Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
KIERAN GILBERT: Let’s go live to Finance Minister, Mathias Cormann, joins me from Washington today, where he has had a series of talks with the Trump Administration. We will get to those talks in a moment because I am very interested to see what the economic climate is like in the United States. But first your reaction to these developments out of the Royal Commission and first of all that breaking news the AMP chief has stood down.
MATHIAS CORMANN: Good morning Kieran. Some of the news that has emerged in the Royal Commission is very concerning indeed. This is one of the consequences out of that process.
KIERAN GILBERT: And in relation to the developments out of the Royal Commission for example the AMP controversy, will this prompt any change to your approach. Will you support for example Labor’s Future of Financial Advice approach, which previously the Government sought to overturn?
MATHIAS CORMANN: That is just inaccurate Labor rhetoric. We never sought to overturn the Future of Financial Advice reforms. We pursued some sensible adjustments to it, which made it more efficient and more effective. That is just inaccurate partisan Labor rhetoric. What the Government has been doing recently … interrupted
KIERAN GILBERT: Well they say you want to water it down.
MATHIAS CORMANN: That is wrong. We just pursued reforms to make them more effective and more efficient. But in any event, what the Government has been doing in recent years is, we have increased the powers and the resources for ASIC to pursue any wrong doing in the financial sector. Kelly O’Dwyer has flagged that we will take that even further. But in the meantime, the Royal Commission is underway. It is getting on with the job. The Royal Commissioner Justice Hayne is doing an outstanding job. I think that all of us need to let him continue to do his work. Any findings and any recommendations that come out of this process will be appropriately considered and dealt with by the Government.
KIERAN GILBERT: In relation to the Royal Commission, do you concede that the Government maybe got it wrong? That you should have supported it sooner given what we have seen out of that Royal Commission?
MATHIAS CORMANN: Our position is a matter of public record. We took the view that it was important to take action, to deal with issues rather than to have another inquiry. But having said that, we did call the inquiry. We did set the terms of reference, much broader than what Labor and the Greens were suggesting at the time. We selected the Royal Commissioner in Justice Hayne, who by all accounts and who everybody recognises is doing an outstanding job. We are where we are. We should let Commissioner Hayne get on with it. Do his job. At the end of this process, the Government will appropriately respond to any of the findings and recommendations out of this process.
KIERAN GILBERT: But you know as well as I do, that Bill Shorten, the Opposition Leader will continue to say that the Government had to be dragged kicking and screaming, why not just concede the fact that you should have done it sooner?
MATHIAS CORMANN: Bill Shorten is going to continue to make noise. That is what he does. But he does not actually put forward anything tangible in practice to make things better. The Government has taken action for a number of years now in providing additional resources. You have to remember that a lot of the issues that we are talking about here are historical issues, many of which occurred on Labor’s watch when Bill Shorten actually was the Assistant Treasurer and Minister for Financial Services and Superannuation. We have been taking action during our period of Government. We have increased the powers and the resources of ASIC to be able to more effectively detect and prosecute and pursue bad behaviour in the financial sector where that does occur. Clearly out of this process there will be some further findings and recommendations that the Government will be able to act on. Kelly O’Dwyer has already flagged some further increases in penalties. We are consistently and constantly exploring what else can sensibly be done.
KIERAN GILBERT: Well as you alluded to, Kelly O’Dwyer and the Treasurer to be announcing these new penalties, pre-empting the outcome of the Royal Commission. Toughening penalties up to $210 million, ten per cent of annual turnover for serious misconduct.
MATHIAS CORMANN: We are not pre-empting any findings or recommendations out of the Royal Commission. We are just continuing to do that work that has been ongoing for some time. We have been strengthening the powers of ASIC. We have been increasing the resources available to ASIC to detect and prosecute and pursue inappropriate and bad behaviour where it occurs. That is essentially a continuation of that effort. At the end of the Royal Commission process, I would expect that there would be some further areas of action that will become clear.
KIERAN GILBERT: I want to play you a quote from Derryn Hinch, he was on the Paul Murray Live program, in relation to the banks and the prospect for company tax cuts.
DERRYN HINCH (EXCERPT): I put this to Senator Cormann, why not for now, while a group, while an industry is before a Royal Commission exempt them. I have told them, give the tax cuts to every company up to $500 million. We got to $50 million last year. There is something like 5,500 companies who would fit into that category of under $500 million. Now 1,200-1,500 of them in Victoria where I live. So do that, but leave the banks alone until the Royal Commission has done its business. You can’t give little giveaways and lollies to people who are being castigated and understandably so, every minute of the day, this week in Canberra. It is jut not right.
KIERAN GILBERT: Derryn Hinch talking to Paul last night on Sky News. Your thoughts on that Mathias Cormann, any sense that you might compromise again to get another increment done?
MATHIAS CORMANN: No. We need to legislate business tax cuts for all businesses in order to ensure that our businesses can be globally competitive. There are many businesses with more than $500 million in turnover who are not banks incidentally. When it comes to the banks we have already imposed the major bank levy on them. That was part of last year’s Budget. We have got to ensure that all of our businesses including and in particular the biggest businesses in Australia that are on the frontline when it comes to global competition are not disadvantaged with the businesses that they compete with in other parts of the world. Big business essentially, not only do they employ many Australians directly, they also buy their goods and services from the small and medium sized businesses around Australia. If big business is at a disadvantage because we forced them to be less competitive than businesses in other parts of the world, we will lose investment, we will lose jobs right across the economy and we will end up with lower wages on the back of higher unemployment. I have spent a couple of days here in the United States now. The data is very clear, on the back of the tax cuts which were legislated by the US Congress in the first three months of this year, wages growth has been the strongest in any continuous three month period since the first half of 2009. They have had massive additional investment, significant additional productivity growth and the highest wages growth in any three month period since the first half of 2009. A business like Walmart, the biggest private sector employer here in the United States has increased the entry level wages for the lowest income workers at Walmart by US$2 an hour. That means $3,000 to $4,000 in additional pay on the back of the tax cuts that were legislated here. We cannot possibly disadvantage Australian workers working for Australian businesses, including the largest businesses. By essentially limiting business tax cuts to businesses below a certain threshold we provide a perverse incentive to business to stay smaller, when we want them to get bigger so they can hire more Australians and pay them better wages.
KIERAN GILBERT: So while you did compromise to get to the point where we are at the moment at $50 million, for the rest it is all or nothing. Are you still hopeful of getting Hinch and Senator Storer across the line?
MATHIAS CORMANN: We will continue to make the case. The situation has changed since we legislated the first three years of our ten year enterprise tax plan. Since we have done that, the United States has legislated to reduce their business tax rate immediately from 35 per cent to 21 per cent. That puts Australian business under significant additional pressure. We now need to provide certainty to businesses around Australia employing nine out of ten working Australians that they can be globally competitive into the future, so that they can invest in the knowledge that they will have access to a more globally competitive business tax rate. France under Emmanuel Macron, hardly a right wing ideologue, France under Emmanuel Macron, who was the Economy Minister in the last socialist government of François Hollande in France. They are reducing their business tax rate from 33 per cent to 25 per cent to protect investment and jobs in France. We must do the same in Australia if we want to protect investment and jobs in Australia, if we want to be able to secure additional investment, create more jobs and drive stronger wages growth as those business tax cuts take effect. It is absolutely imperative and we will continue to make the case.
KIERAN GILBERT: And you feel you have still got enough headroom in terms of revenue to deliver income tax cuts that will have an impact?
MATHIAS CORMANN: The business tax cuts are already reflected in the Budget bottom line. If you look at our monthly financial statements, you would be able to observe that the Government’s fiscal position has actually been improving. Already having factored in the cost of the business tax cuts our Budget is projected to return to surplus by 2020-21 and to remain in surplus over the medium term. The cost benefit of business tax cuts is higher than the cost benefit of any other tax cuts that we could possibly deliver. We will be pursing personal income tax cuts in the Budget as well. That is a matter of public record and we will be having more to say about that at the time of the Budget.
KIERAN GILBERT: Only a couple of minutes left, just finally then an overarching question on the narrative of this Budget. What is it because this week there was a bit if confusion from the Acting Prime Minister describing Scott Morrison as Santa Claus, portrayed in the red suit on the front page of the Daily Tele and then no Christmas coming in May, a bit of confusion back home. What is the narrative around this Budget that you want people to hear?
MATHIAS CORMANN: There is no confusion. Our Government’s priority is on economic growth, jobs and our national security. We want Australia to be on the strongest possible economic and fiscal foundation and trajectory for the future so that we can continue to grow our economy, create more jobs and drive stronger wages growth. We want to continue to make the necessary investments into our national security to ensure our country is as safe and secure as we possibly can be.
KIERAN GILBERT: Finance Minister and Leader of the Government in the Senate, Mathias Cormann joining us live from Washington. Thanks so much, we will talk to you soon.