Senator the Hon Mathias Cormann
Minister for Finance
Deputy Leader of the Government in the Senate
Senator for Western Australia
SAMANTHA MAIDEN: Joining us now from Perth to discuss these measures is the Finance Minister Mathias Cormann. Good morning.
MATHIAS CORMANN: Good morning.
SAMANTHA MAIDEN: What is the fate of Australian businesses and the Australian economy if we don’t respond to this reform that has just been announced overnight in the United States?
MATHIAS CORMANN: We must act. We must ensure that the Australian business tax rate is internationally competitive. We must reduce our business tax rate for all businesses down to 25 per cent. Bill Shorten must change his position on this. This is now very serious. This is a matter of national interest. If we do not have a competitive business tax rate, an internationally competitive business tax rate we will lose investment and jobs to other parts of the world. We have got the US now going to 21 per cent. The UK is already down to 19 per cent and will reduce that further to 17 per cent by 2020. Even France is now looking at reducing their business tax rate from 33.5 per cent to 25 per cent. If Bill Shorten decides to continue to stand in the way of a business tax rate of 25 per cent in Australia, he is making a decision to wilfully damage the Australian economy. We need to ensure that our businesses can compete internationally. We need to ensure that our businesses can be as successful and as profitable as possible, so they can hire more Australians and pay them better wages. Bill Shorten’s approach of higher taxes for business if he doesn’t change it will mean less investment lower growth, fewer jobs and lower wages. That is as certain as night follows day. He must change his position. If he cares about Australia’s national interest, he will change his position.
SAMANTHA MAIDEN: Okay, Treasury has estimated a one per cent hit to the Australian economy if we don’t respond to these tax cuts. That it could even have a recessionary impact. Are you seriously suggesting that Australia could be staring down the barrel, down the track of a recession if we don’t cut taxes?
MATHIAS CORMANN: Any decision by Bill Shorten to continue to stand in the way of a 25 per cent tax rate for all businesses in Australia, would be a wilful decision to harm the Australian economy. Australia is an outward looking, open trading economy. We compete with businesses from all around the world. Our businesses need to be internationally competitive. You have got to remember that nearly nine out of ten working Australians work in a private sector business. Their future job security, their future career prospects, their future wage increases depend on the future success and profitability of those private sector businesses. We compete for investment with businesses all around the world. If we have businesses in Australia stuck at a 30 per cent corporate tax rate, when all around the world business tax rates are much lower than this, it will send investment and jobs overseas. That would be the decision that Bill Shorten would be making. His approach of higher taxes on business will make it harder for business in Australia to be successful and to be profitable. It means that businesses in Australia would invest less, would grow less, would be able to hire fewer people and pay them less. That means that Bill Shorten’s agenda of higher taxes on business would lead to higher unemployment and lower wages. We want to ensure that Australian business can be as successful as possible. We want them to be able to compete successfully internationally. We want them to invest more, to grow more, so they can hire more people and pay them better wages, because we want Australians to have the best possible opportunity to get ahead.
SAMANTHA MAIDEN: Okay, the US has cut its corporate rate to 21 per cent, but does that really compare in real terms when you take into consideration differences between the tax system with Australia’s rate of 30 per cent, are we really comparing apples with apples there. I have had some people suggest that when you factor in other measures, that basically that 21 per cent rate is probably closer to 25 per cent. If they are on 25 and we are on 30, is that such a big gap?
MATHIAS CORMANN: It is a big gap. It is a gap that is too big. The Australian business tax rate is internationally uncompetitive. Even before this, the OECD average, before the US’ move, the OECD average was a corporate tax rate of about 25 per cent. We are sitting at 30. We are sitting at the high end. Now the average is going down to 22.5 per cent. You have got a country like France, which is led by a President who was the economy minister in a socialist government before this current administration pushing to reduce the business tax rate in France to 25 per cent. The United Kingdom went down to 19 per cent some time ago and is taking it down further to 17 per cent. Ireland, 12.5 per cent. Australia, we are an open trading economy, we are engaged in competition for investment and in competition in terms of market access for our products and services with countries and businesses from all around the world. We need to ensure that our businesses have the best possible opportunity to succeed. We cannot leave them with this excessive lead in their saddle bag. Bill Shorten’s approach is reckless. It is irresponsible. It is driven entirely by his perception of the politics. This is now a character test for him. Will he do what he knows to be the right thing to do by Australia, or will he continue to run a blatant political line in order to appease the left inside the Labor party?
SAMANTHA MAIDEN: Okay. Just in relation to the assumptions though behind that one per cent, what are they? And will you be releasing that paper in full so voters can get a chance to look at how Treasury has arrived at that prediction of a one per cent hit to economic growth.
MATHIAS CORMANN: We have long released a lot of information as part of our Budget announcements when we first announced our ten year enterprise tax plan. What the Treasurer decides to do in terms of Treasury documents I will leave that to him. Everybody knows that this is true. If we have a corporate tax rate which is materially higher than the corporate tax rate in all of the countries that we compete with, we make it harder for Australian business to be successful. We make it harder for Australian business to attract investment. We make it harder for Australian business to grow. We make it harder for Australian business to hire more people and pay them better wages. The future job security, the future career prospects, the future wage increases of Australian workers depend on the Australian Parliament passing a more competitive business tax rate here in Australia. There is no question. Go no further than Ken Henry when he was the Treasury Secretary to Wayne Swan, who made the very accurate observation then, working as Treasury Secretary in the Labor administration then, that the principle beneficiaries of a more competitive business tax rate are workers. We are pursuing this so that the workers of Australia have the best possible opportunity to get ahead.
SAMANTHA MAIDEN: Okay, so you are committed then to taking those big business tax cuts that you have previously announced to the next election?
MATHIAS CORMANN: We are unequivocally committed to those business tax cuts. We will be seeking to legislate them through the Senate next year. What I am saying to you is that if Bill Shorten cares about Australia, if he cares about jobs, if he cares about the future job opportunities and career prospects and wage increases of Australian workers, he will vote in favour of those business tax cuts. He will look at what is happening around the world, including in the United States just now and he will provide some leadership to the Labor party and say that the Labor party needs to change their position on business tax cuts. Bill Shorten, Chris Bowen, they all used to be in favour of business tax cuts. They are just running a crass, political opportunistic agenda here. He is stuck in a bit of a rut because he has not moved on from the politics of the pre-2016 election era. We have seen that in the Bennelong by-election. He is still bringing out the same old stuff. His policy agenda has not evolved even though the challenges and opportunities for Australia have evolved. He cannot keep running on the same old, tired higher taxes on business agenda that he took to the last election.
SAMANTHA MAIDEN: Okay, can the United States afford these tax cuts though? The conservatives traditionally in Australia have prided themselves on trying to reduce debt. These tax cuts are funded through debt. The personal income tax are only temporary. Wasn’t the experience of the Reagan years was that debt spiralled and that essentially at some point these income tax cuts have an expiry date on them?
MATHIAS CORMANN: I am not going to be a commentator on internal domestic decision making in the United States. They clearly made a decision that they could not afford not to implement these business tax cuts, given the way they see economic challenges and opportunities in front of them. Let me say that the Reagan business tax cuts over time led to very significant economic growth in the United States. These economic and fiscal policy decisions can have a bit of a lead time. It can take a little bit of time for that to properly pay out in terms of the increased investment and all of the beneficial flow on consequences. That is not a reason not to do it. That is precisely the reason we must make decisions now for the medium and long term interest of Australia down the track. That is our responsibility as public policy decision makers. Here in Australia, we cannot afford not to legislate the business tax cuts in full. If we want to protect jobs in Australia, if we want to ensure that Australians have the best possible career prospects in the future, if we want to ensure that we can sustainably deliver future pay rises, then we need to also ensure that our business tax rate is internationally competitive and to reduce it to 25 per cent for all businesses is absolutely non-negotiable.
SAMANTHA MAIDEN: Okay, is it your view that you get more bang for your buck in terms of the economy out of delivering corporate tax cuts rather than personal income tax? I know that you have said that is a priority as well, but in terms of the impact, which lever is going to deliver the biggest result?
MATHIAS CORMANN: We want to do both. In the end, if we want to ensure that every Australian has the best possible opportunity to get ahead, then we need to ensure that the businesses that employ them have the best possible opportunity to be successful and get ahead. People forget, jobs don’t grow on trees. Jobs are created by successful, profitable businesses. Our policy agenda is designed to help business be more successful and more profitable. That is why we want to bring the business tax rate down. That is why we are pursuing an ambitious free trade agenda. That is why we are pursuing our energy reforms and an ambitious infrastructure investment program. Labor’s approach is to make it harder for business to be more successful. By making it harder for business to be successful, it will mean that business will invest less, grow less, hire fewer people and only be able to pay them lower wages. Bill Shorten’s agenda as it stands today would lead to higher unemployment and lower wages.
SAMANTHA MAIDEN: Okay, there is also a lot of reports in the last week that the Labor leader Bill Shorten has involved himself with a factional power play in Victoria. Also reports that Joe McDonald has received some sort of award from the Labor party in WA. Are you surprised that Bill Shorten is involving himself in Victoria in these matters?
MATHIAS CORMANN: Bill Shorten is clearly losing control in the Labor party. He is clearly getting desperate to hold on. He had a very bad by-election in Bennelong. People on the ground in Bennelong clearly did not want him to turn up, yet he kept turning up, day in and day out, when his own people did not want him to because he was so toxic on the ground in Bennelong. So he is now casting around to try and hold on by whatever means to his position as Leader of the Labor party. So I am not surprised that he is doing whatever he thinks he needs to do in order to try desperately to hold onto his position. But these are really matters for the Labor party.
SAMANTHA MAIDEN: Okay, just finally in what I described as a fairly spicy analysis, Peta Credlin on Sky News this week suggested that you out rank the Treasurer now that you are the Leader of the Government in the Senate as well as holding the economic portfolio that you now outrank the Treasurer in the economic portfolio space. Is she right?
MATHIAS CORMANN: No. The Treasurer is the leader of the economic team. Unequivocally, the Treasurer is the leader of the economic team. I am the Leader of the Government in the Senate. I am very privileged that the Prime Minister has given me that opportunity. I will seek to fulfil that to the best of my ability. We all work as a team. But as far as the economic team is concerned, the Treasurer is very much in charge.
SAMANTHA MAIDEN: Alright, congratulations and Merry Christmas Mathias Cormann to you and your family.
MATHIAS CORMANN: Same to you.