Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
KIERAN GILBERT: First though we are live to Perth, the Finance Minister Mathias Cormann joins me. Finance Minister thanks very much for your time.
MATHIAS CORMANN: Good to be here.
KIERAN GILBERT: Andrew Liveris is very optimistic about the prospects of manufacturing and the economy in the United States. Do you share his optimism?
MATHIAS CORMANN: What he is saying is what the Government in Australia has been saying for some time. That we need a more growth friendly tax system, that we need to cut red tape, that we need to ensure that we have reliable and secure access to competitively priced energy. We certainly agree with his analysis as reported today.
KIERAN GILBERT: And he is talking about getting the growth in the United States from the twos to the fours and he says if that is achieved that would be an astonishing positive driver for the global economy.
MATHIAS CORMANN: Stronger American growth would be very good for the global economy. It would be very good for Australia. In the end, if we want to continue to drive stronger growth, and that is the case for Australia as it is for countries in other parts of the world, we have to continue to improve our competitiveness. We have to continue to improve our productivity. That is why in Australia the Turnbull Government is pursuing our ten year enterprise tax plan to bring down the level of business taxation to attract more investment, to drive productivity improvements, to create more growth and over time provide an engine for increases in real wages.
KIERAN GILBERT: Yeah, sure, but hanging over the mid-year Budget update, which you and the Treasurer hand down next week is the threat that the ratings agencies might downgrade our AAA rating. The Labor party says if you were to shelve those tax cuts that you talk about that would basically lock in the AAA credit rating because of the reduced spending in the forward estimates and beyond.
MATHIAS CORMANN: The Labor party is wrong. They still don’t understand the difference between spending and tax cuts. A tax cut is not government expenditure. It means that we leave more of the people’s own money, or businesses’ own money in the economy for investment and for generating stronger economy growth and over time increases, among other things, in revenue available for Government. We need stronger growth in order to be able to sustainably afford the important expenditure that the Federal Government incurs every year. In terms of the AAA credit rating, the judgement on that is a matter for the credit agencies. But our national economic plan and our fiscal plan are all designed to ensure that Australia is on the strongest possible economic and fiscal foundation and trajectory for the future. Given all of the external challenges and opportunities that we have in front of us from time to time, we have to ensure that we are in the best possible position to deal with all of that.
KIERAN GILBERT: Are the ratings agencies and the credit rating is it less important today in the context of a few things, one, the abysmal performance of the ratings agencies in going anywhere near predicting the GFC and the fact that, unlike decades ago, now corporations have their own resources to make their own judgements about the strength and trajectory of our economy?
MATHIAS CORMANN: The AAA credit rating is important. The Government will continue to do everything we can to ensure we are on the strongest economic and fiscal foundation for the future. But in the end, the AAA credit rating means that our cost of borrowings is lower than it otherwise would be. It is one of the important components to ensure that our economy is as competitive internationally as it can be. We are certainly focussed on making sure that we are in the best possible position to maintain our AAA credit rating.
KIERAN GILBERT: And can we expect any further reductions in spending, anything that might provide information that would placate the ratings agencies further in next week’s MYEFO? And if you don’t go in that direction, are you confident that the ratings agencies will hold off until May to give you and the Treasurer time to lock in further saves?
MATHIAS CORMANN: The judgements that the ratings agencies make are ultimately a matter for them. From our point of view, one of the very important developments since the election is how successful we have been in legislating the Government’s fiscal agenda. We have been able to pass more than $22 billion worth of Budget improvements through the Parliament. There is still a bit more work to be done, but certainly we have made very good progress in those first six months after the election. Beyond that our focus in this half yearly Budget update as it has been in every Budget and Budget update since we were elected in 2013, is to ensure that the decisions that we make, that the effect of policy decisions on the spending and on the revenue side of the Budget improves the Budget bottom line instead of taking us backwards. To the extent that there are challenges that we have to deal with, these are external challenges related to the level of economic growth. The effect of policy decisions, the effect of spending decisions and the effect of decisions on the revenue side, the net effect of those has always been, under our Government, a net improvement in the Budget bottom line. That has really been our focus.
KIERAN GILBERT: Will there be much movement on that on Monday in the MYEFO when you hand down that update? Can we expect any further saves, or any changes in terms of that projection?
MATHIAS CORMANN: The specifics and the numbers will be revealed in the half yearly Budget update on Monday. It is a matter of public record that we took a whole series of additional savings measures to the last election. That we more than paid for all of our election commitments in the lead up to the last election with savings in other parts of the Budget. The half yearly Budget update is the first opportunity since the election for us to reflect our election commitments, including the savings that we took to the last election in that update.
KIERAN GILBERT: Now as you reflect on the year, I know you have been talking up the various saves that you have legislated there. It still remains $14 billion in those cuts to education and welfare largely that remains stalled in the Senate. Labor showing no signs of relenting in that. When is the time to actually realise that you have to accept a loss on that front. Look elsewhere for savings that might actually get through the Parliament?
MATHIAS CORMANN: The effect of savings measures that have been implemented by the Government, so not just on our books but have been implemented, is a net improvement in the bottom line of more than $250 billion over the medium term. So that is $250 billion that the Government now does not now have to borrow which we otherwise would have had to borrow if we are in a deficit situation. The fiscal position of the Government is much better than what it was. Yes there is more work to be done. We are focussed always ... interrupted
KIERAN GILBERT: Okay, we’ve lost our line to Perth there. I don’t know what’s go on there. But my apologies, let’s see if we get the Finance Minister back. No, we have lost him. My apologies to the Minister and to you at home for our loss there, of the Finance Minister’s line. We will catch up with him again soon.
We are back with the Finance Minister. We have fixed that line and Minister I wanted to ask you finally before I let you go. The Federal ICAC proposal that seems like it has received some renewed support in the wake of the jailing of Eddie Obeid. What you thoughts on the idea of a Federal corruption watchdog?
MATHIAS CORMANN: At a Federal level we have got zero tolerance for corruption and we have a very robust framework and administrative architecture in place to fight corruption. We have the Australian Federal Police, we have the AFP Fraud and Anti-Corruption Centre, we have various other Commonwealth agencies, the Australian Crime Commission, the Commonwealth Law Enforcement Integrity Commission and so on. Yes, we need to have a robust framework to fight corruption which we do at a Federal level. We do not believe that another bureaucracy is the way to go. We have just got to continue to strengthen the existing frameworks.
KIERAN GILBERT: Mathias Cormann, appreciate your time this morning and throughout the year. We will talk to you in 2017, appreciate it.
MATHIAS CORMANN: Looking forward to it.