Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
MICHAEL ROWLAND: The Federal Opposition has committed to closing what it calls a tax loophole that gives shareholders cash refunds for dividend imputation credits even if they pay no tax at all. Labor says the policy will inject $5 billion a year into Government coffers.
VIRGINIA TRIOLI: So let us hear from the other side, Mathias Cormann is the Federal Finance Minister and we are pleased to say he joins us from Parliament House. Good morning Minister.
MATHIAS CORMANN: Good morning.
VIRGINIA TRIOLI: The Labor Opposition says it is aiming to make the taxation system fairer. That is hard to argue with, isn't it?
MATHIAS CORMANN: This is just the latest example of Bill Shorten's high taxing agenda. What every Australian can see again today is that should Bill Shorten become Prime Minister, no one in Australia will be safe from his high taxing agenda. He has already announced higher taxes for workers, for homeowners, for professionals, for small business and now self-funded retirees. Wherever you look, he wants to hit people with higher taxes to fund his reckless spending sprees and that is not the right way forward for Australia. A higher taxing agenda will lead to less investment, less effort and indeed lower growth, fewer jobs and lower wages.
VIRGINIA TRIOLI: I am going to jump in there because I think it is really important to clarify this at this point, that is a very big hyperbolic rant there. To quote the Opposition Leader, the change only affects a very small number of shareholders who currently have no tax liability and use their imputation credits to receive a cash refund and this is the key point, they will no longer receive a cash refund but they will not be paying any additional tax. This morning, for accuracy, you cannot go on in relation to this about paying more tax.
MATHIAS CORMANN: You are allowing yourself to be misled by Bill Shorten's shifty rhetoric. Bill Shorten always…interrupted.
VIRGINIA TRIOLI: But as I can see it, the cash refund goes away but there isn't an additional tax.
MATHIAS CORMANN: Bill Shorten always dresses up any higher taxes in his rhetoric around the politics of envy instead of pursuing the politics of opportunity. What is happening here is, tax that has already been paid and which should not have been paid because various Australians do not have a marginal tax rate at the same level as the company tax rate, is provided by way of income tax refund, which incidentally was introduced in the late 90s with bipartisan support. When the Howard Government introduced this, senior Labor Members of Parliament at the time pointed out that that was a policy that they had taken to the previous election, that it was a logical extension of the Paul Keating reforms introducing dividend imputation…interrupted.
VIRGINIA TRIOLI: Sure, but times change and Budget bottom line changes as well. This is at least one concrete plan Minister, to save the Budget almost $6 billion in the first year. You are offering tax cuts while leading economists such as Chris Richardson and others strongly argue you should still be focusing on Budget repair. That is what this policy seems to be doing.
MATHIAS CORMANN: We are focused on Budget repair. Under the Coalition the Budget is getting back into surplus by 2020-21 and remaining in surplus all the way through. At the last election… interrupted.
VIRGINIA TRIOLI: Chris Richardson's point is that you need to get there sooner rather than 2020-21.
MATHIAS CORMANN: Well 2020-21 is actually not that far away. What I would put to you is that, whatever way Bill Shorten tries to dress this up, this is going to be a tax hit, a $59 billion tax hit by his own numbers, which will hit low and middle-income earners the hardest. If you are a self-funded retiree on a low income, you will pay more tax. If you are a pensioner who has invested in some shares, you will pay more tax. More than a million retirees, many of them pensioners or part pensioners will pay more tax under this proposal. This is just the latest. We have had $165 billion worth of Labor tax grabs announced before. There is no question that under Labor the overall tax burden in the economy would increase beyond the 23.9 per cent cap that we have imposed on ourselves. Higher tax burden in the economy will lead to less investment, will lead to lower growth, which would lead to fewer jobs and lower wages. That is precisely the opposite to what we are trying to achieve. We are working to make our economy stronger, more prosperous, to ensure that people across Australia have the best possible opportunity to get ahead. Bill Shorten wants to hit people working to get ahead for six.
VIRGINIA TRIOLI: I feel like we are in the middle of an election campaign already Minister. You mentioned wage growth and where people’s wages are. Wage growth in Australia we all know is at historically low levels and basic household struggles are now a broad reality. In that context, isn’t the ACTU's minimum wage claim of $50 a week reasonable?
MATHIAS CORMANN: Firstly, wages growth has been picking up and the key is to ensure that wages growth continues to pick up on the back of stronger growth and…interrupted.
VIRGINIA TRIOLI: It is still historically low.
MATHIAS CORMANN: If I may, wages growth has been picking up and it is important for wages growth to pick up on the back of stronger economic growth and stronger profitability of businesses employing people across Australia. We do have one of the highest minimum wages in the world. These are decisions that are made independently by the Fair Work Commission. The Fair Work Commission appropriately will consider the economic impact, the impact on work force participation…interrupted.
VIRGINIA TRIOLI: Of course they will, but I am asking if you think it is reasonable?
MATHIAS CORMANN: What I am saying is that the Fair Work Commission needs to consider this very carefully. If you increase the minimum wage further when we already have one of the highest minimum wages in the world, without taking steps to improve the profitability of business, you will drive more people into the unemployment queues and that is not what we need and that is not what we want.
VIRGINIA TRIOLI: Do you really not have a sense of just how tough it is for so many households across Australia just to meet their weekly bills? That is not surprising to you, is it Minister?
MATHIAS CORMANN: We absolutely have a sense of this and that is why we are working very hard on our plan to strengthen growth and create better opportunities for all Australians to get ahead. We also understand that the only way that all Australians can have the best possible opportunity to get ahead is to ensure that those businesses employing nine out of 10 working Australians have the best possible opportunity to be successful and profitable into the future. In the end, it is those businesses that have to create the new jobs and have to pay the higher wages that we want Australians to be able to benefit from.
VIRGINIA TRIOLI: Mathias Cormann, just finally this morning, I wanted your reflections on the big Australia discussion. If we need a national population strategy and most experts seem to agree that we do. Does the focus need to be more on immigration levels or infrastructure?
MATHIAS CORMANN: When it comes to immigration levels, the focus ought to be on attracting the right set of skills and the right people into Australia to help us build a stronger, more prosperous, more successful Australia into the future…interrupted.
VIRGINIA TRIOLI: So we still need that skilled migration scheme, you think?
MATHIAS CORMANN: Of course we need to continue to attract skilled migrants and at the right level, consistent with the needs of our economy and the infrastructure development needs to run in parallel. We have to ensure that we plan and that we continue to invest and develop the infrastructure that we need in order to accommodate those people that are joining us here in Australia.
VIRGINIA TRIOLI: Mathias Cormann, good to talk to you. Thank you
MATHIAS CORMANN: Always good to talk to you.