Press Conference – Budget Reply

Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia






Budget Reply

MATHIAS CORMANN: Tonight Bill Shorten must tell the Australian people clearly whether he will support our fair and responsible plan to secure a better future for Australia, or whether he will continue to stand in the way.

There are a number of questions that he will have to answer.

Firstly, he has to explain very clearly, will Labor keep or reverse $24 billion worth of business tax cuts for small and medium sized businesses, which are delivering benefits for 3.2 million small and medium Australian businesses and their 6.5 million workers?

Will Labor commit to actually secure the future of the National Disability Insurance Scheme by funding it in full, by supporting our proposed measure to increase the Medicare levy in the way that is identical to the way that the former Labor government in which he was a senior member did before?

Is Labor still committed to spend an additional $22 billion on special deals for schools on top of the additional record $18.6 billion investment the Turnbull Government has made to schools in this Budget?

And can Labor guarantee the future of a strong, private health sector in Australia by ruling out that he would abolish the Private Health Insurance rebate?

If he is not prepared to answer these questions clearly, people across Australia can draw their own conclusions. Ultimately, the question for Bill Shorten is will he focus on the national interest by joining in with us in implementing our fair and responsible plan to secure a better future for Australia? Or will he continue to play politics and focus on his perceived political self-interest?

Happy to take questions.

QUESTION: Minister given the kind of shift in this Budget to be very achievable. Can I ask on the rise in the Medicare levy, is there any room on the Government’s side to negotiate over the level rather, in which it kicks in?

MATHIAS CORMANN: We have thought about this very carefully. The proposal we have put forward we believe is the right way forward. It is fair because when you apply a percentage, the higher your income the more you pay, the lower your income, the less you pay. The way the Medicare levy operates is that for those on very low incomes, they are actually exempted from paying it all together. The proposal that we have put forward is there for all to see. It is consistent with the approach taken by Labor in the past, expect that they did not make the decisions required to fully fund the National Disability Insurance Scheme. The National Disability Insurance Scheme is a very important initiative, which enjoys bipartisan support. Here is the opportunity now to secure its funding. We are currently facing a $56 billion funding gap over the medium term to 2027-28. Bill Shorten has the opportunity to reach across the aisle and say let’s deliver this together. That is what we are asking him to do.

QUESTION: So it is not negotiable? Not negotiable?

MATHIAS CORMANN: Our position is in the Budget. What we are saying to Bill Shorten is tell us what your position is? Because so far he has been fudging it. He has not been coming clean with the Australian people so far on what his position is in relation to our proposal to secure funding for the National Disability Insurance Scheme. Tonight he has to tell the Australian people very clearly yes or no, is he going to join in with us to secure funding for the National Disability Insurance Scheme so that people across Australia, people with a disability across Australia can have certainty that the NDIS will and can be delivered in full.

QUESTION: In that spirit of reaching across the aisle then, for example would you be willing to keep the deficit levy on high income earners for an extra year, an extra two years? We know that Mr Shorten is going to argue that it should remain in place in his speech tonight.

MATHIAS CORMANN: Mr Shorten has been a complete flip flopper on all of this. I was here in this room, when we announced the temporary Budget repair levy and what did Bill Shorten say at the time? He opposed it. He said he would oppose it and he would vote against it in the Parliament. Of course when it came to the Parliament, he voted for it. Now he wants to make it permanent. No, we do not support making the temporary Budget repair levy permanent. It was always designed as a temporary Budget repair levy, which consistent with the legislation that was passed by the Parliament will come to an end at the end of this financial year.

QUESTION: We are not talking about making it permanent, just having it in place for another year or two.

MATHIAS CORMANN: Bill Shorten went to the last election with a policy to permanently increase personal income taxes. He went to the last election with a policy to permanently increase personal income taxes to the tune of about $20 billion, just under $20 billion over the medium term. Despite more than $100 billion in additional taxes all up, Bill Shorten went to the last election with $16.5 billion in bigger deficits, which at the time respected economic commentators said would put our AAA credit rating at risk. I think I might have read that on the front page of a very august publication, which was on strike over the past week. Good to see you back here. Our position is very clear. The Budget Repair Levy was a temporary levy. We know that Bill Shorten wants to permanently increase taxes in Australia, permanently increase income taxes. We are proposing a fair, responsible and proportionate increase to the Medicare Levy in order to fully fund the National Disability Insurance Scheme. Tonight Bill Shorten has to explain what his position is.

QUESTION: Minister, is that a no to leaving it on any longer?

MATHIAS CORMANN: I have answered that question very clearly.

QUESTION: Not permanently, but?

MATHIAS CORMANN: The Budget Repair Levy, the Temporary Budget Repair Levy, will expire at the end of this financial year.

QUESTION: Minister can I just, on the bank tax, wonder if you could explain the logic for us behind why you didn’t apply the tax to offshore banks? Why was it only the big five? And also on question of, given that banks are obviously very profitable, it’s one of the reasons you’ve looked at them, why aren’t you going after other companies with very high returns on equities like say Crown or Aristocrat?

MATHIAS CORMANN: Our preference was to be able to get back into balance and back into surplus on the projected timetable by spending reductions. But because the Senate blocked, or took positions in relation to about $14.7 billion worth of spending reductions, which clearly were not going to pass, we had to look for revenue measures. We made a judgement that in all of the circumstances, the major banks in Australia, the biggest banks in Australia who between them make more than $30 billion a year in after tax profits, had the capacity to contribute to Budget repair. We believe that $1.5 billion out of more than $30 billion a year in after tax profits was a contribution that they could make to Australia, to help getting the Budget back into surplus in a reasonable timeframe. This is now a bipartisan major bank levy. The Labor Party supports this, the Coalition supports it. So it will happen.

QUESTION: Offshore banks are big as well, they can handle these sorts of taxes by that logic.

MATHIAS CORMANN: We have made an explicit decision not to apply the bank levy to smaller banks in Australia,  banks that are smaller in Australia, because that actually helps to level the playing field in Australia. It helps to improve competition. It helps to ensure that the banks actually do the right thing by their customers in not increasing prices and not trying to use this as an excuse to increase prices.

QUESTION: Minister, John Howard expressed his concerns about the bank levy and also said this morning that perhaps it’s time to have another look at the GST. Wouldn’t it be better to raise taxes through an efficient economy-wide sort of method rather than these sort of ad hoc levies?

MATHIAS CORMANN: We believe this is an efficient way to raise additional revenue to get the Budget back into surplus.

QUESTION: Minister, a couple of specific questions about Budget measures. Firstly, would you be prepared to be drug tested as per the measure outlined in the Budget?

MATHIAS CORMANN: Yes, I have already said that. Yes, happy to. No worries. Any day.

QUESTION: Second, can I ask in MYEFO I think it was $154 million was taken out for the same sex marriage plebiscite and $170 million was put back in, if you like, in the Budget papers a couple of days ago. Why did it come out and then go back in?

MATHIAS CORMANN: We make decisions all the time. At the time it was clear that the plebiscite was not going to be able to proceed in the timetable that was reflected then. We remain committed to the plebiscite as the way forward in relation to this issue. That is a reflection of that.

QUESTION: Why is the combination of the Medicare Levy plus the HECS threshold been lowered? It’s a particularly hard hit on poor graduates. Do you think that’s fair?

MATHIAS CORMANN: We believe that the measures we have in this Budget are fair.

QUESTION: Why have you only lifted your self-imposed debt ceiling to $600 when the Budget has got it going to $606 and $649 within that year. In fact it goes to $725 in ten years’ time, a figure you wouldn’t tell Andrew Bolt last night. Don’t you agree with your figures?

MATHIAS CORMANN: Let me just refer you to Budget paper one, page 7-8. It makes a very important point there. The point that it makes there is that the Australian Office of Financial Management publishes an issuance strategy for the budget year only. Projections beyond the budget year are based on a set of technical assumptions and will vary with changes in the assumptions and budget estimates and projections. The decisions that the Treasurer has made are the responsible decisions to ensure the operations of Government can continue to operate in a sensible fashion, that there is certainty in the financial markets and in the market more generally. If there are further decisions required down the track, we will make them then. Let me just also make the point, of course I knew what the gross debt figures were in the Budget Papers. I believe that Andrew Bolt knew that too.

QUESTION: Minister can I just ask, one of the justifications given for the bank tax is that it is common in European countries, among others. Today, chef Jamie Oliver has said that the sugar tax is an inevitability in Australia because it has become so popular elsewhere in the world, particularly in Europe. Now I know your opposition to it. Does that remain, or do you acknowledge that one day we might have a similar tax?

MATHIAS CORMANN: We do not support a sugar tax. If I can refer you to the Budget, there is no sugar tax in the Budget.

QUESTION: Just to follow up on the debt issue, it is not clear from the Budget Papers when gross debt is going to peak. Can you give us an indication?

MATHIAS CORMANN: I have just explained to you that the Australian Office of Financial Management actually only publishes an issuing strategy for the Budget year, the 2017-18 year. There are some technical assumptions that underpin the projections. You will see that over the Budget forward estimates, at the end of the Budget forward estimates, the expectation is that based on technical assumptions, that gross debt would be at $606 billion. There is a peak in the final year of the forward estimates of $649 billion. That is all published. Beyond that I cannot assist you today.

QUESTION: Minister, your Government has been keen to say all along you take a very practical approach to what you can get through the Senate. Can you explain the rationale behind why you did not choose to temporarily extend that deficit levy and lift the level at which the Medicare levy is raised? Because that would seem to be something that is more palatable to the crossbench and Labor and the Greens. Why have you made that?

MATHIAS CORMANN: You are making all sorts of assumptions. You are making an assumption that Bill Shorten will answer the question about whether or not he will join us in securing funding for the National Disability Insurance Scheme with a no. Let me tell you that the half a per cent increase from 1 July 2019 in the Medicare levy is a structural change, which will secure funding for the NDIS on an ongoing basis. It will close the funding gap on an ongoing basis. The reason it starts on 1 July 2019 is because that is when the expenditure starts to ramp up. That is when the bills start to come in. What you are suggesting is, essentially just raising additional tax before the NDIS bills start to ramp up and then for that to drop off when they do start to ramp up. We made a decision about what is, structurally, the most sensible way forward. A half a per cent increase in the Medicare levy, the way we have proposed, raises substantially more than the extension of the Budget repair levy would raise.

QUESTION: Minister, that did not exactly answer the question, the question was about can you explain to us why you have chosen, did you consider that as an option, extending the deficit levy and introducing the Medicare levy at a higher rate? And can you explain to us, if you have discarded that, why you have discarded that as an option?

MATHIAS CORMANN: I have directly answered the question. The Budget repair levy was always designed as a temporary measure, a three year measure. What we are proposing with the increase in the Medicare levy from 1 July 2019 is a structural change, it is a structural revenue measure, which will help to guarantee and will help secure funding for the NDIS on an ongoing basis. It will help ensure that the $56 billion funding gap between now and 2027-28, that we are currently facing will be closed. Labor made all sorts of promises in relation to what is a very good initiative. We support it. We want to see it properly funded. What we are putting forward is a structural measure which will help ensure it can be.

Thank you.


Senator the Hon Mathias Cormann, Minister for Finance, Perth