Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
Date: Sunday, 11 December 2016
PETER VAN ONSELEN: But first up, as mentioned off the top of the program, our guest today on the program is the Finance Minister, Senator Mathias Cormann. He joins us live from Perth. Thanks very much for being there particularly at the hour of the morning that we know it is. Very much appreciate you taking the time to talk to us. Tough GDP figures Senator that were released during the course of the week. We are, are we not, half way towards a recession?
MATHIAS CORMANN: The last quarter was not a good result, but if you look at the economic growth data over the year it is still stronger than all but one of the G-7 economies. It is above the OECD average. The important point to make is, imagine if we had not got rid of the carbon tax and the mining tax. Imagine if we had not pursued an ambitious free trade agenda. Imagine if we had not started to roll out our record investment in infrastructure. Imagine if we had not pursued an ambitious deregulation agenda. All of these things have helped to ensure that we are in as good a position as possible. Certainly the situation would have been worse if we had not changed those policy settings, economic policy settings, that we inherited from Labor.
PETER VAN ONSELEN: Nonetheless though Senator, the election mantra was jobs and growth. And this quarter shows that there isn’t growth. We’re going backwards. And we already know from the employment figures that there’s significant underemployment. How do you live up to the mantra from the election?
MATHIAS CORMANN: You have to always consider what the counterfactual would be. Jobs and growth remains very important. We have to ensure that the Australian economy is internationally as competitive as possible, that we are as productive as possible. We have to ensure that we continue to implement our national economic plan, which includes a more competitive business tax rate so we can attract more investment, improve productivity and over time increase real wages. We have to ensure that when it comes to the Australian economy that we are in the best possible position to be successful into the future. We have to do that in the context of the global economic environment of slower global economic growth and going through a very difficult and challenging economic transition in our own economy.
PAUL KELLY: Minister, do you believe that we can avoid a recession?
MATHIAS CORMANN: I don’t think that we should be talking about a recession. Our focus is on keeping the economy strong. Our focus is on making sure that we take the economy forward in the best possible way. We have had one quarter of negative growth. But again if you look at it over the annual period, by international standards, we are still in a very good position. In particular when you consider the challenges that come with the transition that our economy has been going through in recent months and years.
PAUL KELLY: Well we have clearly got a major investment problem. What’s the Government’s strategy to address that?
MATHIAS CORMANN: The strategy is in our Budget. We have put forward a ten year enterprise tax plan. A proposal to reduce the company tax rate to 25 per cent over a ten year period. Precisely to address this point. If you want to attract more investment you have to ensure that your business tax rates are internationally competitive. Every sensible economist will tell you that a more competitive business tax rate will help you boost investment, which will help you boost productivity, which will help you boost growth and over time increase real wages. That is one of the next cabs off the rank when it comes to our national economic plan. We have made significant progress, incidentally, since the election. So just taking issue with part of your opening remarks there. The Parliament has worked very well. In the lead up to the election if we had said to anyone that by the end of the year we would have legislated our two major industrial relations reforms, which were the two double dissolution triggers, the re-establishment of the Australian Building and Construction Commission, the establishment of the Registered Organisations Commissions and we would have legislated personal income tax cuts as well as a major superannuation reform package, most people would not have believed us. But that is what we have been able to do in the first six months after the most recent election.
PAUL KELLY: Minister it is one of the worst kept secrets in politics that much of your corporate tax cuts will not pass the Senate. What will be the consequences of that and do you have a plan B?
MATHIAS CORMANN: We believe that the Labor party needs to reconsider. We know that in their heart of hearts economic leaders in the Labor party know that a more competitive business tax rate is the right thing to do for our economy. Bill Shorten took a reckless and irresponsible approach to the last election driven by his perception of the politics instead of what is good public policy. People like you make all sorts of assumptions on what will or will not pass. People suggested in the lead up to the last election that we would not have any opportunity to pass our superannuation reform package and of course we have. People have suggested that we wouldn’t be able to pass the re-establishment of the Australian Building and Construction Commission and we have. That will now help ensure that infrastructure projects across Australia are delivered on time and on budget, giving investors confidence to invest more in significant infrastructure projects into the future. All these parts of our national economic plan are coming together. The next cab off the rank is pursuing the proposal for a more competitive business tax rate. We will be arguing the case for that very hard as we have in the last six months argued the case for all these other reforms, including more than $20 billion worth of savings which have gone through the Parliament.
TROY BRAMSTON: Minister, the falling growth has led a number of ratings agencies to warn that any further downgrade in the budget forecast could put Australia’s AAA credit rating at risk. How serious is this warning about our AAA credit rating?
MATHIAS CORMANN: The decisions on credit ratings are a matter for the credit agencies. What I can say is that the Government continues to work hard to ensure that the economy and our Budget are on the best possible foundation and the best possible trajectory for the future. What we have done at every Budget and Budget update is to ensure that we don’t go backwards, in fact that we improve the position based on the effect of policy decisions. That is something that we are focussed on when it comes to the half yearly Budget update. But in the context of external factors, in the context of changes in economic parameters, there are certain developments that are beyond our control that we will have to take into account when we put this next Budget update together, as we have had to do in the context of previous Budgets and Budget updates.
TROY BRAMSTON: Well Minister what does the lower growth figure suggest for the actual state of the Budget and the Government’s plan to return to surplus. There must be alarm bells ringing about that surplus timetable now going out again further into the outer years. Are you worried about that, about the state of the books?
MATHIAS CORMANN: The update in terms of the state of the books, the next update will be in the half-yearly Budget update, the Mid-Year Economic and Fiscal Outlook on the 19th of December. Incidentally the reason why our Government consistently has delivered the half-yearly Budget update in December rather than, as the previous government did, earlier in the year, was because we did want to have that third quarter economic data available to ensure that the information that is provided to the public wasn’t out of date by the time it was released. These are all matters, the economic parameters and the effect of policy decisions, these are matters that are currently being finalised. They will be released on Monday week.
PETER VAN ONSELEN: Senator Cormann though, in terms of the return to surplus, one of your team, backbencher Craig Kelly told me during the week a few weeks ago that he thinks the Government needs to actually accelerate its return to surplus and to do it sooner that you are currently predicting to do so beyond the forward estimates. Any chance of that?
MATHIAS CORMANN: The Government is doing, as we have said consistently for some time, we are getting the Budget back to surplus as soon as possible. We are not locking ourselves into an artificial deadline. We are mindful of the fact that we need to make decisions that are both fiscally and economically responsible. Based on the numbers in the Budget, the return to surplus is forecast, is projected for 2020-21. There will be an update to the fiscal and economic numbers in the Mid-Year Economic and Fiscal Outlook. Our focus very much as a Government and the discipline that we have imposed on ourselves as a Government is to ensure that we do not go backwards as a result of the policy decisions that we are making. That in fact we go forward as a result of the policy decisions that we are making. If you look at the net effect of Budget improvement measures that we have put in place since the 2013 election, you will see that over the medium term they have improved the Budget bottom line by more than $250 billion. That is in net terms. That is $250 billion that the Government will not have to borrow between now and 2026-27 that we would have had to borrow if we had stayed with Labor’s policies settings prior to the 2013 election. You have to remember that in the lead up to the last election, by their own admission, Labor took commitments to the election that would have deteriorated the Budget bottom line by more than $16 billion over the forward estimates. That was after more than $100 billion in higher taxes than under the Coalition's policy settings.
TROY BRAMSTON: Minister, you have had some success this year in improving the Budget bottom line. But I guess there are weaker growth figures in the economy that does place pressure on the Budget settings. How confident are you that you will be able to get additional savings measures, more perhaps than you imagined or envisaged, if indeed the budget position does worsen by the end of the year?
MATHIAS CORMANN: The 45th Parliament I believe overall has worked rather well. We have not been able to get 100 per cent of what we wanted through the Parliament on all occasions, but we have certainly been able to make significant progress. I am quietly confident that people of good will and acting in good faith, focused on the national interest across the Parliament, I think there will be the opportunity for the Senate in particular, because that is where the Government does not have the numbers, to make decisions to put Australia on a stronger economic and fiscal foundation for the future. That is certainly going to be the Government’s focus. We will be looking forward to working with the representatives of all parties to help ensure that happens.
PAUL KELLY: As Finance Minister what is the argument for getting rid of Tony Abbott’s Green Army?
MATHIAS CORMANN: You are inviting me here to confirm or deny certain things that may or may not be announced as part of the Mid-Year Economic Fiscal Outlook. Let me just make the general point that at every Budget and Budget update relevant announcements are made, both in terms of additional spending and spending reductions to pay for it and given the state of the Budget, you always have to put the ruler over all of your expenditure, to make judgements on whether it is still a sufficiently high priority in all of the circumstances. That is what the Government has done in the course of putting the half yearly Budget update together, as we have done in the lead up to every Budget and Budget update so far.
PAUL KELLY: Have you spoken to Tony Abbott about this?
MATHIAS CORMANN: I am not going into the details of private conversations.
PAUL KELLY: Do you think that given the fiscal situation of the Government that Tony Abbott needs to better realise that some of the programs initiated under his Government will need to be trimmed back?
MATHIAS CORMANN: I am not a commentator. I am on the field, as part of a team that makes decisions on how to put Australia on the strongest possible economic and fiscal foundation for the future. We are making these decisions every day to the best of our ability. I am very conscious that Tony Abbott also is very committed to the need for ongoing Budget repair. He has said that on several occasions, that the Government is very focused on the need to continue to repair the Budget. That means that at all times we have to reassess whether certain expenditure is still an appropriately high priority or not.
PETER VAN ONSELEN: But Senator, Tony Abbott may well be as interested as the next person, he told us as much when he joined us on this program the other week in Budget repair. But clearly not when it comes to the Green Army, he was very clear about that on social media. That is one thing that if it is in MYEFO, he is more than unhappy about it. Should that be taken into account?
MATHIAS CORMANN: The Government takes the views of all our Members into account and all of our relevant stakeholders into account. But in the end the Government has to make decisions in the context of the pressures that we are facing on the spending side of the Budget, the pressures that we are facing given economic conditions, looking at putting all of the expenditure side by side and making judgements on the appropriate prioritisation of public expenditure. That is what we have done in this half yearly Budget update. That is the same process that we followed in previous Budgets and Budget updates.
PETER VAN ONSELEN: Alright we are going to take a quick break in the program. You are watching us have a chat with the Finance Minister Mathias Cormann. We will continue the discussion when we come back.
Welcome back to the program, we are talking to the Finance Minister Mathias Cormann, live from Perth. Senator I want to ask you about a story that is splashed across pretty much all of the Sunday News Limited papers today. Centrelink is paying multiple spouse benefits to Islamic families, I am reading from the story, with two or three wives. Effectively giving the tick of approval to polygamy. Bureaucrats are authorising the payments to avoid the more expensive single mothers’ pension. You are the Finance Minister, is that right?
MATHIAS CORMANN:Firstly, the proposition that somehow the Government is authorising polygamy, that is just completely ridiculous. The next proposition is, the story seems to suggest that the Government is refusing to pursue savings out of some sort of political correctness motivation. That is also wrong. When single payments are higher payments than partner payments there are only two options in the welfare system. Either you receive a single payment if you are qualified or you receive a partnered payment. The partnered payment is much lower. If all of these people that are allegedly in that situation were to claim single payments because they are otherwise qualified, they would actually end up getting more money. By forcing people to accept the lower payment, the Government actually achieves a much lower outlay than otherwise would be the case.
PETER VAN ONSELEN: Can I just see if I understand this correctly, so the concern, the fiscal issue correct me if I am wrong is that if you are a Muslim man with multiple wives and presumably therefore have children to those multiple wives. Were they not treated as spouses one and all, they would receive higher payments being treated as single parents other than presumably one spouse. So therefore Centrelink treats them as married even though it does not recognise the marriage? Am I right in that understanding?
MATHIAS CORMANN: The Government does not recognise multiple marriages. The question when it comes to welfare payments is, do you get the higher single rate or do you get the lower partnered rate. If you were in that scenario and you claimed to be single you would end up getting higher welfare payments, all other things being equal than you get if you actually appropriately declare that you are in a partnered relationship. The story suggests that somehow the Government ends up paying more than it otherwise would, but that we are too worried for political correctness reasons to pursue it is wrong because ... interrupted
PETER VAN ONSELEN: But let me understand this. It is true though that the Government, if you are paying welfare benefits to a family of one man and for example three wives. You are paying more than you would to another family with one wife and husband?
MATHIAS CORMANN: You do not pay welfare payments to a family. You pay welfare payments to an individual. The eligibility is assessed on an individual basis. So when it comes to various payments in relation to children for example, they are payments in relation to the children. If it goes into relation to individuals, the question is do you get the higher rate because you are single or do you get the lower rate because you are part of a relationship. The proposition that somehow we should be paying the higher rate no matter what is a false proposition.
TROY BRAMSTON: Just returning this week’s growth figures, for a moment Minister. If there is another quarter of negative growth of course that would meet the technical definition of a recession. What contingency planning has the Government undertaken in the event that there is a second quarter of negative growth and would that include possible stimulus spending?
MATHIAS CORMANN: Firstly, we are not anticipating a second quarter of negative growth. So I am not going to go down this hypothetical proposition that you are putting. No, we do not believe that it is sensible to pursue so called stimulus spending. Labor pursued that sort of approach when they were in Government. It clearly caused damage to the Australian economy, making in particular the non-mining sectors in the economy less competitive internationally than they otherwise would have been, making it harder for our economy to properly transition in the period post GFC.
TROY BRAMSTON: But would it not be wise and prudent for the Government to do some contingency planning given that this week’s growth figures surprised everybody, the professional economists and also the Government economists. I mean it just makes sense that you would undertake some contingency planning in the event that we are in a technical recession right now.
MATHIAS CORMANN: I completely reject your proposition that we are in recession right now. That is just false and ... interrupted.
TROY BRAMSTON: I didn’t suggest that I just said we could be in a technical recession. It would be wise of Government to undertake some contingency planning given the Government itself was surprised by this week’s growth figures. Is that not a sensible course of action to take?
MATHIAS CORMANN: If I might just answer your question. Firstly, I reject your proposition that we are in a technical recession. Secondly, the Government at all times reviews all of the economic data, reviews all of the information in front of us and makes decisions on the best way forward. In the context of the circumstances that Australia is in right now, one of the first things that we should be doing is legislate our more competitive business tax rate so that we can attract more investment into Australia, boost productivity by more and provide an engine for the increase in real wages over time. That is what we call on the Labor Party to do as soon as we get back from this break, first thing next year. That is to legislate our ten year enterprise tax plan in full so that we can boost investment and boost growth.
PAUL KELLY: Minister, why has the Government rejected the option of an emissions intensity scheme for the electricity sector given that a number of experts and a number of regulators argue that this is the most efficient means of reducing emissions in that electricity sector.
MATHIAS CORMANN: Paul that argument has well and truly been settled. There have been some experts and some regulators that have been arguing this for a long time. The Coalition went with a very clear policy position to the 2013 election. If you look at what we are achieving, we are well and truly on track to meet and exceed the 2020 Kyoto emissions reduction targets. We are very confident that we are able to meet the 2030 emissions reduction targets agreed to in Paris without going to an approach that is promoted by Labor of higher electricity prices based on higher taxes, whatever way you want to call them.
PAUL KELLY: Well I refer you to the preliminary report this week from the Chief Scientist in which argues that under current policy settings there was not clear pathway for the Government to achieve the 2030 targets. Is the Chief Scientist wrong?
MATHIAS CORMANN: Look at our track record. People thought that we could not meet the 2020 emissions reduction targets based on our policy settings and we are exceeding those targets. We are very confident that with our policy settings we are able to achieve the 2030 emissions reduction target. There is a matter of course review taking place, which has been on the table for some time, which will look at how, within our existing policy settings we can further improve the implementation and further adjustments we have got to make or we are able to make within the overall policy settings that have been adopted by the Government. That will happen in the ordinary course of events.
PAUL KELLY: So I assume from that answer, the Government thinks that the Chief Scientist is wrong?
MATHIAS CORMANN: We are very confident that we can meet our emissions reduction targets for 2030 based on the Government’s policy settings, as we we have met and exceed the emissions reduction targets for 2020.
PETER VAN ONSELEN: Does that mean that you have lost faith in the Chief Scientist then? Lost confidence?
MATHIAS CORMANN: Again, my answer is pretty self evident. We are on track to meet and exceed the 2020 emissions reduction targets, when various people thought and said that could not be done. We are very confident that based on the Government’s policy settings, that we can meet and exceed the 2030 emissions reduction targets. In the lead up to the next election, let’s see whether Bill Shorten is honest about this. Because he was ducking and weaving in the lead up to the last election, trying to avoid providing an appropriately clear answer on this to the Australian people. Is he going to be honest and upfront in the lead up to the next election that Labor will be the party of higher electricity prices, whereas the Coalition will be the party of comparatively lower electricity prices. Will Bill Shorten be honest about the fact that he wants to push up the cost of electricity for families and businesses across Australia at a time when our economy, quite frankly, needs us to be as competitive internationally as possible, needs a secure, reliable and affordable and internationally competitive supply of energy. Will Bill Shorten go to the next election and really argue that Australia needs higher electricity prices based on a return of a Labor electricity tax.
PAUL KELLY: I assume from that answer, Minister that the Government is very keen to make electricity prices a prominent issue in the life of this Parliament and in the next election?
MATHIAS CORMANN: We are very keen for the Australian people to understand the difference between the Labor party and the Coalition. The Labor party for some time now has been the party for higher electricity prices. The Coalition for some time now has been the party for comparatively lower electricity prices. Labor, not because of what happens in the market generally, but because of deliberate policy decisions, wants to push up the cost of electricity, wants to push up cost of living expenses for people across Australia, wants to make businesses in Australia less competitive internationally by forcing them to pay more for their electricity than they otherwise would have to. We do think it is important for the Australian people to clearly understand the difference between our policy position and the policy position of the alternative government, the Labor party.
PAUL KELLY: Now the terms of reference for the 2017 review on climate change, that we were discussing this week, does refer to international units. I think in the context of the Emissions Reduction Fund, that is the direct action policy. Is it your understanding that that continues to remain part of the terms of reference of the review?
MATHIAS CORMANN: Our policy settings in relation to action on climate change have been settled for some time. There is a review taking place, consistent with the terms of reference that have been released by the Minister. You should be looking at this review as a housekeeping review. This is very much routine. It has been on the table for some time that this review would take place after a period of the direct action policy and the Emissions Reduction Fund in particular having been in place as centre pieces of our policy platform. The Government is always keen to ensure that our policy is implemented in the best, most effective possible way. That is why this review is taking place.
PETER VAN ONSELEN: Senator you, going back in history now, were one of three shadow parliamentary secretary’s who offered up their resignation on this very issue of climate change when Malcolm Turnbull was leader last time. With this review, having pricing of carbon back in the mix potentially, are you fully confident that the Prime Minister is in the right space to deal with this?
MATHIAS CORMANN: The Coalition is strongly united behind the policy position on climate change. We are strongly united behind our Prime Minister Malcolm Turnbull. All of us are very clear that the Labor approach, to push up the cost of electricity, hurting families and hurting our international competitiveness, is the wrong way to go. We have gone through a very extensive internal policy debate over some years as you know. That was settled, well and truly, in the lead up to the 2013 election. The policy position when it comes to our response to climate change was well and truly settled in the lead up to the 2013 election. It is a consensus position across the Coalition. We are always looking at ways to deliver on our policy framework as efficiently and as effectively as possible. That is what is currently taking place.
TROY BRAMSTON: Can I ask you Minister, when the Prime Minister became the Prime Minister, Malcolm Turnbull, last year, he said that we have to have a mature debate about policy in this country and we have to keep things on the table and not rule things out immediately, given this past week that strategy seems to be thrown out the window because the Minister for the Environment did announce a new policy review and then aspects of that review were ruled out immediately. Is it still the Government’s approach to have a serious, mature and sensible policy debate like the Prime Minister said?
MATHIAS CORMANN: The Government’s approach is that this issue was settled some time ago. We had a very extensive debate on policy settings in terms of the Government’s response to climate change. Peter referred to the fact that that debate was quite an extensive and intensive debate during our period in Opposition. The Government’s intention in conducting this review always was for that review to take place in that settled framework of our climate change policy as adopted by the Government some time ago. This was never designed to be a review to question again or to fundamentally reopen and revisit questions that have previously been settled after a very lengthy and intensive debate.
TROY BRAMSTON: Well that certainly not what the Minister, Josh Frydenberg, said earlier in the week. He did propose new policy ideas for discussion and debate. Why have a review if you are going to ignore the advice of the energy sector and the Chief Scientist?
MATHIAS CORMANN: The reason we have a review is to ensure that our policy, which has been settled, is implemented in the most efficient and the most effective way possible. It is always good practice and good housekeeping to look back at what you have done and the way that you are doing it to ensure that you are giving your policy settings the best possible chance to be successful. That is what we are doing. That was the Government’s intention. That is what will happen.
PAUL KELLY: Minister, at COAG on Friday, there was discussion about family violence leave given the initiative being pushed by the Victorian Government which I think is interested in a fortnights family violence leave as an entitlement. What is the attitude of the Turnbull Government to this and why is the Government reluctant to embrace this position.
MATHIAS CORMANN: We just believe it is another cost on the economy that will have an impact on our international competitiveness. These are matters that my good friend and colleague, Michaelia Cash has addressed in detail. It is not something that we are attracted to. We are providing record investment and we are pursuing very sensible initiatives when it comes to fighting domestic violence. Arguably the Turnbull Government is providing the strongest investment ever in addressing domestic violence. It is a matter of making sure that you get the balance right and that you pursue policy settings that don’t have counter-productive consequences potentially.
PAUL KELLY: Okay. So you think there are counter-productive consequences potentially from this policy, can you explain that for us?
MATHIAS CORMANN: That is the risk, but I will let Michaelia Cash take you through the ins and outs of it. I am sure she will be very happy to do so.
PETER VAN ONSELEN: Senator Mathias Cormann, Finance Minister as well as Deputy Leader of the Government in the Senate, we appreciate you joining us on the program today, thanks svery much for your company.
MATHIAS CORMANN: Always good to talk to you.