Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
Date: Friday, 28 October 2016
KIERAN GILBERT: Good morning and welcome to the program this Friday, as the Dreamworld operators Ardent Leisure facing criticism over its handling of the tragedy this week. Many questions around their response. One of them in relation to remuneration package of the CEO and should the AGM of Ardent Leisure have been considering this, just days after people lost their lives at Dreamworld. To discuss this and other issues of the week, I am joined by the Finance Minister, Mathias Cormann. First of all Minister your thoughts on this. The fact that the AGM considered the incentive package, the remuneration of the CEO within a couple of days of that tragedy at one of their theme parks on the Gold Coast.
MATHIAS CORMANN: It was an awful tragedy. Our hearts and prayers remain with the families of the victims, including the three public servants from Canberra. It was an awful event. An absolutely shocking and awful event. The timing is clearly very unfortunate. But I suspect that there will be a series of processes yet to play out in the coming days and weeks and indeed months to resolve what happened, who is responsible and to ensure appropriate action is taken.
KIERAN GILBERT: Yeah, but it is not just about the CEO obviously, I don’t want to make that a witch hunt towards that individual but as part of the corporate Australia, surely the board and others must have come up with the idea of at least having some sort of damage control and not even voting on that particular part of the incentive package for the chief executive days after there are other things obviously in the wake of what, as you say was such a tragic event. Doesn’t Corporate Australia, don’t we deserve better standards from them in relation to that.
MATHIAS CORMANN: I am sure that on reflection, the board would accept that what you are saying is right.
KIERAN GILBERT: Alright, okay let’s move on to the issue of terms of trade. I want to get a sense from you on the commodity prices, because we have seen the terms of trade climb in the last quarter by four a half per cent. Largely driven by our most important commodity in terms of revenue and that is iron ore. What is your feeling on this in the medium to longer term. Is it sustainable.
MATHIAS CORMANN: These are judgements that we will make as we put the numbers for the half yearly Budget update together. In any Budget, at any point in time, there is always a range of moving parts. You reconcile that once you have all of the necessary information to feed into your forecast assumptions. In relation to our terms of trade, it is true that global prices for some of our key commodity exports are better than what they have been. Over the next month or two we will make judgements on how that is most appropriately reflected in the Government’s assumptions moving forward.
KIERAN GILBERT: But there is obviously demand on one side to be sober in terms of your forecasts and not wanting to be too ambitious in terms of what price per tonne we will generate in terms of iron ore exports, but on the other side we have got ratings agencies wanting to look at what your mid year update is going to be saying as well in terms of our budgetary outlook. So it is a balance act in that sense isn’t it?
MATHIAS CORMANN: The Government always takes a prudent approach to these things. Treasury has got an established forecasting methodology. These are matters that relate to external factors. Global prices for our key commodity exports is not something that we control. Our focus, very much, to ensure that we are in the best possible position to maintain our AAA credit rating is to make the right policy decisions, to ensure that the decisions we make continue to improve our Budget position moving forward, continue to bring us back into Budget balance as soon as possible. When it comes to our terms of trade, when it comes to global prices we can achieve for our key commodity exports, certain judgements have to be made in relation to how sustainable current price increases really are into the future. These are always finely balanced judgements. The Government, this Government, takes a very prudent approach to this, to ensure that the assumptions that are underpinning our forecasts are based on the best available information at the time.
KIERAN GILBERT: And are you, what do you make of the comments of Nev Power the CEO of Fortescue Metals. He is a lot more optimistic about the outlook than others who are downplaying China’s demand for our iron ore into the foreseeable short to medium term.
MATHIAS CORMANN: I don’t have a crystal ball. Only the future will tell what the prices for iron ore and coal will be into the future. From where we sit, we see what everybody else sees. That is that global prices for some of our key commodity exports like iron ore and coal are better than what they have been. There is a methodology on how that is reflected in our Budget forecasts. We will consider very carefully what the likely future trends are going to be. But in the end, it is very difficult to predict with any precision what future prices will be… interrupted
KIERAN GILBERT: Sure.
MATHIAS CORMANN: There has been a level of volatility when it comes to prices for iron ore and coal in the past. Let’s just see where this all settles.
KIERAN GILBERT: Indeed, one thing, just my final question in relation to this specifically, that goes to where we started in relation to the credit agencies. Are you confident regardless of what number you put into your mid year economic update that we will retain our AAA rating?
MATHIAS CORMANN: All three major credit agencies have reconfirmed Australia’s AAA credit rating in the recent past. Our focus is to continue to manage the Budget responsibly. To continue to implement our plan to bring the Budget back into balance as soon as possible and to ensure that all of the policy decisions we make, the net effect of the policy decisions that we make continues to improve our Budget bottom line.
KIERAN GILBERT: Minister, let me ask you about the paid parental leave proposal. You’ve got Derryn Hinch saying he wants it delayed until at least July 30 of next year. Others saying October next year, so that women who are currently pregnant and planning their maternity leave that they are not adversely affected. What is the Government’s position on that? As a father of some young kids yourself, do you have some sympathy for them?
MATHIAS CORMANN: I understand the point of course, as we all do. This is a Budget measure that was announced some time ago. The starting date was a reflection of the timing when this measure was first released as part of the Budget and the half yearly Budget update last year. This has not been legislated yet. As is always the case depending on the timing of passing the legislation, that will inevitably have a bearing on the time it comes into effect. These are matters that are yet to be finalised. These are matters that are the subject of discussions with relevant crossbenchers in the Senate in particular. Again, let’s just work our way through the process.
KIERAN GILBERT: A delay is not a deal breaker for you on this?
MATHIAS CORMANN: The timing of a measure like this coming into effect is directly related to the timing of the legislation passing. So at this stage the legislation has not passed the Parliament even though it had been announced some time ago. The conversations continue, but we will not be conducting that negotiation with crossbench Senators or others through Sky News.
KIERAN GILBERT: That’s a shame...interrupted
MATHIAS CORMANN: I am sure you think that.
KIERAN GILBERT: Indeed, let’s move on to the welfare payments to some parents. In the Australian reporting this morning, Sarah Martin’s piece suggesting that some families, single parents in fact and others getting $45,000 a year tax free. Therefore there is no incentive, according to Christian Porter, les incentive to find a job. Isn’t it true though that if you are a single parent with four children for example that the childcare fees would swamp even $43,000 tax free or not?
MATHIAS CORMANN: What is true is that depending on your circumstances, depending on the number of children. If you receive parenting payments, family tax benefit payments, child care payments, the top 10 per cent of welfare recipients in that sort of circumstance can receive around about $45,000 a year. Our objective as a country ought to be to move welfare recipients where that is possible from long term welfare dependence to long term self reliance, by encouraging them and incentivising them into long term employment. That is the overall policy objective. That is based on better, more accurate actuarially driven information that Christian Porter as the Minister for Social Services is very much focused on.
KIERAN GILBERT: And Minister, finally Gina Rinehart’s fresh bid with her Chinese joint venture partners has been unanimously recommended by the Kidman board, this for the cattle empire, Australia’s largest. Do you or the government have a preference either way in terms of these bids before the board?
MATHIAS CORMANN: There was a competitive process there, which I am sure the Kidman board would have been very pleased about. It is a matter for the Kidman Board as to which bid they decide to proceed with. Depending on what the features of that deal are, the Treasurer may or may not have to get himself involved. I will leave that to him. But it is good to see that there is strong interest in Australian agricultural assets.
KIERAN GILBERT: Minister, Finance Minister Mathias Cormann, we will talk to you soon.