused on a sustainable Budget with crackdowns on tax avoidance and also the better targeting of tax concessions, so there is a comprehensive plan here.
MARIUS BENSON: The former Prime Minister Tony Abbott condemned the proposal for an increase in tobacco excise as a workers tax and your trimming of super tax breaks as a wealth tax and you’ve increased the workers tax and the wealth tax in Tony Abbott’s terms.
MATHIAS CORMANN: We are not increasing the overall tax burden in the economy. In fact, we’re slightly reducing the overall tax burden in the economy, which helps to strengthen growth and job creation. If you contrast that with Labor’s plan, Labor is proposing to tax more to the tune of about $100 billion over the next decade and spend it all, in fact spend more so there would be more deficits and more debt. For us it is part of a plan to make our tax system more growth friendly, to ensure we raise the necessary revenue in the most efficient least distorting way in the economy and in a way that is also fair.
MARIUS BENSON: Do you think it’s going to do you some good in the election campaign?
MATHIAS CORMANN: That is entirely a matter for the Australian people to judge. We have done the best we can to put a good Budget together for Australia, a fair Budget together for Australia. We put ourselves in the hands of the Australian people in terms of their judgement at the next election.
MARIUS BENSON: Mathias Cormann, thanks indeed for speaking with News Radio this morning.
MATHIAS CORMANN: Always good to talk to you.