Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
MATT TAYLOR: Let us speak to one of the architects of the Budget, Mathias Cormann is the Finance Minister and he is joining us now, here inside Parliament House. Minister, thanks very much for joining us.
MATHIAS CORMANN: Good to be here.
MATT TAYLOR: I want to start with the banks, because there has been a negative reaction on the market. Today we also saw significantly bigger negative reaction yesterday as we saw speculation that this levy would be announced. Does the Government have a beef with the banks? We spoke to the Treasurer yesterday, who said they can afford it with profits of $30 billion but the significant falls we have seen on the markets in the last few days already wiped about $14 billion off the cap of the banks.
MATHIAS CORMANN: We believe that was an overreaction. We are very confident that that will just settle in the days ahead as people work their way through this. The Treasurer is of course right. With $30 billion in after-tax profits, a $1.5 billion levy which is comparable to what is done in other jurisdictions around the world, a $1.5 billion levy per year to contribute to our Budget repair effort, we believe is fair and proportionate.
MATT TAYLOR: Okay, let us talk about Budget repair. As I just said, getting back to surplus as you had previously maintained in that 2020-21 period. Is the surplus going to be a little bit bigger? We know that the rating agencies are watching that closely A couple of them have come out and said that they are satisfied so far. Are you worried that if we do see some erosion to revenue over the forward estimates that that $7.4 billion might be harder to come by and the rating agencies might not look on the Budget so well as they have overnight?
MATHIAS CORMANN: Over the last four years we have dealt with a significant erosion in revenue , but we have made the decision in this Budget to make sure we are on the strongest possible fiscal foundation and fiscal trajectory for the future. You will be pleased to see that a number of the rating agencies have already come out to make positive comments.
MATT TAYLOR: Let us talk about some of the estimates though. On growth, you are expecting about 3 per cent across the forward estimates. What is the biggest challenge to growth as you see it going forward? Is it what still happens geopolitically with President Trump’s protectionist policies that could influence global growth?
MATHIAS CORMANN: The way we have looked at things is that the global economic outlook clearly has improved somewhat since our last Budget update. That is consistent with what the IMF has said in recent times. Domestically, we continue to have a very low official cash rate, we have a lower exchange rate, we have a flexible labour market. We also have an ambitious growth agenda pursued by the Government. All of that taken together means that our outlook is quite optimistic which is reflected in our Budget projections.
MATT TAYLOR: There was some talk amongst some of the economists last night, we have been playing some of their comments throughout the course of the morning, about some of the assumptions, particularly around wages at the wage price index at 3.75 per cent by that 2020-21 period. They reckon that is a little bit optimistic especially when unemployment is still sitting at around 5.25 -5.5 per cent when you get out to those final years of the forward estimates.
MATHIAS CORMANN: These sorts of forecasts are based on expert advice out of our Treasury. We believe they are realistic and credible forecasts.
MATT TAYLOR: Let us talk about the Medicare levy increase. Why did you decide to take that particular avenue? Essentially, it is a contribution that all Australia’s will have to contribute to, to fund the NDIS.
MATHIAS CORMANN: One of the challenges we face as a Government is that the National Disability Insurance Scheme, which does enjoy bipartisan support, was not fully funded. We faced a significant $56 billion funding gap over the medium term. We would have preferred to pay for that by spending reductions from other parts of the Budget, but the Senate in Australia was not prepared to pass all of the savings that we said needed to be passed in order to pay for it. So we had to find measures on the revenue side of the Budget. From 1 July 2019, it means that we will be increasing the Medicare levy by half a per cent.
MATT TAYLOR: We spoke to Wayne Swan a little bit earlier on, who was of course one of the architects of the NDIS, and he said that they claim that it is not fully funding was a “lie”. What is your response to that?
MATHIAS CORMANN: He is hardly an objective observer. It does not warrant any comment.
MATT TAYLOR: Okay. Just before we let you go, this Budget was all about I guess resetting the political agenda, which of course had some bad press perhaps, or copped some flak for that 2014 Budget that was called by some people one of the nastiest Budgets that we have seen. This was all about trying to reset the agenda with a new leader who has won the election last year. How confident that it is going to be effective, that the Budget is going to be effective to selling your message to the Australian people?
MATHIAS CORMANN: The 2014-15 Budget was a Budget that was required at the time. When we came into government we inherited a Budget position that was rapidly deteriorating. It was a very ambitious Budget on the spending side, in terms of reducing expenditure. We have got a lot of it done. There is a final bit that we did not get done, that we were not able to get through the Parliament. We have made pragmatic decisions in this Budget to continue to put us on the strongest foundation for the future, but we had to make some decisions on the revenue side as well. We believe that overall the Budget appears to be well received and we will continue to make the case as to why this is the right way forward.
MATT TAYLOR: Okay. We are out of time but I appreciate you as always coming to chat to us.
MATHIAS CORMANN: Thanks very much.