Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
KIERAN GILBERT: First though to local news and the build up to the Budget. Let us go live to the Finance Minister Mathias Cormann. With the scrapping of the increased Medicare levy, is it true that the Government is basically spending the increased revenue as quickly as it is coming in?
MATHIAS CORMANN: No, that is not right. What we have decided to do on the back of stronger growth and a stronger Budget position, both because of less spending as well as higher revenue than anticipated last year, is continue to make decisions on the right way forward. We have come to the view that in all of the circumstances we could commit to fully fund the NDIS without the need for the additional Medicare levy increase, which was not going through the Senate anyway.
KIERAN GILBERT: Well that is true, but you did not try did you?
MATHIAS CORMANN: That is not right. We … interrupted
KIERAN GILBERT: Did you try to get it through?
MATHIAS CORMANN: Of course … interrupted
KIERAN GILBERT: Was it put to a vote?
MATHIAS CORMANN: No. We could have spent months and months wasting time. We knew that the Labor Party was opposed. We knew that the Greens were opposed. We knew that One Nation was opposed. There was no prospect of getting it through the Parliament. We could have wasted weeks and weeks in the Parliament without any prospect of getting this through or we could have made the decision as we have, that in all of the circumstances, given the stronger growth, given the stronger Budget position on the back of the sound fiscal management of the Turnbull Government, that we needed to focus our efforts on getting those measures through that we could achieve a consensus for in the Senate.
KIERAN GILBERT: But you are persuasive, you are persuasive. You are trying that on the company tax cuts at least, you could say the same thing about them, they are not being supported to scrap them.
MATHIAS CORMANN: On the company tax cut, which is absolutely necessary to protect our economy, to protect jobs and to secure future wage increases in Australia, we are within two votes. There are still four crossbenchers who are prepared to engage with us. This is quite a different situation to the Medicare levy increase. On the Medicare levy increase, there were absolutely firm positions against the proposal that was on the table from a majority of people in the Senate. We made a judgment in all of the circumstances, also in the context of our commitment to cut personal income tax rates, that this was the right way forward.
KIERAN GILBERT: Does it mean that because you have already spent a great deal in covering that revenue that would have been otherwise obtained through the half a per cent increase in the Medicare levy, that it will be a soft start I guess, a smaller start than otherwise we would expect in terms of the income tax cuts?
MATHIAS CORMANN: The extent of the income tax cuts will be revealed by the Treasurer in the Budget on the second Tuesday in May. Self-evidently, as we have always said, the extent of the personal income tax cuts will be guided by what is affordable in the Budget. In the context of the decision that we have made on the Medicare levy, self-evidently there is going to be less revenue than otherwise there would have been and as such that will have a bearing on what other decisions we can make in the Budget.
KIERAN GILBERT: But what you can do now in terms of the economic message is draw a line between a Government that says it is reducing taxes across the board versus the opposing side.
MATHIAS CORMANN: Bill Shorten is running a socialist agenda that will do harm to our economy and cost jobs if he had the opportunity to implement it in Government. As he is putting jobs at risk, causing higher unemployment and there is less competition for workers in the economy, wages will go down. That is the clear consequence of Labor’s attacks on people’s incomes with ever-higher taxes. Bill Shorten so far has already put more than $200 billion worth of tax increases on the table. As you increase the overall tax burden on the economy, it leads to less investment, lower growth, fewer jobs and lower wages.
KIERAN GILBERT: But you are giving him even most scope for spending and to outdo your proposed income tax when they eventuate because of the fact that you are keeping the company tax cuts on the books even though you are not getting them through. The Labor party can spend that projected revenue can’t they?
MATHIAS CORMANN: Firstly, an income tax cut is not spending. An income tax cut leaves individuals or business with more of their own money so that they can invest it the way they see fit …interrupted
KIERAN GILBERT: But Labor will still spend it won’t they and you know that.
MATHIAS CORMANN: You are making all sorts of assumptions here. As I say, we continue to work to get the business tax cuts legislated in full through the Parliament. We believe that there is a prospect that we will secure the necessary support. So we will keep working at that. Let me tell you, in the circumstances where the US has reduced their business tax rate to 21 per cent, the UK is going to 17 per cent, France is going to 25 per cent, countries around the world are lowering their business tax rate. If we do not lock into our legislation a globally more competitive business tax rate, we will be hurting the economy. We will be sending investment and jobs overseas and as jobs and investment go overseas, people in Australia would only be able to secure lower wages than they otherwise would. It is very important in our national interest that the Senate passes our business tax cuts in full.
KIERAN GILBERT: It would be a bit easier to be making this case if not for a parallel Royal Commission putting the banks, some of our biggest businesses through the wringer right now.
MATHIAS CORMANN: You have to consider these things separately. What is happening with the banks, any wrongdoing by the banks has got to be addressed. The Royal Commission is going to get to the bottom of these things. The appropriate policy responses will follow. When it comes to the banks and tax, we have imposed a major bank levy in last year’s Budget, which the banks are paying now. Any business tax cuts will not apply to the banks in any way, shape or form at least for another five years and the full extent will not come through for another eight years. By then all of these issues will have been addressed. Let me say, when it is all said and done it is in our national interest, it is in the interest of every Australian, that we have strong, profitable and stable banks, who can underpin the future economic growth in our economy.
KIERAN GILBERT: Going back to what we started with on the NDIS and the funding of it. What do you say to members of that sector, to families, to carers, to those with disabilities, who have been, some of them in contact with me over the last 48 hours, concerned about the developments here and concerned about whether or not commitment to the NDIS is waning, because there is a lot of people who have a lot at stake when it comes to this.
MATHIAS CORMANN: Our commitment to the NDIS is not waning. But through good economic and budget management we have been able to get ourselves into a position where we no longer need this increase in the Medicare levy in order to fully fund the NDIS. My message to those families that have spoken to you around Australia is that having something sit in the Parliament without any prospect of getting through the other end does not help them. What helps them is the Turnbull Government making judgements on the spending and the revenue side of Budget that will help us ensure that we can guarantee the necessary funding for the NDIS and all of the other important social and health services that people across Australia expect us to deliver.
KIERAN GILBERT: As Finance Minister though, you can reassure everyone and the economists worry that the Government might be shovelling out the money as soon as it is coming in, the revenue as soon as it is coming in, that you are still committed to Budget repair, because there is not a lot of talk about that right now.
MATHIAS CORMANN: Of course we are committed to Budget repair. We have been projecting a return to surplus by 2020-21 since our half yearly Budget update in December 2015. That remains our trajectory. I reject this proposition that we are shovelling out money because we are not proceeding with an increase in the Medicare levy which was not going through the Parliament. What do people expect us to do, just to keep it on the books without any prospect to actually collect the money in practice? That just does not make sense.
KIERAN GILBERT: Labor will have a lot more to spend if they do keep the increase in the high income levy, which they were going to do in part to fund the NDIS. Even though that is not needed now, they could still keep that in place couldn’t they?
MATHIAS CORMANN: Labor is pursuing a high taxing, socialist agenda, which will do great harm to our economy and jobs if they got the opportunity to implement it in Government. Bill Shorten wants to increase permanently the top marginal tax rate to just under fifty cents in the dollar, which is crazy. It will be an anti-opportunity, anti-success tax. He wants to hold our economy back. He wants to hold aspirational Australians back. We want to ensure that families around Australia have the best possible opportunity to get ahead. Whereas Bill Shorten is running an anti-business, anti-opportunity class warfare type agenda, which will do great harm to our economy if he gets the opportunity to implement it in Government.
KIERAN GILBERT: Okay a couple of issues to conclude. This huge spending commitment that the Prime Minister is going to make alongside yourself in WA on infrastructure, the Metronet and others. Is this a bit catch up given how hardly done by WA has gone on the GST?
MATHIAS CORMANN: We have been working with the McGowan Government here in Western Australia over the last nine or ten months on an infrastructure package, which follows a $2.3 billion package in our Budget last year. This is about making sure that Western Australia gets its fair share of the infrastructure investment around the nation. What we have done is we have worked with the McGowan Government on making sure that the funding is directed into the appropriate economic infrastructure priorities, to bust congestion and improve connectivity across Perth and across Western Australia generally and improve the quality and the efficiency and the productivity of our freight routes across Western Australia. So this is very much a strategic investment in future jobs and growth here in Western Australia.
KIERAN GILBERT: And finally and onto the story relating to Labor’s negative gearing plans, more than two thirds on taxable incomes of less than $80,000 per year. But isn’t the point here that it can be misleading, the way this is portrayed by the Government because if it is taxable income of $80,000 a year, that is after all the other deductions are factored in, including negative gearing deductions. So there income could be much higher than that.
MATHIAS CORMANN: Whatever way Bill Shorten shiftily wants to spin this, he talks about going after the rich while targeting low and middle income earners with higher taxes. That is what we have seen with this attack on people’s retirement savings. That is what we have seen with his attack on middle income Australians, who are leveraging the value of their asset and their income to invest in further income producing and capital appreciating assets, which is what negative gearing is all about. He knows that he is targeting police officers, nurses and teachers to a very large degrees. He knows that but he is going after them anyway because that is just part of his anti-success, anti-opportunity, anti-families having the best possible opportunity to get ahead, socialist agenda.
KIERAN GILBERT: Finance Minister and Leader of the Government in the Senate, Mathias Cormann we will talk to you soon.
MATHIAS CORMANN: Always good to talk to you.