Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
KIERAN GILBERT: First though, let’s go to the Finance Minister, Mathias Cormann he joins me now, live from Perth. I want to ask you first of all Senator Cormann about the report in relation to the banks, that they have spent millions of dollars on their image. It’s an exclusive by Phillip Coorey in the AFR today, but obviously hasn’t been that effective.
MATHIAS CORMANN: The banks need to do what the banks need to do. It is true they should be very mindful of their community licence and the fact that they are reflecting on how they can improve their standing in the community I would have thought is a good thing.
KIERAN GILBERT: In relation to how effective they have been thought, that is questionable. The other thing that has been criticised this week is their position, their ongoing position against the levy, despite that shoring up the Government’s AAA credit rating, which has a flow on effect to their own rating.
MATHIAS CORMANN: It is true that the AAA credit rating for Australia is beneficial and is another contributing factor to increased profitability for the banks. Beyond that, the four major banks in Australia in particular have a very dominant position courtesy of the four pillars policy, the market structure and all of the regulatory arrangements that flow from it. They are more profitable than they otherwise would be. In the Government’s judgement it is appropriate for them to make a fair and reasonable contribution to our Budget repair efforts in all of the circumstances.
KIERAN GILBERT: Much of the debate is that it won’t make as big a contribution as the Treasury had thought. Has the Government given the banks assurances that the percentage of this levy will be legislated, will be locked in so it can’t be changed via regulation if the Government went down that path as opposed to legislation.
MATHIAS CORMANN: The measure is as it has been announced in the Budget papers. There is, as there always is, consultation going on now about practical implementation arrangements. As soon as we are in a position to release the legislation, which will have all of that detail in it on how it is going to be structured, we will do so.
KIERAN GILBERT: But in relation to the concerns that it is not going to generate as much funds as the Government thought it would at Budget night, that must be a worry for you?
MATHIAS CORMANN: We stand by the Budget estimates. There has a been a very intriguing technical discussion in the Parliament this week, which seemed to suggest that the Shadow Treasurer did not understand the difference between fiscal balance and cash balance. On a cash basis the numbers are reasonably consistent. The numbers that were released by the banks and the numbers that were released by the Government were quite consistent.
KIERAN GILBERT: Would you advise the banks now to cut their losses, accept the levy and move on, otherwise their reputation won’t see any improvement?
MATHIAS CORMANN: Banks will make their own decisions. But I note that the Chairman of ANZ, David Gonski has made precisely that point. The truth is that both Labor and the Coalition are supporting the bank levy. The major bank levy is a bipartisan initiative now, so it will be legislated. The best way forward for the banks certainly is to engage constructively with the Government on making sure that the design is the most appropriate design possible.
KIERAN GILBERT: That is right, it is s bipartisan measure, one of a few of the big ticket items that are bipartisan. What do you say to the fact that Labor is opposing things that you probably thought they might back including the increase in the Medicare levy, the needs based funding model that the Government is also proposing.
MATHIAS CORMANN: Bill Shorten does not have any principles. He makes a judgement on everything based on his self-interested assessment of the politics. When it comes to Gonski, Bill Shorten now stands for a plethora of expensive special deals as opposed to the introduction of genuine needs based schools funding as recommended by David Gonski. When it comes to the National Disability Insurance Scheme, we know that a majority of the Shadow Cabinet is opposed to Bill Shorten’s proposition here. Bill Shorten is now standing in the way of fully funding the National Disability Insurance Scheme. We do not believe that that is ultimately going to be a sustainable position for the Labor party. What we are proposing is fair, it is entirely consistent with what Labor in government has done in the past. The only reason why Bill Shorten is doing what he is doing is because as he always does, he plays politics instead of focusing on what is the right thing to do.
KIERAN GILBERT: In relation to the funding of the NDIS, this is not going to take place until 2019 anyway, so it is post the next election. If you win the next election it will not matter.
MATHIAS CORMANN: There are certainly still plenty of conversations to be had on the inside of the Labor party in relation to this, I am sure about that. All of the feedback we have been getting publicly and privately is that people inside the Labor party are aghast at the incredibly political and reckless position adopted by Bill Shorten. Bill Shorten does not have the support of his own caucus for the position that he has adopted. People are aghast at the position that he has taken.
KIERAN GILBERT: With the schools funding are you confident from your discussions with the crossbench that you will be able to secure Senator Birmingham’s reforms in this regard?
MATHIAS CORMANN: Simon Birmingham is talking to all parties represented in the Senate. We will continue to work through that process. The question really is one for the Labor party. Do they really want to follow Bill Shorten’s approach of entrenching expensive special deals, which are inequitable, unfair and which essentially provide more money to schools who do not need it at the expense of schools who do? Is this really what Labor under Bill Shorten in 2017 stands for, expensive, special deals instead of implementing genuine needs based funding reform to our schools funding arrangement as recommended by David Gonski?
KIERAN GILBERT: Finally, the Moody’s investor service has downgraded the Chinese credit rating this week. What implications could that have for us and our largest trading partner?
MATHIAS CORMANN: Credit ratings agencies, and this is what we say in relation to Australia, they make their own decisions. These are not decisions that we make when it comes to the credit rating for Australia. It is the same situation vis a vis China. Our assessment is that the global economic outlook is better than what it has been. That is certainly what the International Monetary Fund has been saying and that the situation in China, the economic growth prospects in China are better than what seems to have been suggested by some commentators in the past. So our outlook continues to be quietly optimistic.
KIERAN GILBERT: And is your advice that the Chinese are undertaking the necessary reforms to boost particularly domestic demand and keep that growth going there?
MATHIAS CORMANN: China is going through a significant economic structural reform from investment driven growth to broader and more balanced drivers of growth, in particular with a focus on consumption driven growth. These sorts of transitions at the magnitude and the scale that they are taking place in China have their challenges along the way. We are very confident that the Chinese leadership is doing everything they can to ensure the transition is as smooth as possible. '
KIERAN GILBERT: Minister, appreciate your time, talk to you soon.