Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
MATT: Mix 94.5 it’s 24 after 6, it’s Clairsy, Matt and Kymba here. The Budget’s been handed down, it’s Scott Morrison’s first. We’re in election mode of course with less than 60 days to what we talked about with the Federal poll. Let’s get a West Aussie Senator on the line and the Finance Minister of course. Mathias Cormann, good morning.
MATHIAS CORMANN: Good morning.
CLAIRSY: Now Mathias, how can giving a tax break to people earning over $80,000 a year boost more money into the economy?
MATHIAS CORMANN: Because it encourages people on full time average weekly earnings to work more, to earn more, because they don’t get hit with the higher 37 per cent tax rate. What we’ve set out do to is to ensure that people who are on full time average weekly wages don’t move into the second highest tax bracket over the next three year period, so that is the adjustment that we’ve made there.
CLAIRSY: So is $80,000 a year considered to be the average? Are we including FIFO workers, are they boosting our average or what?
MATHIAS CORMANN: Well $80,000 is the middle range when it comes to our marginal tax rates at present. The current full time average weekly earnings are just below $80,000 that’s right.
MATT: Now Minister Cormann, we know that you enjoy a few tokes on a stogie after a hard day’s work, and there’s nothing wrong with that. It seems over the last eight years the greatest minds in the economy, all they can come up with is raising the price of tobacco. Is it fair? It is essentially a poor tax?
MATHIAS CORMANN: One it’s a tax to encourage people to quit smoking, which is a good public health policy outcome and it does help raise additional revenue for Government. What we have done in this Budget is wherever we have increased revenue from one source, we have reinvested that into tax cuts in other parts of the economy. So what we focused on is making our tax system more growth friendly. We haven’t increased the overall tax burden in the economy, in fact it has come down slightly, which is part of our broader plan to strengthen growth and strengthen job creation.
MATT: Mathias when you walk into these top end of town lunches where the rich and influential are there, are you and the PM and Treasurer quite happy with the frowns because there will be a few of those with the changes to super for the rich retirees, won’t there?
MATHIAS CORMANN: We believe it was necessary to rebalance the tax concessions in the superannuation space to ensure that tax concessions in super are fit for purpose. We have got to remember that the whole purpose of superannuation and the reason why there is tax advantageous treatment of savings going into super is to provide an income in retirement to replace or to supplement the age pension. The change that we’ve made, for example limiting the amount of capital you can put into an income tax free retirement income account to $1.6 million, that impacts on 1 per cent of Australians with superannuation. All of our changes, 96 per cent of Australians with superannuation are either unaffected or better off as a result of the changes that we’re making to superannuation. So what we have set out to do really is to ensure that the tax concessions that are available are better targeted. Superannuation is not meant to be a tax effective intergenerational wealth transfer vehicle, it is very much meant to be a vehicle to encourage people to save during their working life in order to provide an income in retirement to replace or supplement the age pension.
CLAIRSY: It’s not easy to generalise, but who will feel the pinch the most from this Budget?
MATHIAS CORMANN: This is not your usual, typical giveaway and takeaway Budget. This is a Budget that presents our national economic plan for jobs and growth. It is about securing our transition from resources investment driven growth to broader drivers of growth in a strong and diversified economy. Western Australia in particular is on the front line when it comes to that transition. For most of the past decade, we have been the engine room of national economic growth. But right now, on the back of significantly lower prices for our key commodity exports like iron ore in particular, Western Australia is feeling the current economic transition acutely, which is why it’s so important that we continue to execute our plan for stronger growth and more jobs. For example, signing all these export trade agreements, giving our exporting businesses better access to markets in China, South Korea and Japan and looking now at India. That is why we are rolling out our Defence industry plan which provides great opportunities for businesses in high end manufacturing in Western Australia. That’s why we’re pursuing our innovation agenda and all of the other things that we are doing. But most importantly, it’s why we are pursuing a more competitive corporate tax rate to make our tax system more growth friendly.
MATT: Minister Cormann, good to catch up with you this morning and all the best. There’s a lot of chats you’ll be having with the press and the media around the country today.
MATHIAS CORMANN: Indeed. Great to talk to you.