Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
KIERAN GILBERT: Joining us live from the front of Parliament House on the lawns, we’ve got the Finance Minister Mathias Cormann. Let’s start with one thing Chris Bowen just told Brooke and I, here in the studio Minister, and this was essentially that the corporate tax cut across the decade isn’t funded, that the Government hasn’t said how you are going to pay for it. How will you pay for it?
MATHIAS CORMANN: Well he is completely wrong. If you look at the costings in our Budget, what you will see is that as a result of Government policy decisions, including our decision to introduce a more competitive corporate tax rate, we actually improved the Budget bottom line. The net effect of all of our policy decisions made in this Budget actually improves the Budget bottom line. A more competitive corporate tax rate helps us attract more investment, it helps us improve productivity, it helps us create more jobs and it helps us over time increase real wages, which is exactly what we need for stronger growth and more jobs. That is why we are doing it. This is part of our overall national economic plan to help us secure our successful transition from resource investment driven growth to a more diversified strong economy of the future.
KIERAN GILBERT: So in terms of funding the corporate tax cut, down to 25 per cent in a decade and the glide path in the meantime, as the Treasurer calls it, you are going to be relying on growth to do that? Because economists, some are suggesting that 3 per cent growth target is heroic.
MATHIAS CORMANN: 3 per cent growth is actually the most recently reported growth over the most recently reported 12 month period in the National Accounts, which is twice the growth rate of Canada. It is higher than any of the G7 economies. What we are setting out in this Budget is to keep jobs and growth going and to indeed ensure that we continue to successfully transition the economy. Now I say it again, over the forward estimates, all of the Government’s policy decisions including our decision to lower the corporate tax rate, our 10 year enterprise tax plan, actually improve the Budget bottom line by about $1.7 billion. The costings are reflected over the medium term and we are funding these tax cuts by making changes in other parts of the tax system.
BROOKE COURTE: We are relying therefore as we are talking about then, on growth to improve the outlook for it. There are so many potential shocks down the line for us though, global shifts, you could see consumers dramatically then change their behaviour for whatever reason, down to the way the banks change rates in the economy. Do you think that the fiscal structures are strong enough if there are external shocks, because the ratings agencies say we look still a little bit vulnerable on that front?
MATHIAS CORMANN: It’s exactly for that reason, because of the global economic headwinds, because of the potential for external shocks, that we need to ensure that the Australian economy is as strong, as competitive, as productive and as innovative as possible. It is exactly for that reason that we need to ensure that among other things, our corporate tax rate is internationally competitive. Bringing it down over a decade to 25 per cent in a measured, affordable and careful way brings us back to the middle of the pack of OECD countries. Right now, our corporate tax rate is relatively high by international standards. What we are doing, is making sure that the Australian economy is as competitive as possible and that we can do as well as we possibly can on jobs and growth.
KIERAN GILBERT: You and the Treasurer in the lead up to the Budget said you wouldn’t do anything that would retrospectively hit superannuation. But I think viewers this morning who have maybe $2 million, or upwards of $1.6 million in their superannuation nest eggs, or planning to put into their superannuation upwards of $500,000 in the next couple of years, if they’ve got the resources to do that, but if they’ve already put in $200,000 in the last 12 months they won’t be able to do that. This is retrospectively hitting the nest eggs of Australians and their retirement plans isn’t it?
MATHIAS CORMANN: No we don’t accept that at all. We are making changes that take effect in the future. For example in relation to our $1.6 million transfer cap into a tax free retirement income account. If you have as you say $2 million in super, you would have to keep $400,000 in your accumulation account where it continues to attract a lower tax rate of 15 per cent. But the important point here is that this is a tax change in relation to income generated in the future. There are no penalties in relation to the capital base. There is no suggestion that somehow any capital is retrospectively taken away through a wealth tax. This is a tax change which applies to income generated in the future. The important point is that this actually impacts on just about 1 per cent of Australians with superannuation. Overall, all of our changes in superannuation either do not impact or leave about, well 96 per cent of people with superannuation are either not impacted at all, or are better off. So it is a very small part of the population here that is impacted. This is part of our efforts to ensure that tax concessions in superannuation are better targeted, are fit for purpose and of course the purpose of superannuation being to provide an income in retirement to replace or supplement the pension, not a tax effective wealth transfer vehicle between generations.
KIERAN GILBERT: But some retirees, or soon to be retirees will have to rework their plans won’t they, and nest eggs that are already in their superannuation accounts. That’s a fact. So how’s it not retrospective?
MATHIAS CORMANN: After every Budget, people across Australia will look at what the opportunities are for them to maximise their personal circumstances. I would expect that this Budget is no different as every Budget before it. When it comes to superannuation, the policy changes in this Budget, in particular the policy changes on the tax side, are all taking effect in the future. This includes the change to the transfer cap, this includes the change to lowering the concessional contributions cap and the various other changes that you’ve mentioned.
BROOKE COURTE: Minister, can I ask on the RBA. Yesterday we know they cut rates and economists are saying rates moves are like cockroaches, you always see another one after the first. So there could be more to come. Will the Government name the RBA successor before the election is called, in order to give some clean air for the RBA to make the moves that it wants?
MATHIAS CORMANN: The Reserve Bank makes these decisions independently and that is a very important feature of our system. What the RBA noted yesterday is that the Australian economy continues to rebalance, they pointed to the low inflation figures which came out the other day. Incidentally, in our Budget numbers, we already reflected market expectations on interest rates in our Budget numbers. The market had expected that a rate cut would occur so that is something that we had already factored in.
BROOKE COURTE: So will you name the RBA successor by the end of the week?
MATHIAS CORMANN: The RBA successor is a matter for the Treasurer and the Cabinet to decide and I’ll leave the announcement timing to him.
BROOKE COURTE: Quickly. Markets expect to see who replaces Glenn Stevens.
KIERAN GILBERT: There we go Minister, thank very much for that.