Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
MICHAEL McLAREN: But as I said off the top of the show the Government has released its Mid-Year Financial Update today, revealing they still expect the Budget to return to surplus by 2020-2021. I wonder if anybody still believes the predictions. You might care to pass judgement. A whole lot of information has come out, but the ratings agencies, well Moody’s and Fitch anyway after hearing Scott Morrison and Mathias Cormann the Finance Minister deliver the numbers are fairly confident that they can reaffirm Australia’s AAA credit rating, which for a whole lot of reasons is important. But some of the numbers are still a little crook, although the current financial year’s deficit is $600 million less than what was predicted in the Budget. Over the forward estimates $10 billion more debt is to be added to the pile. I thought we would chat about this with Mathias Cormann, he is the Federal Finance Minister. He has been good enough to join me on the program this afternoon. Mathias, thank you for your time.
MATHIAS CORMANN: Good afternoon. Good to be here.
MICHAEL McLAREN: Good numbers, bad numbers or mixed?
MATHIAS CORMANN: The numbers are based on the best available information at this point in time. Based on what we know about where the economy is at and based on the decisions that the Government has made since the election. We continue to improve the Budget trajectory moving forward, the deficit this year is slightly less than what was anticipated at Budget time and we are still projected to return to surplus by 2020-21, though there is a deterioration of about $10.3 billion over the forward estimates. Importantly, we have been able to maintain an improving Budget trajectory despite additional global economic headwinds and despite further additional revenue write downs. Principally that is because payments are expected to be $18.5 billion less over the forward estimates than had been anticipated and the Budget repair of the Government continues.
MICHAEL McLAREN: The headline figure from Scott Morrison today was a $600 million improvement in the deficit this financial year. To put that in perspective we still have a $36.5 billion deficit just this financial year to manage. You put that on top of all the others we are heading towards $350 plus billion. The mountain of debt is growing and becoming ever more difficult to climb, I mean the oxygen is getting pretty thin up the top there now.
MATHIAS CORMANN: Actually if you look at what is happening to debt, Government net debt is projected to be less this year as a share of GDP, 18.1 per cent instead of 18.9 per cent. It is expected to peak below where it had been anticipated it would be. So it is now going to peak at 19 per cent in 2018-19 instead of 19.2 per cent in 2017-18. We are making progress. We are heading in the right direction. Yes we are facing certain challenges, many of them beyond our control. The decisions of the Government continue to improve the Budget position and that is an important factor.
MICHAEL McLAREN: Some of those things beyond your control no doubt include the Senate. That seems to be over the last ten years where most Governments, Labor or Coalition, have come a cropper, they have some reasonable ideas but the other mob block the stuff.
MATHIAS CORMANN: To be fair, we have actually made pretty significant progress through the Senate in terms of getting our Budget repair measures through since the July election. More than $22 billion worth of additional Budget improvement measures have been implemented since the election and that’s about two thirds of what remained unlegislated at the time of the election. So there is another $13.2 billion or thereabouts to go and we are quietly confident that in February, March we can continue to make some further progress.
MICHAEL McLAREN: Predictions, and this isn’t your fault, this has been something that has plagued Australian Governments and probably a lot of international Governments for a while. But we have all sorts of projections and predictions as to where the economy is going to be in twelve months, six months, hence and they always tend to be wrong. Over the last decade they have been wrong in an overly positive sense. But you speak about returning to surplus is in 2021. The Australian public if I might say so, Mr Cormann, has grown I think you would say sceptical is a very kind word of these sort of projections as the surplus continues to elude us. Why should we believe these numbers now?
MATHIAS CORMANN: To be fair, the 2020-21 projection of a return to surplus has been in place now for a little while unchanged. These are estimates and projections. They are not actual outcomes, they are estimates and projections based on the best available information at a point in time. Obviously, the Government’s projections and estimates do get scrutinised, including by the ratings agencies, and all three major ratings agencies have come out to confirm that the state of the Budget as outlined in our half-yearly Budget update is consistent with a AAA economy. So obviously we welcome that vote of confidence. But it is true that as new information comes before a Government, in both directions, that then gets reflected in future Budgets and Budget updates. Facts change, global economic conditions change for good or for bad, and always the objective of the Government is to ensure that the Australian economy is in the strongest possible position to deal with the challengers coming our way and the best possible position to take advantage of opportunities in particular in our region, so that people in Australia have the best opportunity to get ahead.
MICHAEL McLAREN: I was reading Tony Shepherd writing in the Financial Review prior to the numbers coming out, and he is a friend to the Coalition, the message was pretty clear, and part of his message was that there’s been a communication fault at the heart of Government for a long time about telling the public just how important the need for fiscal or budget repair actually is. He says “the truth is we have over-complicated it when all we need to do is tell the truth and if we don’t create a competitive economy with a sustainable budget Australia will be a banana republic.” Last time we heard those words we know what happened to the economy and the stock market. But he’s right isn’t he? We do over-complicate a lot of this and as a result many people in the public simply say “why should I have this cut?” or “why should this be removed?” or “why should that payment go?”
MATHIAS CORMANN: I am not a commentator on ourselves. What I would say is that every single day we work to explain why we need to live within our means, why it is important for the future success of our economy that Government revenue is higher is than Government expenditure, that we don’t spend money we haven’t got.
MICHAEL McLAREN: Did you sell the Super changes successfully? That’s just one example.
MATHIAS CORMANN: Well, clearly we have because they have been successfully legislated through the parliament with only very minor adjustments. It was a very significant reform package to make superannuation tax concessions fairer and more sustainable and they were passed through the Senate with the support of the Labor Party incidentally, so there was bipartisan support, a broad consensus in the parliament in favour of our superannuation changes.
MICHAEL McLAREN: But what happens in the parliament does not often reflect what is happening in the public and I can tell you that this station and others continue to be flooded with calls on financial shows saying “when do the super changes kick in?”, “will it affect me?”, “what’s it going to do?” – I mean, people are still completely confused.
MATHIAS CORMANN: I do not accept that. Obviously, as questions are put to us we answer them. If you look at the results of the election in those seats that you expect to be more impacted by our superannuation changes, our vote, if anything, improved, including dare I say the vote for the Liberal Party in the Senate in the great state of Western Australia. Our primary vote improved and obviously we have engaged substantially through our Liberal-National Party backbench and others, with the community in relation to all of these matters and we believe that the changes that we have now legislated are fair and will help make superannuation tax concessions more sustainable.
MICHAEL McLAREN: Well, I will grab the listener’s opinions on that, 131 873. Finally then Finance Minister, are we being fair with all these numbers, and people can get dizzy with all these MYEFO numbers and Budget numbers, they’re huge, but are we being fair to younger generations, to future generation, with the way we are setting this economy up? We seem to be leaving them a substantial pile of debt to pay down and as you’ve acknowledged, little of a buffer should the headwinds of global economic change hit us hard. Are we being fair to the coming generations here?
MATHIAS CORMANN: You are going to the heart of why we believe Budget repair is important. We don’t believe it is fair to younger generations to pay for day-to-day living expenses today with either higher taxes or even higher spending cuts in the future. We don’t think it’s fair for our children and grandchildren to pay for day-to-day living expenses today which we cannot afford. That is why we are so focused on brining spending down and that is why we are so focused on making sure that today’s generation pays its own way.
MICHAEL McLAREN: Good to catch up. Thank you for your time.
MATHIAS CORMANN: Always good to talk to you.