Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
Date: Wednesday, 5 October 2016
LEIGH SALES: The Finance Minister Mathias Cormann joins me now from Perth. Thank you for being with us.
MATHIAS CORMANN: Good to be here.
LEIGH SALES: Ian Narev said not a single worker had been sacked at CommInsure. What do you think of that?
MATHIAS CORMANN: I don't know that the number of workers sacked is a measure of the success in actually resolving legitimate grievances by bank customers... interrupted
LEIGH SALES: But who is accountable for the culture then?
MATHIAS CORMANN: Mr Narev is accountable for the culture at the Commonwealth Bank. His appearance at the House of Representatives Economics Committee inquiry is part of our efforts to ensure that the banks are directly accountable through the Parliament to the Australian public. In relation to CommInsure specifically, my advice is that these are reasonably recently revealed events that are subject to pretty comprehensive inquiries, including an inquiry by ASIC, which has been requested by the Government. I believe that Mr Narev today flagged that their own inquiries are ongoing and flagged further actions if appropriate.
LEIGH SALES: You said that this inquiry will deliver accountability, but in what way can this inquiry change anything for Australians who have been ripped off by banks? It is powerless, isn't it?
MATHIAS CORMANN: I don't accept that at all. It is important for us to ensure that those bank customers with legitimate grievances do have the most efficient way possible to resolve those grievances, initially through the banks. At present there is also a process through the Financial Ombudsman service. We have already said that the Government is open to look at how that process could be further improved. The important point is that a Royal Commission would not actually provide any resolution to aggrieved bank customers... interrupted
LEIGH SALES: We are not talking about a Royal Commission. We are talking about your inquiry.
MATHIAS CORMANN: These hearings through the House of Representatives Economics Committee is one part of an overall approach. We have given additional powers to ASIC. We have given additional resources to ASIC. There have been a whole series of previous inquiries including a comprehensive Senate Inquiry into the banking system, a Financial Systems Inquiry with about 43 recommendations, which we are currently in the process of implementing. This is not something that happens in isolation. It is one of a series of steps that the Government has taken to ensure that there is increased accountability by the banks towards their customers and the public.
LEIGH SALES: These hearings will go for three days. You have got four separate CEOs who represent millions of Australians. Individual MPs have 20 minutes each to ask questions. There is no way that can get through the full extent of what has gone wrong, can it?
MATHIAS CORMANN: Three hours per bank CEO is actually a pretty sizeable session. When you consider they ... interrupted
LEIGH SALES: They have got about 11 million customers each, don't they?
MATHIAS CORMANN: I don't believe that anybody is suggesting that there are 11 million customers all with individual grievances. We have to remember, banks fulfil a very important function in our economy, very important for customers, for savers, borrowers, small and medium-sized businesses and it is very important for the success of our economy that our banks are strong and stable and well regulated. If you look at the performance of Australian banks in the wake of the global financial crisis, where banks in other parts of the world were failing, our banks continued to perform strongly and came out of the global financial crisis quite well, compared to banks in other parts of the world. So ... interrupted
LEIGH SALES: Sorry, but if I can pick up on that point. Just because the banks performed strongly, that doesn't mean they have carte blanche, for example, to ignore when the RBA imposes an interest rate cut. That is something that Australians find hard to stomach?
MATHIAS CORMANN: You are absolutely right. They don't have carte blanche. We always need to review and assess whether the regulatory framework is appropriate, whether it can be improved, whether competitive tensions in the system can be improved, but in a way that doesn't undermine the stability and fundamental strength of the banks in our economy. Whether we can do better in ensuring that legitimate customer grievances, bank customer grievances, are resolved as efficiently and effectively and as swiftly as possible.
LEIGH SALES: Let me ask you about another matter. On Friday afternoon the Turnbull Government released the Final Budget Outcome for 2015-16 on the Treasury website. When you first came to power you projected that the 2015-16 deficit would be $17.1 billion. What you posted on Friday shows that actually in reality, what it turned out to be was $39.6 billion. How does the Coalition justify more than doubling the size of the deficit when you were elected on a platform of eliminating it.
MATHIAS CORMANN: There have actually been several Budgets and Budget updates since the one that you mentioned. We have explained in some detail how, for example, external global economic headwinds and their impact on global prices for key commodity exports and the like, impacted on our revenue collections in particular. If you look at... interrupted
LEIGH SALES: Sorry to pick you up on that point. I remember Wayne Swan when he was Treasurer making that point and the Coalition absolutely did not accept that. You said it was Labor's mismanagement and not external forces?
MATHIAS CORMANN: Labor made decisions, policy decisions, which had a negative impact on the underlying cash balance. All of the decisions of the Abbott and Turnbull Governments in aggregate have actually improved the Budget bottom line. To the extent that there has been a deterioration in the Budget bottom line, it is because of factors outside of our control, which would have happened irrespective of who would have been in Government. If you compare the Final Budget Outcome for 2015-16 compared to what was anticipated in May earlier this year, it is actually a slight improvement because we have spent several billion dollars less than what had been anticipated... interrupted
LEIGH SALES: Sorry for the constant interrupting. Is it not more useful though to compare over a longer period of time in what you said when you came to power versus what the actual results are after three years of Government?
MATHIAS CORMANN: What we have said is that we would continue to ensure that we get spending growth under control. If you look at the policy decisions that we have made, the things that the Government controls, the net effect of the policy decisions we have made is that we are spending less now than we would have spent if we had not made changes in policy settings. Yes, there has been ... interrupted
LEIGH SALES: Thanks for raising spending growth because I wanted to talk about that as well. In the final year of the Labor government, their spending was 24.1 per cent of GDP, your spending has now hit 25.7 per cent of GDP. Again, I ask, that is a worse position?
MATHIAS CORMANN: Again, we have had this conversation several times. The forward spending growth trajectory that we inherited from Labor was taking us to 26.5 per cent as a share of GDP and rising by 2023-24. There is absolutely no question that we have brought down the spending growth trajectory. That we are spending less than we would have. In fact, we have stabilised spending as a share of GDP at 25.8 per cent. It is now projected to come down to 25.2 per cent. Where we inherited a spending growth trajectory, locked into legislation from the previous Labor government, that according to the Intergenerational Report was actually taking us past 30 per cent over the next few decades. We have actually been able to stop the growth in spending as a share of GDP and started to bring that down moving forward.
LEIGH SALES: You are talking about the trajectory. I am just talking about the cold, hard figures of what you spending now compared to what Labor was spending at the time.
MATHIAS CORMANN: Leigh, the trajectory actually does matter because just before Labor lost government they legislated to lock in a pie in the sky spending growth trajectory across a whole range of areas, knowing that they wouldn't be responsible for it in government, because they were anticipating that they would lose the 2013 election. They locked into legislation spending growth. Labor can't have it both ways. They are trying to suggest that we ... interrupted
LEIGH SALES: I don't want to talk about Labor. I want to talk about you. Why do we need to talk about Labor's in your words pie-in-the-sky?
MATHIAS CORMANN: You are running their argument. You are running their argument.
LEIGH SALES: I’m not. I am quoting you the figures in the Budget papers, which is your spending today versus their spending in their last year of government.
MATHIAS CORMANN: The argument that you are running is essentially that we are saving too much and we are not saving enough. That is essentially ... interrrupted
LEIGH SALES: I am not running a line. I am giving you the actual figures.
MATHIAS CORMANN: What I am saying to you is that since we have come into Government the effect of policy decisions is we have stabilised the growth in spending as a share of GDP. It was heading to 26.5 per cent. We have stabilised it at a lower 25.8 per cent. Spending as a share of GDP is lower than it would have been if Labor had stayed in government. It is projected to come down to 25.2 per cent over the current forward estimates period.
LEIGH SALES: Senator Cormann, thank you very much for your time this evening.
MATHIAS CORMANN: Always good to talk to you.