Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
PRESENTER: Let’s go right now to the federal Finance Minister, Mathias Cormann. Mathias Cormann, welcome.
MATHIAS CORMANN: Good morning.
PRESENTER: Do you know the words to Tina Arena’s song Reset or do you know the words to any Tina Arena song?
MATHIAS CORMANN: Not off the top of my head I am sorry.
PRESENTER: Do you know the words to any song, Mathias Cormann?
MATHIAS CORMANN: Well, I am not a good singer.
PRESENTER:Anyway. Minister, the State Government says that South Australians have been dudded in this Federal Budget. In the terms of specific cash for infrastructure, are they correct?
MATHIAS CORMANN: Well they are wrong. The South Australian government sadly, we have always known, is the most partisan, least constructive state government around Australia, but I didn’t know until today that they can’t read. Clearly when it comes to South Australia the federal government has made substantial commitments for some time now. Everybody knows that we have a $90 billion naval shipbuilding program rolling out, centred around South Australia. There is $530 million in infrastructure spending to be rolled out at the Osbourne facility from July. We are making substantial investments in road infrastructure across South Australia. In the north south corridor, the Darlington Interchange, $500 million there, with about $200 million in 2017-18. Also the Torrens Road to River Torrens, $400 million with about $105 million to be invested in 2017-18. The Northern Connector, $708 million with $233 million to be invested in 2017-18. We have of course announced yesterday $68 million towards the establishment of Australia’s first proton beam therapy facility in South Australia at the South Australian Health and Medical Research Institute. There is also the $10 billion National Rail Program. What a constructive State Government would have said today is that they will do everything they can to seize the opportunity to put forward projects so that South Australia can get, which it can if South Australia puts those projects forward, its fair share out of the $10 billion National Rail Program. There is much more.
PRESENTER: Minister, they have put those projects forward haven’t they? Stephen Mullighan said that the Gawler line, the business case has been put forward and it is on the A1 priority list. It has got no money and yet Perth Metronet $1.2 billion without a business case and it is not on the 1A priority list, I should say the Infrastructure Australia priority list.
MATHIAS CORMANN: We have announced yesterday $10 billion as part of a $10 billion National Rail Program that South Australia can absolutely specifically apply for. Funding is available under that program. It is a matter now for South Australia going through the process. In the context of some previous funding allocations in Western Australia, we had to go through a process of reallocating that money. That was money that was allocated in previous Budgets. The same as money was allocated in previous Budgets for South Australia. Billions of dollars were allocated to South Australia in previous Budgets to road infrastructure. In Western Australia, because of a change of State Government we had to make some reallocations in relation to previously allocated money. That was not new money.
PRESENTER: Talking about transport infrastructure though, the transport infrastructure items that you rattled off, they’re all established and ongoing.
MATHIAS CORMANN: Western Australia is the same.
PRESENTER: Is it correct, Mathias Cormann, is the State Government correct and is the freight council here is South Australia correct to say there is not one new cent towards new transport infrastructure in South Australia?
MATHIAS CORMANN: The State Government is wrong and if they took a constructive approach instead of just whinging and not even reading the Budget papers properly, they would see the $10 billion new allocation in a National Rail Program. They would see that as an opportunity to get additional funding towards rail infrastructure into South Australia.
PRESENTER: So that is an opportunity to get something, not a commitment to a specific new project.
MATHIAS CORMANN: Because South Australia has not gone through the process yet of applying under that $10 billion National Rail Program. There is absolutely no reason why the South Australian Government wouldn’t be able to successfully secure funding under that $10 billion in new money that has been made available for national rail infrastructure.
PRESENTER: You keep talking about the negativity of this South Australian government effectively calling them whingers. Is this pay back for Jay Weatherill’s attack on Josh Frydenberg? In other words, did that encapsulate their behaviour and the problem you have with dealing with the State Government?
MATHIAS CORMANN: Not from our point of view. We are committed to the great state of South Australia. In this Budget, as I have indicated, from 1 July we will be investing $530 million in upgrading the infrastructure at Osbourne so that we can successfully roll out the $90 billion naval shipbuilding plan. That is an absolutely massive undertaking. There is around 500 people already working in South Australia now on the next generation of submarines, a $50 billion project creating about 2,800 jobs through the life of the project. There is the frigate program, 9 frigates to be built in Adelaide. We have the offshore patrol vessels, with 400 jobs to commence in 2018. The Air Warfare Destroyer project of course is continuing to press ahead. We have additional investment in this Budget, $40 million towards local road upgrades across South Australia. We have the $68 million, as I have mentioned, towards the establishment of the first proton beam therapy facility in South Australia. We are keen to work with the State Government, but when the first reaction, before they have even properly looked at the Budget papers is just negativity, that is indeed very disappointing.
PRESENTER: That $10 billion national pool of money that you said South Australia could apply for rail and transport infrastructure, how long has that been available? Could they have fired off those letters?
MATHIAS CORMANN: It was announced in the Budget last night. It is not rail and transport infrastructure, it is a National Rail Program. This is my point, there is $10 billion available for state governments around Australia to apply for. There is now a process to be gone through.
PRESENTER: You cannot criticise them for applying for money that was only made available last night.
MATHIAS CORMANN: I am criticising them for saying that there is nothing in it for South Australia, when there is $10 billion available for them to apply for to invest in rail infrastructure in South Australia.
PRESENTER: Minister, moving onto some of the nuts and bolts that are not necessarily specific to South Australia. The restoration of the discount cards for pensioners. You took away the pension for some I think 92,300 former pension recipients, that was a Christmas present to them. Is this a concession that that was a mean move by Malcolm Turnbull?
MATHIAS CORMANN: I do not agree with that characterisation. What we did, two years ago incidentally, in the 2015-16 Budget, was to restore the same means testing arrangements when it comes to the pension asset test that was in place for most of the period of the Howard Government. It was only changed toward the tail end of the Howard Government. We restored the same asset test arrangements for the pension in the 2015-16 Budget. It came into effect as of 1 January 2017. What we have done is, for those pensioners that were effected by that change indeed we have restored the pensioner discount card.
PRESENTER:: Okay. And when will that be restored from?
MATHIAS CORMANN: By 1 July 2017.
PRESENTER: Okay, so from the start of the financial year. And so all of the 92,300 people who lost the pension because you changed the limits at which they would be able to receive it or it would phase out, they will get that restored to them?
MATHIAS CORMANN: They get that restored to them.
PRESENTER: Okay, and do they need to apply for that or will it happen automatically?
MATHIAS CORMANN: It will happen automatically.
PRESENTER: Okay. Minister, the increase in the Medicare levy, according to the front page of The Australian, that will raise an extra $8 billion over two years, is that about right?
MATHIAS CORMANN: $8.2 billion, yes.
PRESENTER: Okay. Now, the same article also says that there is a $56 billion gap in funding for the National Disability Insurance Scheme over ten years. So, how are you going to make up the difference?
MATHIAS CORMANN: Over the forward estimates we will be putting an additional $9.1 billion into the National Disability Insurance Scheme and $8.2 billion of that will come from the increase in the Medicare levy surcharge. We have a whole series of savings, specifically in the welfare space over past Budgets, that have been earmarked to be put into the National Disability Insurance savings account, and that will still happen. So between various past savings that were earmarked to help fund the NDIS and the Medicare levy increase – interrupted
PRESENTER: You are still a long way short of being able to fund the National Disability Insurance Scheme, if there is a $56 billion gap.
MATHIAS CORMANN: The $56 billion gap is over the medium term, that is over a ten year period. You are mixing things up here. The $8.2 billion is over two years and the $56 billion gap that we have to confront is over ten years. As a result of the measures in the Budget last night, what we can say to all Australians is that the National Disability Insurance Scheme will now be fully funded.
PRESENTER: Okay, it will be fully funded. For how long? For the next four years?
MATHIAS CORMANN: In perpetuity. We have put the National Disability Insurance Scheme on a sustainable and affordable trajectory for the future. It is now fully funded over the medium term at this point, the Budget estimates are over a four year period, the Budget medium term is over a ten year period plus the Budget year, and over that whole period the NDIS will be fully funded as a result of the measures we have announced last night.
PRESENTER: It is, though, a tax grab is it not? It does not matter what it is used for, because you could use other money by saving and there does not appear to be much evidence of that in this Budget.
MATHIAS CORMANN: We have tried to fully fund the NDIS by spending reductions in other parts of the Budget, but the Senate did not let quite a number of those savings pass, so we had to reverse about $14.7 billion worth of spending reductions, and if you cannot fully fund an important initiative like the NDIS through spending reductions, because the Senate will not let those spending reductions go through, then the only other alternative is to achieve that objective through increases in revenue.
PRESENTER: Do you think you have got Xenophon onside for the Medicare levy increase?
MATHIAS CORMANN: I do not speculate. I will let Senator Xenophon speak for himself.
PRESENTER: We will talk to him after 8.30. Terry McCrann writing in, I think it is The Advertiser this morning, says “What is stopping the banks just putting up fees and charges to cover the new levy?” I am paraphrasing here, but you put up a levy on the banks, well they are just going to charge their customers more, aren’t they?
MATHIAS CORMANN: Well the way that we have designed the levy, that is not necessary. It excludes all of the day to day bank accounts of Australians, it excludes mortgage accounts, it excludes anything that is subject to the Financial Claims Scheme, so deposits of up to $250,000.
PRESENTER: But if you squeeze them in one part, they will just make somebody else pay, won’t they?
MATHIAS CORMANN: A couple of points. Firstly, the banks make about $30 billion in after-tax profits a year, this is a $1.5 billion levy – interrupted
PRESENTER: Yes but they aren’t going to soak it up, Minister, are they?
MATHIAS CORMANN: You have asked me a question, if I may make a couple of points. Firstly, it is a $1.5 billion levy out of $30 billion in after-tax profits. Secondly, it only applies to the larger banks, it does not apply to the smaller banks and non-bank financial institutions, which means it helps them get a better level playing field, it helps them compete with the banks, put pressure on the banks if they were to do some things that are not sensible on the pricing front. We have also given the Australian Competition and Consumer Commission the job to scrutinise and keep a very close eye on what the banks are doing in this space, to ensure that there is no misleading here of customers in relation to any pricing decisions.
PRESENTER: How can you stop them from passing it on? Either by using their discretion to raise interest rates, and/or jacking up fees and charges?
MATHIAS CORMANN: As I have just indicated to you, firstly, there is no reason for them to pass it on because it is a $1.5 billion levy out of $30 billion in after-tax profits. Secondly, this measure actually improves competition, which means that the smaller banks will be in a better position to put the bigger banks under pressure when it comes to pricing arrangements. Thirdly, we have given the ACCC the job of keeping a very close watch on what the banks are doing and they have got relevant powers, should the banks be doing the wrong thing in this space.
PRESENTER: So Bill Shorten was on the money when he said that the banks could take a haircut?
MATHIAS CORMANN: I am not going to provide political commentary. What we have done here is introduce a major bank levy. It is better designed and better targeted than what Labor, in Government, tried to do. They did impose a levy on bank deposits, which was going to be immediately passed on to bank deposit holders. Our major bank levy excludes the smaller banks, Labor’s was across the board, it excludes the day to day banking accounts and the day to day mortgage accounts. It is essentially targeted in such a way that the banks should have no reason to pass any such costs on.
PRESENTER: How many first home buyers will be able to get into a house because of the changes that will enable them to access preferential tax treatment from their superannuation voluntary contributions?
MATHIAS CORMANN: This is one measure out of a very comprehensive package, which mostly is focused on increasing the supply of housing to put downward pressure on housing affordability. The measure that you mention, from 1 July 2017, will enable first home buyers to save up to $30,000 in voluntary savings through their superannuation account and as such attract concessional tax treatment. The future will tell how many Australians have accessed – interrupted
PRESENTER: How many do you think it will help get into a home, because you would need to have the disposable cash to be able to access that, wouldn’t you?
MATHIAS CORMANN: …indeed. It is very difficult to predict how many will access it. We believe that it is a very good and very attractive opportunity and as part of an overall package it will help get more Australians into their first home.
PRESENTER: And how long will that stay in force?
MATHIAS CORMANN: We have put that in force on an ongoing basis.
PRESENTER: Okay, because people would need to know, wouldn’t they? If you are saving for your first home you wouldn’t want this to be another one of those super changes that comes out of the blue.
MATHIAS CORMANN: We have made the announcement and we are committed to it.
PRESENTER: Just before you leave us, Mathias Cormann, you worked on the Hockey Budget, you worked on the Morrison Budget. What is the difference, what is the mindset, from that 2014 Budget, when you and Joe Hockey are smoking the cigars, and today’s Budget?
MATHIAS CORMANN: When we came into Government in 2013, we inherited a rapidly deteriorating Budget position from the previous Labor Government, so we had to make some tough decisions on the spending side of the Budget in particular. While we have not been able to get through everything we wanted to at the time, we did make significant progress in getting spending under control, getting spending growth under control. This is now the fourth Budget of our period in Government, we are in a better position now than we were then.
PRESENTER: Well the Budget bottom line has deteriorated, you have increased your borrowing.
MATHIAS CORMANN: We inherited a forward trajectory that was taking spending as a share of GDP to 26.5 per cent and rising and in this Budget is going down to 25 per cent, which is very close to the long-term average of 24.8 per cent.
PRESENTER: And you have lifted your debt ceiling to $600 billion.
MATHIAS CORMANN: Debt is much less than it would have been if we had not changed those Budget settings we inherited when we came into Government in 2013.
PRESENTER: Is this going to be the last time you lift the debt ceiling, I mean where will it stop? Will it get to $1 trillion?
MATHIAS CORMANN: The administrative decision in relation to the debt ceiling is a sensible and responsible decision in order to ensure that the Government can continue to function and that there is certainty for financial markets and the community at large.
PRESENTER: Minister, we do thank you, as always, for joining us after the Budget.
MATHIAS CORMANN: Always good to talk to you.