Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
HELEN DALLEY: We are very pleased to say that we now have the Finance Minister Mathias Cormann live from Perth. Minister, you were up with the birds to join us this morning. We really appreciate it so thank you.
MATHIAS CORMANN: Good to be back.
HELEN DALLEY : But let’s get into MYEFO, Paul’s just said it’s a very dangerous document for the Turnbull Government. How much worse will the Budget picture be tomorrow?
MATHIAS CORMANN: It is the half yearly update on the state of the Budget, the Budget delivered in May this year. The specific numbers will be revealed tomorrow when Treasurer and I release the Mid-year Economic and Fiscal Outlook. In terms of the Government’s focus and the discipline we have imposed on ourselves, we have again focused on making sure that the net effect of policy decisions taken by the Government improves the Budget bottom line, that we continue to be on an improving trajectory to get the Budget back into balance as soon as possible.
HELEN DALLEY : Mathias Cormann, these words, we continue on this trajectory, seem to be used a lot. We’re on the right path, used by the Government, not necessarily used by anyone else. Because since the May Budget, quite a bit has happened and we had that slow and unexpectedly slow growth in the September Quarter. So, there are expectations that the Budget picture may be pretty horrific.
MATHIAS CORMANN: Firstly, the numbers are what they are. Everybody has been able to look at the numbers in the past and will be able to look at the numbers tomorrow, once the Mid-year Economic and Fiscal Outlook is released. The reason we are releasing it in the second half of December by the way, is because we were committed to ensuring that the third quarter national accounts economic data was able to be factored into our economic and other parameter forecasts, to ensure that the information that is provided to the public about the state of the Budget is as current and as accurate as possible, based on the best available information at this point in time. We have been working for some time to get spending under control, to get the Budget back into balance as soon as possible. We have been making progress at every Budget and every budget update. There have been external factors, which have had an impact, if you look at the revenue downgrades in recent Budgets and budget updates - on the back of significantly lower commodity prices than have been experienced in the past, on the back of lower wages growth and lower profits growth. If you look at all of that, then we are in a stronger position than we would have been if we had not made those decisions.
HELEN DALLEY: But even you would agree that for the ratings agencies the budget cuts that you have been able to make go nowhere near enough what they want and they are now breathing down your neck. How much of a threat is a ratings downgrade for Australia.
MATHIAS CORMANN: We know based on what the credit agencies have said that they were looking very carefully at the Parliament’s attitude and approach to the Government’s budget plan. What I would say is that since the election we have been able to implement more than $22 billion in additional savings since we came into Government.
HELEN DALLEY: Alright, but how much of a threat is it still Minister? As we understand from media reports the Cabinet has been warned to expect that it could happen or at least a fifty-fifty chance of it happening.
MATHIAS CORMANN: I am not going to speculate on the decisions that the ratings agencies may or may not make. That is a matter for them. What I would say though, before you interrupted me there, we have been able to legislate and implement more than $22 billion in additional budget improvement measures since this election. The net effect of all of our policy decisions on the spending side of the Budget since we came into Government in 2013 is a $250 billion improvement to the Budget bottom line over the medium term. That is money that we either don’t have to borrow or that can be used once we are back in balance to pay down debt. That is a $250 billion net improvement over the medium term. We clearly are making headway. We are clearly heading in the right direction, but yes of course there is more work to be done in the context of a more challenging economic outlook.
PAUL KELLY: Minister, how tenable is it for the Government to continue to count in the Budget estimates the potential savings from measures that have not yet passed the Parliament? The so-called zombie measures?
MATHIAS CORMANN: I don't subscribe to that so-called description that you have used. It is true that there still is some unlegislated measures. As I have indicated to you, with a list of about $40 billion worth of unlegislated Budget improvement measures after the election, we have passed more than half of those in the six months since the election. We are quite confident that we will be able to make further progress in February, March. We are going through the list of unlegislated Budget improvement measures, one by one. We have made a significant bit of progress through the Omnibus Savings Bill earlier this year. There will be more work to be done in February,March.
PAUL KELLY: Minister, what we've seen for a number of years now and more recently of course is that the revenue estimates tend to be over-exaggerated and not realised in practice. Do you agree with that as a general proposition and if so, why have we seen this mistake being made by so many governments in so many budgets?
MATHIAS CORMANN: I do not agree with that as a general proposition. Certainly under our Government, we go out of our way to ensure that the assumptions underpinning revenue forecasts are based on the best available information and are as accurate as they can be. They are just estimates. The thing is, over the last two or three years at various times, I remember the Opposition telling us that we were intentionally pessimistic, for example in using certain forecasting methodology in relation to commodity prices for example, suggesting that we were trying to make the numbers look deliberately worse at one point to make them look better down the track. That's not true. From the Government's point of view, we are very open and transparent in terms of the methodology that we are using. We are very open and transparent about what the forecasts are based on. Then people can make their own judgements and people do. There is always a lot of discussion, but our intention always is to provide information about the state of the budget based on the best available information at the time that these numbers are released. But you know, the facts change, context changes, global economic conditions change, and as things change, in the global or the domestic economy, you have to update those numbers. That is why we are having an update tomorrow.
PAUL KELLY: Well let me ask you directly, will this document, do you believe, offer a really credible pathway to a restoration of a balanced budget by 2020-21?
MATHIAS CORMANN: I am not going to obviously confirm the numbers. The numbers will be released in the half-yearly budget update tomorrow. But what I can say is that the document tomorrow, like every Budget and budget update under our Government, is based on the best available information, based on the best available advice and is essentially our best information to the Australian people about the current state of the Budget.
HELEN DALLEY: So Minister, are you not guaranteeing that you’re even aiming to get to a balance, let alone a surplus, by 2020-21?
MATHIAS CORMANN: The Budget in May projected a return to balance, a return to surplus by 2020-21. The whole purpose of the half-yearly budget update tomorrow is to provide an update on the state of the Budget. So what I am saying to you is that, as I have always done and as all my predecessors have always done, I am not going to pre-empt the announcement that is going to be made by the Treasurer and I tomorrow.
HELEN DALLEY: But if the deficit is even worse than perhaps the picture was in the May budget and we’ve had this very slow growth, how can you even sort of aim to have that as your target by 2020-21?
MATHIAS CORMANN: I think you are very much speculating and inviting me to comment on hypothetical questions and speculation, in the absence of having seen the released documents. I am not going to do that.
HELEN DALLEY: Well I guess we’re asking you to re-iterate what has been, was, Government policy and then became a Government aim, or target, to have a return to balance by 2020-21?
MATHIAS CORMANN: I think that you are mis-characterising there what the 2020-21 number actually is. We have always been very clear that our objective is to get back to balance, get back to surplus, as soon as possible. Based on the information in May, about economic parameters, about the policy decisions that the Government had made at that time, the projection showed that the Budget was expected to get back to surplus by 2020-21. Tomorrow there will be an update on the policy decisions taken since the election, principally incidentally, that is implementing the commitments that we took to the last election and the update on economic parameters. Again, there will be a projection in the budget update. That will also show when the Budget is expected to return back to surplus. But I will leave it to the official release of the Mid-year Economic and Fiscal Outlook tomorrow to publicly reveal, when that is expected to happen.
HELEN DALLEY: Sorry, go ahead Paul.
PAUL KELLY: Minister, we have recently had a pick up in commodity prices, or at least some commodity prices. How much does this help in terms of the outlook?
MATHIAS CORMANN: We have been on the public record to say, we prefer higher commodity prices to lower commodity prices of course. Over time, higher commodity prices will flow through in terms of increased revenue as a result of higher profits and higher company taxes. What we have also said is that the recent increases in commodity prices are not enough to offset the effect of lower wage inflation in particular on income tax receipts and the lower growth in company profits more generally. It is welcome. We always prefer having higher terms of trade, higher global prices for our key commodity exports, but as it stands, it doesn’t fully offset the effect of lower wages growth and lower profit growth.
HELEN DALLEY: Minister how are you going to demonstrate, to particularly the international credit ratings agencies that you are going to get the rest of your agenda passed, supported by the rest of the crossbenchers in the Senate, both the zombie measures and things like the business tax cuts.
MATHIAS CORMANN: As I have just indicated, we have made significant progress in the six months since the 2 July election. We have passed or have implemented more than $22 billion worth of Budget improvement measures. At the time of the election, about $40 billion of Budget improvement measures were unlegislated. Many of them incidentally from the 2016-17 Budget. So we are working our way through the remainder in an orderly fashion. In February, March next year, we will have the next instalment. Our intention certainly is, that by the time of the next Budget to have dealt with everything that is remaining.
PAUL KELLY: Minister, given the situation overall, do you think the Government’s spending objectives have been sufficiently firm? I mean, the general position has been by the end of the forward estimates that spending would be reduced to 25.2 per cent of GDP. Is this enough? Was this objective as sufficiently ambitious or should the Government have tried to do more?
MATHIAS CORMANN: We have done as much as we can responsibly do. You have to remember, we inherited a spending growth trajectory, and that is a matter of public record and you will be talking to Tony Shepherd later in the program I hear, you can ask him to confirm this. When we came into Government, spending as a share of GDP was on a trajectory to 26.5 per cent by 2023-24. The Intergenerational Report last year showed that it was expected to continue to grow to in excess of 30 per cent as a share of GDP. It was essentially growing, growing, growing. We were able to stabilise spending as a share of GDP at about 25.8 per cent. We are projected to bring that down, in the Budget, to 25.2 per cent. Again, there will be an update on those numbers in the half yearly Budget update tomorrow. We have gone as hard as we responsibly can in the context of being responsible economically and responsible fiscally.
HELEN DALLEY: Mathias Cormann, I wanted to just ask you about another issue, more on politics certainly than MYEFO. But Pauline Hanson is readying her troops, her team to take to the Queensland State election. She’s announcing some names. Some 36 candidates, mainly in rural and regional areas in Queensland. How worried is the Government by her growing support in the polls?
MATHIAS CORMANN: One Nation is a competitor of ours. We will do everything we can to explain why people should put their trust in us to provide good Government, whether that is in Queensland, or nationally, or in Western Australia for that matter in March next year. It is not a matter of being worried. It is a matter of focussing on the task at hand. That is to explain what we intend to do to put our respective jurisdictions on the strongest possible foundation for the future, so that families across Australia and across relevant States have the best opportunity to get ahead.
HELEN DALLEY: And Minister, just finally I just wanted to ask you about Malcolm Turnbull making the speech as a boost for the republic last night. Do you share his views? Do you want a republic?
MATHIAS CORMANN: I am a well known Constitutional monarchist. I think that ... interrupted
HELEN DALLEY: You haven’t changed your mind after hearing the Prime Minister.
MATHIAS CORMANN: I heard the Prime Minister say that the issue was settled at the referendum a little while ago. I certainly agree with him on that.
HELEN DALLEY: Alright Minister Mathias Cormann thank you so much. We appreciate you joining us this morning.
MATHIAS CORMANN: Always good to talk to you.