Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
PETER VAN ONSELEN: The big news from the week, well really, it has been the Budgie Nine and that international furore around their antics in Malaysia. But in between times, we’ve had the banking inquiry get underway as the House of Representatives Committee grills the CEOs from the Big Four. We’ll talk a little about that. But of course we’ve also had the reality that we are now creeping up towards the end of the year, when will MYEFO be released Well we will find out very shortly from the Finance Minister, Mathias Cormann. Well we will at least try to find out. Let’s bring him in now. Senator Mathias Cormann live from the great state of WA. Thanks very much for your company.
MATHIAS CORMANN: Good to be here.
PETER VAN ONSELEN: When will MYEFO be released? Is it sort of going to be the usual practice in terms of timing later this year?
MATHIAS CORMANN: It will be later this year. If you look at the Charter of Budget Honesty there are certain requirements there as to when it has to be released. Under our Government, we have released it every year in the middle of December, thereabouts. The reason for that is that we are always keen to ensure that the economic data from the National Accounts for the third quarter can be included into the forecasts and the assumptions. That comes out around about the first week of December.
PETER VAN ONSELEN: The Budget Outcome of about $40 billion deficit was released late on Grand Final eve Senator. Maybe I am a little too cynical but one of the things that I revealed, was that spending was at 25.7 per cent of GDP. Now that was only higher than that once during the life cycle of the Labor years, during the GFC. That is obviously a rate that has to massively come down isn’t it?
MATHIAS CORMANN: It is less than when that 2015-16 Budget was released. It is less than what was anticipated at the time of this years’ Budget. Spending is actually down further. The only reason that the improvement to the Budget bottom line compared to what was released at Budget time earlier this year wasn’t better was because revenue was down quite a bit as well, because of economic conditions. When we came into Government… interrupted
PETER VAN ONSELEN: But you would agree though Senator, you would agree though wouldn’t you that in terms of the actuals, spending at 25.7 per cent, that the Labor years spending as a share of GDP was only higher than that once during the actual and that was during the GFC.
MATHIAS CORMANN: When we came into Government, we inherited a forward spending growth trajectory taking Government spending as a share of GDP to 26.5 per cent by 2023-24 and rising. The Intergenerational Report showed that it was expected to increase past 30 per cent as a share of GDP. That was because of spending growth decisions that the previous Labor Government had locked into the budget, in legislation or had reached agreements on with State and Territory Governments and the like. We have been bringing that down. We have been able to stabilise spending as a share of GDP. As you say in 2015-16 it came in at 25.7 per cent. Below the 25.9 per cent that was anticipated at the time of the original Budget. Below the 25.8 per cent that was anticipated in the Budget earlier this year. Over the forward estimates we are projected to bring spending as a share of GDP down to 25.2 per cent. So instead of continuing to increase, as was the trajectory under Labor, we have been able to stabilise it. We are now projected to bring it down. That is as a result of the decisions that we have made at Budgets and Budget updates since we came into Government in September 2013.
PETER VAN ONSELEN: Presumably you will need to find more saves, find more cuts in MYEFO later this year though for that downward trajectory that you talk about to meet the targets, particularly given when we think about some of those zombie measures that are stuck in the Senate. Nothing you can do about that. But they are stuck.
MATHIAS CORMANN: I don’t agree and accept that description at all. If you look at what has happened over the last two or three years, a whole series of savings measures that Labor initially opposed and opposed for quite an extended period of time, eventually ended up supporting and voting in favour of. Our plan is reflected in the Budget. The Budget shows that spending as a share of GDP is projected to come down to 25.2 per cent at the end of the forward estimates period. Having said that, from time to time, governments face spending pressures and have to deal with urgent and important priorities. The discipline that we always impose on ourselves and that is a discipline that we have imposed on ourselves all the way through, is that whenever there is a need to incur additional expenditure on a higher priority area we need to more than pay for that with savings in other parts of the Budget. That continues to be part of our fiscal discipline moving forward.
PETER VAN ONSELEN: One of your colleagues on the House of Representatives Committee that was grilling the Big Four bank CEOs during the week he said, I think it was to the nab CEO, he said we can do this the easy way or we can do it the hard way. It is not the wild west is it, when the CEOs are fronting this inquiry?
MATHIAS CORMANN: The bank CEOs appearing before the House of Representatives Economics Committee is part of an overall approach. It is part of making sure that the banks are accountable through the Parliament to the Australian people. I thought that this was a very productive exercise this past week.
PETER VAN ONSELEN: Most commentators don’t agree though Senator. You might think it was productive, but most commentary that I have read about it was suggesting that it was a bit of a show trial really and a bit of grandstanding and an example that both major parties are now hitting the populist button when it comes to the banks.
MATHIAS CORMANN: I reject that. As far as we are concerned, we think that it is clearly very important for us that we have strong and stable, well regulated banks. We also need to ensure that there is public confidence in the banking system. So from time to time, when things go wrong, when the banks don’t deal with certain issues in an appropriate way, then we need to consider how regulatory arrangements can be improved. The Turnbull Government has done that. We have increased resources for ASIC. We have increased the relevant powers for ASIC. We are looking at how we can ensure that legitimate customer grievances that customers might have with banks from time to time can be more efficiently and more effectively resolved. We don’t support a Banking Royal Commission because we think it would recklessly and irresponsibly undermine confidence in our banking system, without actually achieving anything beneficial for bank customers with legitimate grievances. We are focussed on taking action to resolve issues where they occur, while preserving the fundamental importance, which is a strong and stable banking system.
PETER VAN ONSELEN: Well, Malcolm Turnbull, he said that the 45th Parliament will be a Parliament judged on achievements. What are the achievements from holding the banking inquiry?
MATHIAS CORMANN: This is a part of an overall approach. Our focus is on making sure that there is strong public confidence in our banking system. That we have a strong and stable banking system, which is a key pillar to our future economic success. To ensure that wherever there are legitimate grievances, legitimate issues that need to be addressed, by putting the spotlight on them, that provides the context and the environment in which any such issues will be addressed. Preferably, there is a job here for the banks themselves. The banks increasingly are embracing the need for that. There is a job for policy makers and regulators. We have taken action already. There are more things that are underway.
PETER VAN ONSELEN: What more can happen here. Because Labor hasn’t reduced its call for a banking Royal Commission and whilst that might be expensive, it might take time and I don’t disagree that it is a form of populism. I don’t actually see what the Government can do to quash community support frankly for a Royal Commission into the banks.
MATHIAS CORMANN: Labor is pursuing a political strategy. They are entirely focussed on their political self interest. Bill Shorten knows that a Banking Royal Commission would actually not help bank customers with legitimate grievances. What we are focussed on is on how we can further improve on existing processes to resolve legitimate grievances of bank customers. There is a process currently in place for alternative dispute resolution through the Financial Ombudsman Service. We are exploring, and that is a matter of public record, how that process can be further improved to ensure that the resolution of customer grievances, of legitimate customer grievances is as efficient and as effective as possible.
PETER VAN ONSELEN: Alright, let’s move to some other issues. Jack Walker, how on earth did that member of the Budgie Nine ever get through the star chamber process. I saw reports that he would have been rejected under Peta Credlin’s watch when she was looking after the star chamber. But he managed to get through the moment that there was a change of Prime Minister. Is this something that needs to be tightened up, looking forward?
MATHIAS CORMANN: I am not sure that that is right the way you described it. I feel sorry for Jack Walker, I have got to say. By all accounts he was a very good staffer who had a lapse of judgement overseas. On the face of it he has paid a high price. As I understood it, he had been working for our Government back since 2013, straddling both administrations so to speak. I hope that he has a great and successful career moving forward. We certainly wish him all the best. I feel a bit sorry for him.
PETER VAN ONSELEN: He has paid a high price. And as you say he has now tendered his resignation. Someone that hasn’t though is that hasn’t is the US Presidential candidate Donald Trump. And Donald Trump’s antics are much more than misdemeanours you would have to agree. Now I know that is common practice for politicians not to necessarily comment on politicians in another country. But surely Senator, this a point of exception, isn’t it. Surely it is time for all senior politicians around the world to call out Donald Trump, now that we have seen some of the commentary that surfaced that he has said.
MATHIAS CORMANN: His comments are absolutely terrible. As I understand it, he accepts that they were entirely inappropriate and has apologised. I will let our friends in the United States resolve the contest for the US Presidency in the United States according to their process.
PETER VAN ONSELEN: But you must have an opinion, I mean we have seen just this morning, John McCain …
MATHIAS CORMANN: I have just expressed my opinion. I have just expressed my opinion.
PETER VAN ONSELEN: But beyond that, what about whether he should step down or not. Senator John McCain of all people has now withdrawn his support. I mean, should the Republicans think about this?
MATHIAS CORMANN: Senator John McCain as a senior United States Senator has a direct stake in this process. That is appropriately a matter for him. As it is appropriately a matter for our friends in the United States to resolve the election of a new President of the United States through their processes. As far as I am concerned, I have already said to you, the comments were outrageously inappropriate. As I understand it, Donald Trump accepts that as well.
PETER VAN ONSELEN: Do you have concerns though, just as a last question on this, do you have concerns that if someone like Donald Trump becomes President of the United States for all manner of other policy issues, with someone, a man of that type being in a position such as that?
MATHIAS CORMANN: I will let the people in the United States decide who they want to be their President. It is very important for Australia that the Australian Government works well, as I am sure we will, with whomever the American people choose to be their President.
PETER VAN ONSELEN: Alright, let’s move back to domestic politics if I can. You are the Deputy Leader of the Government in the Senate, the leader of the Government is George Brandis. There has been a furore during the week in a he said, she said between himself and the Solicitor General, with the allegation that the Attorney General George Brandis misled Parliament. Those two can’t work together from here can they. Surely, it is clearly toxic.
MATHIAS CORMANN: Firstly, there is absolutely no doubt that George Brandis did not mislead Parliament. It is a matter of record that George Brandis did consult the Solicitor General. Beyond that, it is… interrupted
PETER VAN ONSELEN: But that is not what the Solicitor General says.
MATHIAS CORMANN: All I can say to you is that, if you look at what has actually occurred, it is very clear that Senator Brandis, George Brandis, did consult the Solicitor General. Beyond that, it is now a matter that is being considered by a committee of the Senate. I will leave it to the committee of the Senate to assess the evidence.
PETER VAN ONSELEN: But you say it is clear, but the Solicitor General doesn’t believe that he was consulted on the terms that George Brandis claimed in Parliament.
MATHIAS CORMANN: Again, I am not going to speak for the Solicitor General. It is a matter for him to explain himself. As far as I am concerned, he was 100 per cent … interruped
PETER VAN ONSELEN: But he has hasn’t he. He said that George Brandis is wrong and therefore may well have misled Parliament.
MATHIAS CORMANN: I am not going to speak for the Solicitor General. What I can say to you, what I have said several times now, is that it is 100 per cent certain that the Attorney General George Brandis did consult the Solicitor General in relation to the particular question at hand. The information that George Brandis gave to the Senate was accurate.
PETER VAN ONSELEN: But not according to the Solicitor General.
MATHIAS CORMANN: If you want to pursue this further with the Solicitor General, feel free.
PETER VAN ONSELEN: You mentioned that a Senate committee is looking into this and that is the process from here. If that committee finds against the Attorney-General should Senator Brandis step aside?
MATHIAS CORMANN: No. All of us, whether it is George or myself, or anyone in the Cabinet, we all serve at the pleasure of the Prime Minister. George is doing an outstanding job as the Attorney General of the Commonwealth of Australia. I would expect him to continue to serve with distinction.
PETER VAN ONSELEN: You are the Deputy Leader in the Senate. If he does step aside, are you ready to take over?
MATHIAS CORMANN: That is not a matter that is in front of us at all.
PETER VAN ONSELEN: Fair enough. Let’s move to reneweables. I was away last week, and my colleague Kieran Gilbert spoke to Josh Frydenberg, the relevant Minister on this program about it. But before that Barnaby Joyce had actually come out and claimed that the power outage in South Australia was a consequence of an oversubscription or dependence on renewables. Do you concur with that?
MATHIAS CORMANN: There is no doubt that some states and South Australia is one of those very aggressively, too aggressively pursued a ramp up in renewable energy without paying enough attention to the need for stability in the system. On Friday, the Council of Australian Governments of Energy Ministers from around Australia met and reconfirmed, very importantly, that the number one priority for all governments around Australia is the need to ensure energy security. Second, affordable access to secure and reliable supply of energy. Followed by a focus on meeting our emissions reduction targets. What we need is a properly coordinated approach at a national level, not individual states going off and pursuing more aggressive targets putting energy security at risk.
PETER VAN ONSELEN: Having said that though Senator, when Barnaby Joyce tried to link the power outages in South Australia to their push towards renewables, there is no causeal link there though is there. Josh Frydenberg seemed to walk back from that statement. You can have whatever view you want about their renewable policy, but it wasn’t connected to the outages that occurred.
MATHIAS CORMANN: What triggered the outage was a weather event, an extreme weather event. But having said that though, because of the decisions that were made by the State Labor Government in South Australia to pursue very aggressive renewable energy targets it is certainly true that in the context of what was an extreme weather event the system wasn’t stable enough. A whole state lost access to energy. That is an entirely unsatisfactory situation. It is something that needs to be properly reviewed and needs to be properly addressed. It is completely unacceptable surely, for a whole state and every business in that state and every household in that state to lose access to energy. If you want to attract investment, if you want to attract future economic activity, reliable access to competitively priced energy supply surely is an important feature of what you need to be able to put on the table.
PETER VAN ONSELEN: Can we just move back to your broader portfolio of finance. Looking forward is it enough for the Government just to continue with the agenda that it has laid out to try to return the Budget to surplus, much less start to try to pay back debt? Or do you need further weighty reforms?
MATHIAS CORMANN: Our plan is reflected in the Budget. But, at every Budget and Budget update there is further refinement of the strategy. That is what will happen again in our half yearly budget update before Christmas and that is what will happen in next years’ Budget.
PETER VAN ONSELEN: So there are plans afoot, there are further reform plans afoot, Senator?
MATHIAS CORMANN: Again, what I'm describing to you is business as usual. In between Budgets and Budget updates you review all of the challenges coming your way in terms of the global economy, in terms of what is happening in the domestic economy. You assess the spending pressures that come your way and you make judgements on how best you are able to make it all add up. That is a perpetual process. Right now though our focus is on implementing the plan for our economy and jobs that we took to the last election. This week we will be seeking to legislate personal income tax cuts. We will be seeking to legislate the protection of the Country Fire Authority from a hostile union takeover. We will be seeking to legislate our ten-year enterprise tax plan. We are getting on with the job of implementing our plan for the economy, our plan for jobs and growth. But as time goes by we will continue to review the environment, we will continue to review the opportunities and challenges that present themselves and we will continue to make decisions on the best way forward, which are reflected in our Budgets and Budget updates as we work our way forward.
PETER VAN ONSELEN: As the Finance Minister along, no doubt with the Treasurer, you would get weekly mud maps of how you are going in pulling together the Budget. Are you on track, I guess is my question, on track from what we had just before the election at Scott Morrison’s first Budget with the forward projections over the four years.
MATHIAS CORMANN: The most recent update we have released is the Final Budget Outcome for 2015-16. What that shows is that expenditure was quite a bit lower than anticipated, revenue was down as well and there was a slight improvement to the budget bottom line compared to what was anticipated at Budget time. Beyond that in terms of the 2016-17 forward estimates, the next update will be the half yearly budget update before Christmas. We do not provide running updates on a weekly basis. We provide budget updates in the half-yearly Budget update. In between that time we do provide monthly financial updates on how the Budget is tracking and that shows that we are on track.
PETER VAN ONSELEN: And just finally Senator before I let you go, again sticking to the theme of looking at the forward estimates I suppose. Well we’re going to get MYEFO later in the year, there are, if you like headwinds in the global economy. From the Government’s perspective, how important is it that you are seen to be reducing debt, or reducing the size of the deficit, that would be a better way to put it, year on year come budget time? I would assume that is an absolutely critical priority for the Government, even if you don’t get to surplus when you’re forecast to, you need to bring down the size of the deficit year on year. Would that be a fair descriptor?
MATHIAS CORMANN: Firstly, Government debt is lower than it would have been if Labor had stayed in Government and we had not changed Labor’s policy settings. Over the Budgets and Budget updates at the time of the election, the policy decisions we made, left the Budget bottom line better off over that forward estimates period by about $10 billion. But over the period to 2026-27, the policy decisions we made left the Budget bottom line better off to the tune of about $220 billion, which means that Government debt over that period will be lower to that extent, lower than it would have otherwise been. Our intention and our commitment is to implement the plan we took to the last election and that does show a reduction in the size of the deficit in both dollar terms and as a share of GDP and for us to return to balance within a five year period.
PETER VAN ONSELEN: Sure, but just on that. It’s one thing to try to get the Budget in that five year period back to balance, it’s a whole other thing to then start paying off what will be nearly a trillion dollars worth of accumulated debt. When you look at the graphic, you would well know the one I’m talking about Senator, the one in the last Budget that goes well out to the ten years, it shows you getting to that wafer thin surplus and then it is a horizontal line in terms of the size of the surplus thereafter year on year on year on year. Now if that’s the case, a horizontal line with the wafer thin surplus, even if every estimate comes true in terms of growth and all the rest of it and you have a wafer thin surplus ad infinitum into the future, how do you ever pay back a trillion dollars in debt?
MATHIAS CORMANN: You are certainly right to say that over the medium term the Budget is projected to be in surplus all the way to 2026-27. Again as I have indicated to you, because of the efforts that we have made so far, debt is significantly lower than it would have been. But we have to keep working. We have to keep working to make further progress. That is going to happen over the months and years ahead.
PETER VAN ONSELEN: Finance Minister Mathias Cormann, we appreciate you finding the time, particularly at the early hour of the morning over there in WA to talk to us. Thanks very much.
MATHIAS CORMANN: Always good to talk to you.