Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
Date: Friday, 25 November 2016
KIERAN GILBERT: Joining me now the Finance Minister, Mathias Cormann. Minister thanks so much for your time. Rob Stokes, the Baird Government Minister for Planning, today is going to make an argument which is much more aligned to the message we heard there from Anthony Albanese than that by Kelly O’Dwyer.
MATHIAS CORMANN: The truth is that if you want to improve housing affordability you have to increase housing supply. The State Government in NSW is in the driver’s seat when it comes to improving planning and zoning regulations, promoting higher density housing and greater diversity of housing options. If you were to make the sorts of changes that Labor was proposing to negative gearing in the lead up the last election, you would reduce the level of investment into rental accommodation, which as a part of the basic laws of supply and demand would drive up the cost of rental accommodation and would make housing for a significant proportion of the community less affordable. So that is certainly not the answer. In the lead up to the last election, our Government made it very clear, made a clear commitment, an emphatic commitment to the Australian people that we would not make these sorts of changes to negative gearing that Labor has been proposing. We will keep the current arrangements in place.
KIERAN GILBERT: Rob Stokes believes you should rethink that. He says, and this goes to the issue of supply that you are talking about, in this speech he says, why should you get a tax deduction on the ownership of a multi-million dollar holiday home that does nothing to improve supply where it is needed, we should promote investment in the type of housing that is needed by the burgeoning populations in cities like Sydney. So clearly he believes that the tax mix is also important in terms of driving that supply that you talk about.
MATHIAS CORMANN: The truth is that additional investment into housing supply does have a very beneficial effect in terms of keeping rental accommodation prices lower than they otherwise would be. If you reduce the level of investment into rental accommodation, which would be the effect of making the sorts of changes that are suggested here in relation to negative gearing, then you would push up the costs of rents. The truth is, the concept of negative gearing, what this is, it enables Australian families, predominantly incidentally middle income families, to leverage the value of their existing homes, the value of their existing income into investments into additional income producing assets. That is a very longstanding way for people across Australia to get ahead, teachers, police officers, ambulance drivers, you name it, medics. This is not something that is accessed by the top end of town, this is something that is predominantly accessed by middle income families across Australia. It helps to keep rental accommodation more affordable than it otherwise would be.
KIERAN GILBERT: So you’re ruling out any move on this front? Any reconsideration at least in the margins of this, particularly in the context of Rob Stokes comments?
MATHIAS CORMANN: Rob Stokes should focus on his responsibilities as the State Planning Minister in New South Wales, where he is in the driver’s seat to ensure that housing supply can be increased in the great state of New South Wales, to improve housing affordability. He is in the driver’s seat when it comes to improving planning regulations, zoning regulations, pursuing higher density housing, a greater diversity of housing options. The States, when it comes to increasing the supply of housing are very much in the driver’s seat. The Commonwealth is always very keen to work with them. But the suggestion that somehow increasing taxes and making rental accommodation less affordable is the right way to go, we completely reject. We made very emphatic commitments in this regard to the Australian people before the last election. We completely stand by those commitments.
KIERAN GILBERT: My colleague Peter van Onselen in his recent book, wrote that the Prime Minister and the Treasurer both suggested and argued within the expenditure review committee that the Government should look at this area of negative gearing, but you and others in the ERC essentially argued against it, over-ruled it, that case. Why are you so opposed to it?
MATHIAS CORMANN: You shouldn’t believe everything that you read either in the media or in books. I never comment in relation to what is discussed in Cabinet or expenditure review committee meetings. Not to journalists and not to book authors. I will stick to that rule.
KIERAN GILBERT: But okay, so just to clarify no movement on this issue though, you are not going to budge. Despite, you say the planning minister should focus on his job. He would say that he is focussing on his job, but tax is part of the overall mix here. But you’re not going to budge.
MATHIAS CORMANN: As I have several times now this morning. We have made very firm commitments to the Australian people before the last election. We will deliver on those commitments. We will stick to those commitments that we made.
KIERAN GILBERT: What about on the backpacker tax? Any movement, any possible further movement on this? Is this another middle ground that you might find between the 10.5 per cent that Jacqui Lambie and Labor are supporting and your 19 per cent tax rate for backpackers?
MATHIAS CORMANN: We went for the middle ground. Wayne Swan introduced a tax for foreign workers from the first dollar earned of 32.5 per cent. If the legislation that the Government has put forward does not go through the Senate next week unamended, then the Wayne Swan tax rate of 32.5 per cent is the tax rate that will apply to all foreign workers. We have suggested as a compromise, having consulted widely with the sector, having consulted with our backbench that 19 per cent is the appropriate line in the sand. Labor wants to cut the taxes for foreign workers further, we don’t believe the Budget can afford that We do not think it is required in order to ensure that our tax arrangements for foreign investments are internationally competitive. They are internationally competitive at 19 per cent. So we believe that the tax cut from 32.5 percent, which was the Wayne Swan tax rate to 19 per cent is as far as we are prepared to go. The Budget cannot afford to cut taxes for foreign workers further.
KIERAN GILBERT: So no chance of say a 15 per cent compromise here?
MATHIAS CORMANN: As I have just indicated to you, we are already pursuing a13.5 percent tax cut. Labor wants us to go for 22.5 percent tax cut. 19 percent is what we are putting on the table. If Labor does not support that in the Parliament next week it will be 32.5 percent, the Wayne Swan tax rate which has been in place since 2012-2013.
KIERAN GILBERT: Finally I want to ask you about comments made by the Shadow Attorney General Mark Dreyfus this morning. It is in relation to a story by Andrew Probyn and Shane Wright in The West Australian newspaper this morning. In relation to the Bell Group of companies, the Bond companies where the Federal Government did a deal with the WA Government reportedly that would see WA claw back $1 billion from the Bell Group. The Shadow Attorney General is saying if this is reported as it is and is correct in The West Australian today, that if those facts are correct then the Attorney General is guilty of corrupt conduct by favouring the West over the Commonwealth. What is your reactive to that?
MATHIAS CORMANN: I am not aware of the ins and outs of it. This is the first time I heard about any suggestion of legal advice. We do not comment on legal advice. In any event I have not seen any such legal advice, so I cannot shed any light on any of this.
KIERAN GILBERT: What about the suggestion that he should be sacked. This is what Bill Shorten is saying this morning, that the Attorney General should be sacked over this report if it is correct.
MATHIAS CORMANN: Mark Dreyfus, and Bill Shorten for that matter, have a long track record of overreach when it comes to matters related to my good friend and valued colleague the Attorney General. I think that this is just another example of them getting way ahead of themselves. I am not aware of the ins and outs of what is reported in The West Australian today. I have not been made aware of any legal advice. Even if I was aware, we do not comment on legal advice.
KIERAN GILBERT: Finance Minister Mathias Cormann thanks. Appreciate your time this morning. Talk to you soon.
MATHIAS CORMANN: Always good to talk to you.