Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Tuesday, 8 May 2018
TICKY FULLERTON: To unpack the Budget I am delighted to be joined by the Finance Minister Mathias Cormann. Minister, great to have you here. Now, Labor says this election Budget is really about tax and irresponsible tax handouts and that was really the thing that the Treasurer was talking about today. Is it irresponsible?
MATHIAS CORMANN: No. This is our plan for stronger growth, for more jobs and for a stronger Budget position. You have to remember when we came into Government in 2013, Labor left behind a weakening economy, rising unemployment and a Budget position that was rapidly deteriorating. When Chris Bowen last was Treasurer of Australia, the Budget position deteriorated by three billion dollars a week. Today…interrupted
TICKY FULLERTON: They see themselves as better economic managers than you these days. They reckon by higher taxing and higher spending they will deliver more in terms of a Budget surplus.
MATHIAS CORMANN: But that is never what they do. In the lead up to the last election, they promised $160 billion in higher taxes and yet went with $16.5 billion in higher deficits to the last election. Look at their performance when they were last in Government. When Bill Shorten and Chris Bowen were last in Government, they left behind a weakening economy, rising unemployment and a Budget position that was rapidly deteriorating. Today, the Budget that the Treasurer delivered shows that our economic growth is strengthening, employment growth is much stronger, 415,000 new jobs last year and the Budget now projected to return to surplus by 2019-20. And as of this financial year, 2017-18, we are no longer borrowing to fund our recurrent expenditure.
TICKY FULLERTON: How credible are some of your revenues going forward do you think over the forward estimates because they are driven in part by China risk aren’t they?
MATHIAS CORMANN: If you look at our economic growth forecast, they are in line or slightly more conservative than those of either the RBA or international institutions like the IMF. We believe that our economic forecasts are based on very prudent, very realistic assumptions. Look no further than what the RBA and the IMF are saying.
TICKY FULLERTON: What about your wages growth numbers because they did raise some eyebrows, particularly when you have got your wage increases starting to happen before you have full employment. Now I do not think anywhere in the world has that happened because you have still got spare capacity.
MATHIAS CORMANN: We had 415,000 new jobs created last year, three and a half per cent employment growth. Just to put that into the context of the United States where they created 2.7 million jobs, they would have created 5.3 million jobs in the US economy…interrupted
TICKY FULLERTON: Are you going to be able to grow at the same rate this year?
MATHIAS CORMANN: We are projecting stronger economic growth moving forward. We are projecting 2.75 per cent growth this year and for that to increase to three per cent over the forecast and projection years…interrupted
TICKY FULLERTON: Can you, if what you are saying is the rate of jobs growth in this country is justifying your wages growth, can you say that you will actually increase at the same rate in terms of delivering on jobs?
MATHIAS CORMANN: Employment growth has picked up, wages growth has picked up. We would like wages growth to be stronger, which is why we need our national plan for the economy and for jobs to be passed by the Parliament in full.
TICKY FULLERTON: Now, Labor has indicated that it will agree to pass the first part of it. You cannot expect them to pass the last part out seven years can you? They are interested in raising taxes on the high-end income earners.
MATHIAS CORMANN: Bill Shorten will have some thinking to do. We want to provide income tax relief to hard working Australians because we believe that hard working Australians deserve tax relief and we also believe that we need to provide encouragement to Australians to work harder so that they can continue to contribute to stronger economic growth into the future. We are prioritising low and middle-income earners in the first instance, but over time, as part of a responsible and affordable carefully put together seven year plan, we believe that it is appropriate to provide tax relief across the board. It is appropriately prioritised, it is phased, but it is a whole package.
TICKY FULLERTON: And you will not negotiate and do the first bit first and?
MATHIAS CORMANN: This is a seven year plan. We want to …interrupted
TICKY FULLERTON: Because after all you have done with company tax cuts haven’t you?
MATHIAS CORMANN: That was a very different proposition. Right now, we are working to pass the final seven years of a ten year plan in terms of company tax. When it comes to income tax, this is a plan, it is a holistic plan, it is a plan that is very carefully put together and we want the Parliament to legislate the plan in full.
TICKY FULLERTON: Mathias Cormann why will lower income taxes lead to higher wages, how can we be sure about that?
MATHIAS CORMANN: It is very simple. Providing income tax relief at the low and middle-income end will drive increased domestic consumption and that is a very important ingredient when it comes to economic growth moving forward.
TICKY FULLERTON: It is not the reverse of a snake eating its tail?
MATHIAS CORMANN: There is a whole range of different things we need to do. We do need to make sure that businesses across Australia employing nine out of ten working Australians have the best possible opportunity to be successful, to invest in their future growth so they can hire more Australians. As they hire more Australians and compete for the workers in the Australian economy, they will have to pay more to secure their services. We also need to ensure that low and middle income Australians, in particular, who work hard, are protected from the effects of bracket creep, that we provide support in terms of cost of living pressures by leaving them with more of their own money. When people talk about Government giveaways, this is not a Government give away. This is a Government taking less out of the pockets of hard-working Australians.
TICKY FULLERTON: Yes but it was not so long ago when you actually committed to all the tax revenues going into Budget repair, now you have moved away from that. Isn’t the reality now that you have boxed yourself in by agreeing to NDIS, by agreeing to Gonski and you cannot actually deliver in terms of reducing spending?
MATHIAS CORMANN: That is actually entirely wrong. If you look at the record over the last 50 years and beyond, this Government has delivered the lowest spending growth of any government in the last 50 years, which is over the period over which we have records in our budget papers. 1.6 per cent spending growth above inflation on average over the four years of the current forward estimates. To put that into context, 3.3 per cent spending growth under the Howard Government, four per cent spending growth per year above inflation under the most recent Labor Government and a forward trajectory of four per cent spending growth moving forward. We have been able to deliver spending growth that is the lowest spending growth on record. Spending as a share of the economy is projected to come down to 24.7 per cent in the last two years of the forward estimates, which is below the 30 year average of 24.8 per cent.
TICKY FULLERTON: The black economy, almost five billion dollars, one way or the other, how are you going to get that, three billion on tobacco and most of that up-front, is that believable?
MATHIAS CORMANN: That is based on the advice from the experts. There is a problem out there in terms of the black market and we have provided additional resources to Treasury and other relevant agencies to ensure that the appropriate taxes are paid, the appropriate excises and other taxes are paid.
TICKY FULLERTON: Just on your various policies now around aged care and the reverse mortgages, could that actually unlock houses? Could that play into housing affordability do you think?
MATHIAS CORMANN: This is designed to help older Australians, pensioners and self-funded retirees deal with their cost of living pressures…interrupted
TICKY FULLERTON: Just wondering what the implications of that might be.
MATHIAS CORMANN: Well over time, I suspect that this will lead to increased supply into the housing market.
TICKY FULLERTON: Newstart, there was a lot of talk in the lead up to the Budget about being able to live on $40 a day. No increase in real terms in Newstart for 24 years. Even people like Chris Richardson calls it cruel, Jennifer Westacott from the BCA, but you have not touched it
MATHIAS CORMANN: Well the Labor Party never increased the Newstart allowance and the Labor party…interrupted
TICKY FULLERTON: But that is not a good reason…interrupted
MATHIAS CORMANN: Let me tell you what we have done. We have helped 140,000 Australians off welfare into a job. The proportion of the working age population in Australia today which is on welfare today is the lowest in 25 years at about 15 per cent. Newstart is not there to be an ongoing income over a long-term basis, it is meant to be a transitional payment while people are supported back into work. Our focus is on getting more Australians into work, off welfare, into work and the data shows that our plan is working.
TICKY FULLERTON: Finally, you have got a very big infrastructure spend. It is all on Budget I believe, should the NBN also be on Budget now?
MATHIAS CORMANN: Are you asking us to ignore accounting standards? I mean, firstly the NBN is on the Budget, because the NBN is on the Budget as an asset and to the extent that it is funded by borrowings as a liability. So this proposition that…interrupted
TICKY FILLERTON: But it is not going to make the returns that it was supposed to make.
MATHIAS CORMANN: Well in fact, the returns have strengthened. The forecast returns have strengthened since we have been in Government. You are right, we would never have started the NBN the way it was started. We inherited a mess. We have been working very hard to turn that around and the NBN is performing much better now than what it was. Surely, you are not suggesting that we should sell out taxpayers by somehow now socialising the entire expense of providing services through the NBN, to shift it from customers to taxpayers. That would be entirely reckless and irresponsible.
TICKY FULLERTON: I am just putting it out there for what it is, but Mathias Cormann, another Budget under the belt. Thank you very much for joining us Minister.
MATHIAS CORMANN: Always good to talk to you.