Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
MICHAEL ROWLAND: The Treasurer speaking in the House of Representatives last night. We are joined now by his colleague, the Finance Minister Mathias Cormann, also heavily involved in the Budget. Good morning Minister, thanks for joining us.
MATHIAS CORMANN: Good morning.
MICHAEL ROWLAND: I want to start, shake it up a bit with what happened outside this building yesterday. The Reserve Bank board decided the cut to official interest rate to 1.75 per cent. That is not exactly a vote of confidence in where the economy is going?
MATHIAS CORMANN: As the Reserve Bank stated, this is an indication of our rebalancing economy and they were obviously focused on the low inflation rate. I might just say, we already factored market expectations on interest rates into our Budget numbers. So there was obviously a wide expectation there would be a rate cut.
MICHAEL ROWLAND: Reserve Bank boards don't cut rates though, if they're completely happy and have a rosy outlook for the economy.
MATHIAS CORMANN: The economy in Australia is growing at about 3 per cent, which is stronger than any of the G7 economies, it is double the rate of growth in Canada. So Australia has been working through the transition from resource investment driven growth to broader drivers of growth in a very good way compared to other parts of the world. Our Budget is our plan for stronger growth and more jobs, our plan for securing that transition from resources investment driven growth to broader drivers of growth in a diversified economy.
MICHAEL ROWLAND: Is the 3 per cent forecast in the out years a bit too optimistic?
MATHIAS CORMANN: That is the forecast that is based on Treasury advice and we are actually implementing a plan for jobs and growth that is designed to help us do better than that.
MICHAEL ROWLAND: Let's look at some of the details now. Where is the fairness in not giving a tax cut to the 70 per cent of workers who earn below $80,000 a year?
MATHIAS CORMANN: We have very much focused on making our tax system more growth friendly. We have done as much as we could sensibly afford. We always would like to do more on the tax cut front. You have to remember that when we came into government we abolished the carbon tax and there was a significant level of carbon tax compensation by way of income tax cuts for people below $80,000, which we have effectively changed into a genuine tax cut. For example, the tax free threshold for low income earners was nearly tripled to $18,200.
MICHAEL ROWLAND: That was then, and this is now, excuse me for interrupting. There is nothing for those on low to middle income earners in this Budget.
MATHIAS CORMANN: There is stuff in here for low income earners. We have very much focused on making sure that for example, in relation to superannuation, the policy settings we have provide quite a bit of support to ensure in particular, that low income earners have the capacity to save more for their retirement. Across the board, our focus has been on how we can make our tax system more growth friendly as part of our overall plan for jobs and growth. That means that we focused on making sure that fulltime average weekly earners are kept out of the second highest tax bracket for the next three years. That is why we have lifted that particular tax bracket from $80,000 to $87,000, making sure they don't pay more than 32.5 per cent tax. That is also why we have put together our 10 year enterprise tax plan, bringing down the corporate tax rate over 10 years to 25 per cent which will help us attract more investment, help us boost productivity, help us create more jobs and over time increase real wages. That is in the interest of low and middle income earners wanting to get ahead.
MICHAEL ROWLAND: I just want to touch on the company tax rate shortly, but just sticking finally with the raising of that threshold, it equates to about $6 a week tax cut. We had the awkward situation with the Treasurer last night even playing down this, saying it wasn't, in his words, a great big tax cut. Something you never hear a Treasurer say, especially on the eve of an election campaign.
MATHIAS CORMANN: There is nothing awkward about it, it was just honest. We have said all the way through that our instinct always is to ensure that taxes are as low as possible, but we also always said we would do as much as we could sensibly afford. Our focus very much was to ensure that the average full time weekly earner across Australia, who aspires to earn more, doesn't get hit with more taxes as a result of wanting to stretch themselves. We have worked to ensure that those people are not going to get into the second highest tax bracket, being penalised for additional effort over the next 3 years.
MICHAEL ROWLAND: You want to get the tax company rate for all businesses down to 25% within a decade. That is a long period of time Minister. Is that too optimistic an aim?
MATHIAS CORMANN: It is a 10 year plan. It's laying out very openly and transparently what we believe can sensibly be achieved and can help us boost jobs and growth. A more competitive corporate tax rate does helps us to attract investment, it does help us boost productivity and does help us increase the level of job creation and over time helps us increase real wages and as such, living standards across Australia. That is what we believe is what is needed in Australia right now.
MICHAEL ROWLAND: Labor has already flagged it is going to be blocking some elements of that company tax reduction because it's concerned about the thresholds that small businesses will now have to meet. Where does that leave your plan?
MATHIAS CORMANN: I think Labor is getting ahead of itself. There will be an election before these matters are put to the Parliament. These are all matters for the Australian people to adjudicate at the next election. We are putting ourselves into the hands of the Australian people to decide what they want to see. If they want to see a more growth friendly tax system, if they want to see our plan for jobs and growth implemented, if they want to see our plan to help secure a successful transition from resource investment driven growth to broader drivers of growth and more diversified stronger economy, if they want to see that implemented we will ask them for their support at the next election.
MICHAEL ROWLAND: Mathias Cormann Finance Minister, thank you very much for joining breakfast this morning.
MATHIAS CORMANN: Always good to talk to you.