Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
Date: Monday, 19 December 2016
MATTHEW TUKAKI: Well it has been a big day down in Canberra with the Australian Government announcing in its Mid-Year Economic Forecast while $600 million has been shaved off the Government’s books, the deficit will blow out by a further $10 or so billion over the next four years. The Prime Minister Malcolm Turnbull and Treasurer Scott Morrison have already identified about $22 billion in savings measures and it looks like the AAA credit rating is safe for now. With mortgages and arrears numbers up in 2016, the unemployment rate edging higher in November and with Australians owing more than $32 billion in credit card debt. The question is where to from here? To get stuck into what is happening with the economy, jobs and more, Mathias Cormann Federal Finance Minister joins us now on the show. Minister, welcome.
MATHIAS CORMANN: Good to be here.
MATTHEW TUKAKI: It has been a big day down there in Canberra, what is going on with the data release today?
MATHIAS CORMANN: What the half-yearly Budget update shows is that despite further global economic headwinds and despite further revenue write downs, our Budget position continues to improve over the forward estimates. Principally because of the work we continue to do to control expenditure growth.
MATTHEW TUKAKI: So with the numbers showing what they show though. I mean it does not appear to the average Australian that 2017 is going to be a hot year. It seems as if it is going to be really rough and tumble leading into 2017.
MATHIAS CORMANN: If you look at the numbers, the deficit this financial year is actually slightly less than what had been anticipated in May and we are still projected to return to surplus by 2020-21. There is a $10.3 billion deterioration over the forward estimates but that is principally because of a $31 billion additional write down in tax receipts. If you look at what is happening on the payment side of the Budget, we are now expecting to spend $18.5 billion less over the current forward estimates. That takes lower payments since last year’s Budget to about $32.5 billion and importantly as a result of all of the Budget improvement measures on the spending side of the Budget that we have implemented so far the Budget position over the medium term will be $250 billion better off. This is money that we either do not have to borrow or that we can use to pay down debt once we are back in surplus.
DAVID PRIOR: Now do not get me wrong, I want to believe you when you say we are going to return to surplus in 2020-21. But we have now been hearing that for some years since the success of Governments and success of Treasurers etcetera. I mean for the everyday Australia out there right now, trying to pay a mortgage or trying to find a job in Western Sydney or over in Perth at the moment. Is it an accurate picture, are we really going to be returning to surplus?
MATHIAS CORMANN: The reason we provide an update is to reflect all of the most current information, the best available information and the best available advice in that document. The update that we are providing is our best information that we can provide on the current state of the Budget. You do not have to take our word for it. The Government gets very heavily scrutinised in terms of the numbers that we put out there as we should be. Including and in particular by all of the ratings agencies and the three major ratings agencies, Moody’s, Fitch and Standard and Poors have all come out to confirm that based on our half-yearly Budget update, Australia maintains its AAA credit rating. That is obviously something that we welcome.
MATTHEW TUKAKI: Now that is a good thing, for everyone listening this is a very good thing because there was a lot of angst in the media today and around town that that would not be the case. But let us turn some other now of the other underlying parts of our economy. Unemployment last month was up to 5.7 per cent, we have got record amounts of credit card debt, personal credit card debt. Last time I looked this morning it was at $32.3 billion and there is also data showing that more Australians than ever are falling behind on mortgage payments. What do we need to do Finance Minister to rectify some of the structural of things that are going on in our economy right now.
MATHIAS CORMANN: We need to continue to do everything we can to ensure our economy is as competitive internationally as possible. One important part of that is to ensure our business tax rates are internationally competitive. We have a plan to bring business taxes down to 25 per cent over a ten year period which would put us into the middle of the pack out of OECD countries. A more competitive business tax rate will help us attract more investment, in particular into the non-mining parts of the economy. It will help us boost productivity, boost competitiveness, increase employment and over time increase real wages. We will not rest on our laurels, we know that there is much more work to be done and we will continue to work our way through our to do list in the months and years ahead.
DAVID PRIOR: But the truth is that we have got a situation at the moment down in Canberra where we do not have a Parliament that is playing ball. What is going on with the Opposition? At a time of great economic uncertainty, why are they not coming to the party to get some of these measures across the line?
MATHIAS CORMANN: You are certainly right that we would like to see Labor as the alternative Government do more to help Australia get into a better fiscal and economic position for the future. But to be fair though, since the election in July, the Parliament has made quite a bit of progress when it comes to improving the Budget bottom line. About two thirds of the outstanding, unlegislated measures at the time of the last election have been implemented in just six and a bit weeks of Parliament, we passed the Omnibus Savings Bill with the support of the Opposition. We passed various other Budget improvement measures, including the increased tax on tobacco and the changes to Superannuation tax concessions and the like. All up we have been able to legislate more than $22 billion worth of Budget improvements since the election and we have got another about $13.2 billion to go under our current Budget settings.
MATTHEW TUKAKI: Some of the other challenges of the economy we talked about before, I mentioned before, is an increase in the unemployment rate and also what appears to be and it has been going on for a while, the casualisation of the Australian workforce. Where can we look for employment growth opportunities in 2017, Minister.
MATHIAS CORMANN: To be fair, again, the employment position is actually much better than what had been previously anticipated at 5.7 per cent the unemployment rate is well below where people thought it would be in the past. Indeed if you look at what the Shadow Treasurer Chris Bowen said when we came into government, he set as one of the benchmarks on whether or not we had succeeded in relation to unemployment, whether we would be able to maintain it below 6.25 per cent. You can rest assured that he would not have given us an easy target necessarily. In terms of where the opportunities for growth are, we have a rebalancing happening in the economy, we have a transition happening in the economy from mining investment driven construction to broader drivers of growth. In particular across the services sector whether that is education, health, tourism, financial services and also across manufacturing. We believe that with the economic plan that we are rolling out we will have the opportunity to increase employment in the months and years ahead. Now one of the figures that has not been talked about enough out of the most recent unemployment numbers either is that they actually also included a pretty significant increase in participation. The unemployment rate going from 5.6 per cent to 5.7 per cent in the context of increased participation levels is actually not all bad news.
MATTHEW TUKAKI: So let us again, focus on some good news stories, and for our listeners we are joined by Mathias Cormann, the Federal Finance Minister, if you have got a question on the economy, if you see things differently, give us a call on 13 12 83. Minister, let us again talk about some of the growth areas, the spurts of opportunity and hope. We have got an increase possibly in the number of defence industry jobs coming into Australia. We are transitioning from the mining boom to high-skills manufacturing jobs, is it right to now be talking about a full-on honest conversation with the Australian people about a transition from jobs that were there since God was a baby kind of thing, to now these high-tech, high value jobs.
MATHIAS CORMANN: The thing is, it is not one or the other. The mining industry will continue to be important and if you look at the increases in export volumes on the back of record investment over the past decade, they will make a significant contribution to our economic success in the future. But we have to compliment that by essentially being in the best possible position to be successful across a whole range of other areas. Our export trade deals with China, South Korea and Japan and hopefully in the future others, are designed to help Australian exporting business to achieve that by giving ourselves more competitive access to these key markets. One of the good things that we have always got to keep in mind is that we live in the part of the world, the Asia-Pacific, that will continue to generate most of the economic growth in the world for years if not decades to come. If we are positioned right, if we have the right policy settings, then that will stand us in good stead to sell more products and services into the Asia-Pacific for years and decades to come.
MATTHEW TUKAKI: We have been joined tonight by Finance Minister Mathias Cormann. Minister thank you so much for joining us tonight, on Talking Lifestyle on the 2UE radio network.
MATHIAS CORMANN: No worries, good to be here.