Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
Date: Wednesday, 10 May 2017
ROSS GREENWOOD: So let us now go to a man who has been consistent through the Budget process of this Coalition Government. Through the period of time for Joe Hockey as Treasurer, Tony Abbott as Prime Minister and now you have got a situation where you have got Malcolm Turnbull as the Prime Minister, Scott Morrison as the Treasurer. That man is the Finance Minister, Mathias Cormann, who joins me now. Many thanks for your time Mathias.
MATHIAS CORMANN: Good evening.
ROSS GREENWOOD: You are the constant factor through all of this. I made an observation to the Prime Minister when I spoke with him today that this is a change of direction for the Coalition’s Budget process. You have been and lived through all of these. And do you feel that change of direction of the Budget process?
MATHIAS CORMANN: Well I would not see it like that. When we came into Government in 2013 we faced a rapidly deteriorating Budget position because the previous Labor Government had made unfunded, unsustainable and unaffordable spending promises across a whole range of areas. Since that time we worked very hard to get spending growth under control. We are in better shape now than what we were. Spending as a share of GDP was heading for 26.5 per cent within the decade when we came in. We have been able to arrest the increase and now over the current forward estimates it is coming down to 25 per cent as a share of GDP. Now we would have liked to get all of the spending reduction measures in our past Budgets legislated through the Senate but there is about $14.7 billion worth of spending reductions which the Senate clearly wasn’t going to pass. So given our commitment to get the Budget back into surplus, because we want to stop borrowing from our children and grandchildren to pay for our living expenses today. If you can’t get all of the spending reductions through the Parliament that you need to get there then the only other option available to you is to look at measures on the revenue side of the Budget. And that is precisely what we had to do.
ROSS GREENWOOD: Okay so that is what I’m saying. There is a change in strategy. In other words because you couldn’t get the spending measures through because they were stuck in the Senate and so as a result a change in strategy is to say all right we are going to try and grow the pie faster. But isn’t there more risk? Because if you make a cut to your Budget, if I make a cut to a business budget or to a household budget, I know that that money has come out. But I’m sitting there are saying I hope that the economy will grow faster, I hope my business, I hope my income will grow faster. Really you can put measures in place to try and make that happen but it’s less of a certainty as compared with making the cuts. Would you agree with that?
MATHIAS CORMANN: It is not just a matter of us hoping that the economy will grow faster and we will get a bigger revenue dividend. We made policy decisions to impose additional revenue measures. One of them is the half a per cent increase to the Medicare levy from 1 July 2019 onwards and the other is the bank levy, the major bank levy, that you have mentioned. If we had our preferred way we would have rather if we could have fully funded the National Disability Insurance Scheme by spending reductions in other parts of the Budget. But the Senate made it very clear that they were not going to support the savings required in order to fully fund the National Disability Insurance Scheme. There was a $56 billion funding gap over the next ten years and we had to find a way to close that gap if we wanted to be able to deliver on that service that Australians clearly expect us to deliver.
ROSS GREENWOOD: And that is absolutely true. And that is something that will be popular because so many people with family members who are disabled they want the certainty of the funding because right now many of them tell me that they don’t get the certainty of that funding. So there is no doubt that that is vital.
MATHIAS CORMANN: But here is the thing, there is bipartisan support for the National Disability Insurance Scheme but Labor left it unfunded. And we wanted to fund it by spending reductions in other parts of the Budget but the Senate was not prepared, the Labor Party was not prepared to support all of the spending reductions that were required to fully fund it on an ongoing basis.
ROSS GREENWOOD: Okay take me through the actual Budget forecasts, in particular for wages, because that, you still as Finance Minister you are acutely aware that half the revenue that the Government receives comes from people’s taxes on their wages – PAYE taxpayers. So take me through the fact that you believe that the economy is going to be relatively flat over the next four years but eventually wages growth starts to jump up to eventually three and a half per cent which is where the long term trend is right now it is just below two per cent. Where do we start to get this wage growth from?
MATHIAS CORMANN: Well it is not quite right to say that we expect the economy to be relatively flat. We are expecting 2.75 per cent growth in 2017-18 and then three per cent growth from 2018-19 onwards over the remainder of the forward estimates.
ROSS GREENWOOD: True but it is modest growth as compared with say the wages growth.
MATHIAS CORMANN: Three per cent growth that is pretty attractive growth in the current context. Certainly stronger growth than you would experience anywhere in the major developed economies around the world right now. We have had a period of low wage inflation for some time. That is right. But we don’t sort of pick these forecasts out of thin air. We rely on expert advice. We rely on advice and the best available information from the experts in Treasury. And considering the improving global economic outlook, considering domestically the impact of continuously low interest rates, a lower exchange rate, flexible labour markets, the pro-growth agenda that the Government is pursuing, all of these things taken together and the judgements that have been made by people who are expert in making those judgements are that these are the appropriate forecasts. So we believe that they are credible, they are prudent and we believe that they are the appropriate forecasts for this Budget.
ROSS GREENWOOD: Just before I let you go. Just one issue. I started with that grab from Derryn Hinch talking about the banks and what happened yesterday with the leak that caused the share prices of those banks to fall. Would you welcome an Inquiry in to trying to find out how information got out that allowed share prices in banks to drop by between three and a half and 3.7 per cent yesterday?
MATHIAS CORMANN: The Treasurer has actually directly addressed this in his Press Club Speech today. There are rumours and speculation in the lead up to any Budget. The media speculates just about on everything and anything in the lead up to any Budget. We don’t have any evidence that there was any leak out of the Budget lock up. Treasury has indicated to us that it has no knowledge of any Budget leaks during the Budget lock up. Treasury monitors the use of devices capable of transmitting information – things like laptops, tablets, cellular phones – they make attendees at these lock ups sign forms around confidentiality and the like. You would have to have some evidence that there was actually something untoward that was done by somebody.
ROSS GREENWOOD: I tell you what Mathias Cormann, our Finance Minister, we always appreciate your time here on the program. And I can tell anybody out there who wants to give me any sort of speculation like that about information going on please feel free to call us on 131873 because that mail I got to tell you was very, very good. Mathias Cormann always great to have a chat.
MATHIAS CORMANN: Always good to talk to you.