Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Wednesday, 9 May 2018
ALAN JONES: But I have got on the line Mathias Cormann and I thank him for coming and what I am going to do to him initially, which I will do to the Labor people too when they come on, I want to give him a free kick to start with. So my first question Mathias, good morning to you.
MATHIAS CORMANN: Good morning.
ALAN JONES: Thank you for your time. Now can I ask you this, what would you hope in the light of the Budget they are talking about today in the pubs?
MATHIAS CORMANN: I would like people to agree that the Government has a plan; for a stronger economy which creates more jobs, to ensure that funding for all of the essential services the Government provides and that Australians rely on is guaranteed within the Budget and that the Government is back on track to live within its means. All of that is good for Australians today and into the future wanting to get ahead.
ALAN JONES: Could I just take the guidelines that the Treasurer set for himself last night, very early in the speech, he said that the plan that you are talking about is based on five things. I will just take them one at a time, they are fairly simple. One, tax relief. Now on the tax relief the bloke under $37,000 will get a tax credit of $200, which is four dollars a week, he will get that at the end of the next financial year. Between $48,000 and $90,000 he will get $10.19 a week. Is that something that is going to excite people in that income bracket?
MATHIAS CORMANN: It is what we can afford while getting the Budget back into balance by 2019-20 and making sure that we can pay down Government’s net debt. It is tax relief for hard working Australians prioritising low and middle-income earners. It is affordable and it is fully funded within the Budget. People will always like to have higher tax cuts but at least we are cutting taxes. Labor is proposing to increase the tax burden in the economy by more than $220 billion so far targeting low-income earners, including pensioners, targeting savers, investors, workers, business. Right across the board they are proposing to increase the overall tax burden. We are cutting taxes they are increasing taxes. We are proposing to strengthen growth, create more jobs and their agenda of higher taxes will lead to lower growth and fewer jobs.
ALAN JONES: Second point he said, he wanted to back business. Now business are writing to me saying they are fed up with red tape, but then very disappointed on the industrial relations front, that the merger between the CFMEU and the Maritime Union has gone ahead and you have got this massively powerful outfit which has both the muscle, industrial muscle, to bully employers and money, buckets of it, millions of dollars to back Labor in an election campaign.
MATHIAS CORMANN: If people share our concern that this should not just have been able to happen, that there should have been a public interest test, then they need to vote Liberal or National at the next election. If we had more seats in the Senate, we would have been able to pass legislation to restore the public interest test…interrupted
ALAN JONES: But you did not give the Senate a vote. Laundy did not even put this into the Senate. I mean, why didn’t you put this into the Senate and let the Senate vote and be responsible for this powerful merger and you could point the finger at them. Laundy did not even go there.
MATHIAS CORMANN: There was no prospect of it going through and in that fortnight we had $400 million of additional savings that needed to be legislated or we would have lost them.
ALAN JONES: Look that is not the way I would operate. I would stick it up there and then if they voted against it I would be banging it down their throats…interrupted
MATHIAS CORMANN: And we would have spent two weeks doing nothing else other than talking about it without any outcome in the end. We do not, the Government does not have the numbers in the Senate…interrupted
ALAN JONES: You spent two months talking…interrupted
MATHIAS CORMANN: The Senate could have even prevented us from having a vote on it.
ALAN JONES: Mathias you spent three months talking about same sex marriage when you could have been talking about this very, very critical issue…interrupted
MATHIAS CORMANN: That is not quite right. Not in the Senate.
ALAN JONES: The third point he said was essential services. Now, you understand that out there all that language last night, that as people are listening to me now and driving to work and whatever, they have pulled up to fill the bowser up. The petrol price is going through the roof. It is a critical and essential service and of course now we have got this decision by Donald Trump in relation to Iran which could disrupt the availability and supply of these essential services. You have got electricity, in spite of what the Government has said, the electricity bills for business and consumers are going through the roof, you have got health insurance premiums increasing beyond the inflation rate and then people are paying tolls everywhere. The consumer who is 60 per cent of the economy is saying ‘listen I can’t see my wages going up, but I can see the cost of living being very intolerable’.
MATHIAS CORMANN: Firstly, our income tax cuts, our income tax relief for hardworking Australians is in part to help Australian families deal with the cost of living pressures, in particular the low and middle-income end. Secondly, we do have a plan for stronger wages growth. If we want stronger wages growth we need to ensure that businesses around Australia can be more successful and more profitable into the future. The way that that is achieved is by making sure that they are not disadvantaged compared to businesses in other parts of the world by forcing them to pay higher taxes. And we are also working to bring down the cost of electricity.
ALAN JONES: Mathias the Reserve Bank Governor said earlier this month that he believes that wage increases of two per cent have become the norm. So if you have got his flat lining, that has got two consequences, one, the poor bloke that is working is not getting a lot of relief and secondly, if it becomes the norm, your personal income tax take is compromised, isn’t it?
MATHIAS CORMANN: The way you increase wages is by increasing competition for workers. The only way to increase competition for workers is by having more businesses expand their business and hire more Australians than they otherwise would…interrupted
ALAN JONES: Is the Reserve Bank Governor wrong?
MATHIAS CORMANN: The Reserve Bank Governor, without wanting to put words into his mouth has actually previously supported to proposition that we needed a globally competitive…interrupted
ALAN JONES: We all know that. But notwithstanding the economy, we have had 20 years of economic growth and now we have got very good conditions in the world economy but not withstanding that. The Reserve Bank Governor says what the people listening to you know that wage growth is flat. Two per cent may be the norm.
MATHIAS CORMANN: Well it has started to pick up. The economic fundamentals are still right, and you will find that the Reserve Bank Governor agrees with this proposition, if you continue to create more jobs and if you continue to reduce the excess supply in the labour market you will be driving up wages by more.
ALAN JONES: The fourth point, I will not discuss because the fourth point of the five proposals is to keep Australia safe and I say to the listeners out there that there is no comparison between the Coalition Government and the Labor Party. I do not believe the Labor Party can be trusted on the issue of border security and illegal immigration and boat people and so on…interrupted
MATHIAS CORMANN: I agree with you.
ALAN JONES: That is a massive plus, so we will not even discuss it. Now the fifth point he said was living within its means. He no sooner he got those words out of his mouth and announced that the deficit for this financial year, which will end on the 30th June, is $18.2 billion and the deficit for the next financial year is $14.5 billion. How is that living within your means?
MATHIAS CORMANN: Firstly, we are spending seven billion dollars less this year than what was forecast in 2014-15 for this financial year. We have reduced spending growth down to 1.6 per cent per year on average over the forward estimates. That is the lowest in the last 50 years. Spending as a share of the economy is going down to 24.7 per cent, which is below the 30 year historical average across Australia. And we are on track back to surplus. As of this financial year, you will be very pleased to hear this Alan, as of this financial year we are no longer having to borrow to fund the recurrent services of Government. Net debt is now peaking this financial year instead of next financial year, at a lower level, at 18.6 per cent as a share of the economy and we are projected to pay off more than $230 billion of Government net debt over the next decade taking net debt down to 3.8 per cent as a share of the economy. So we are projected to get to surplus by 2019-20 and to remain in surplus all the way over the medium term and exceeding the surplus of one per cent as a share of GDP by 2026-27.
ALAN JONES: But see, people when you say all that, Ross is frowning listening to me because he cannot cop it, you see the Labor Party are in front at the polls and you have got to go to an election and try to win the thing. Now the people have publically said, or you have said and a lot of us have said on financial matters, that Labor Party are vandals. Now the prospect of other people coming in here we say that raising the levels of taxes and destroying productivity and people saying it is terrible it is the Labor Party. However, Labor was last in power on 2012-13. Net debt was ten per cent of GDP. Interest payments were 8.2 billion. That is 2012-13. Now the debt is 19.2 per cent of GDP, not ten per cent and interest payments aren’t $8.2 billion but $15 billion. How do you win the argument that you are the better economic manager?
MATHIAS CORMANN: The reality is this Alan, when Labor lost Government, they had locked into legislation a forward spending growth trajectory of four per cent increased expenditure per year on average over the subsequent ten year period. We have more than halved that spending growth trajectory, and let me tell you, it has been hard to do so. Labor are running this argument at the same time that we are spending too much and we are cutting too much. That just does not work. The truth is that we have more than halved the spending growth that we inherited. We are at the lowest level of spending growth of any Government. Spending growth is less under our Government than it was under the Howard Government. That is what we have been able to achieve. The truth is, if we had not made those decisions debt would higher, the Budget position would be weaker, we would be much further away from returning the Budget to surplus.
ALAN JONES: Look, I cannot, I cannot understand and I am sure people out there and your wife would not be able to understand. If you are getting in $482 billion of revenue this year and you cannot make sure when you as the Finance Minister and Morrison as the Treasurer sit down and you say hello here are the figures and suddenly we say righto we have got the revenue on this side and suddenly the revenue on the other side is greater, the expenditure on the other side is greater than the revenue. Doesn’t someone say well hang on, go back and do your homework and cut something so that we can go to the people saying we are not in deficit, we have got a deficit of $18 billion.
MATHIAS CORMANN: Let me say it again, spending as a share of the economy is lower than the 30 year average. We have brought spending down and we have absolutely controlled expenditure growth, but we have got to get the Budget back into surplus in a way that is economically responsible and that is socially responsible. We are in a much stronger economic position and a much stronger Budget position now than we would have been if Labor had stayed in Government over the last five years.
ALAN JONES: Peter Costello pruned spending by two percentage points to 23 per cent of GDP in the year 2000. He just cut it. He cut it. The economy did not tank. Other countries have done the same thing. The United States and Britain have cut their Budget deficits by, the United States by 9.3 per cent Britain by 6.6 per cent.
MATHIAS CORMANN: Alan, over the period that Peter Costello was the Treasurer, Federal Government expenditure increased by 3.3 per cent on average per year…interrupted
ALAN JONES: But he never spent more than he got in. In his last Budget, he spent $235 billion but he got in $246 billion. That is called living within your means.
MATHIAS CORMANN: Expenditure grew by 3.3 per cent on average per year under Peter Costello as Treasurer, it is growing at 1.6 per cent now…interrupted
ALAN JONES: Yeah but do not worry about…interrupted
MATHIAS CORMANN: This is the thing right…interrupted
ALAN JONES: Last year, listen you got $444 billion last year. Isn’t that enough. You spent $464 billion when you have a debt of $600,000 million.
MATHIAS CORMANN: When we first came into Government, we inherited a deteriorating position. The price for iron ore went from $120 a tonne to $45 a tonne having a massive impact on our revenues. Now we could have slashed and burned and hurt a lot of Australians and hurt the economy along the way in order to get into surplus in the way that you are suggesting. It would have been bad for the economy, it would have been bad for families around Australia…interrupted
ALAN JONES: I do not agree with that…interrupted
MATHIAS CORMANN: That is fine. You are entitled to that. We are making judgements on what is in the interest of Australian families, what is in the interest of Australia today and into the future, who we want to have the best possible opportunity to get ahead. We are on a responsible and credible path back to surplus and on a responsible and credible path to pay off Government net debt, reducing it down to 3.8 per cent as a share of the economy over the next decade.
ALAN JONES: Look, we have got many things we could talk about. Paul Keating in the late 1990’s slashed spending from 27 per cent of GDP to 22.9 per cent over four years. That is the equivalent of cutting spending today by $90 billion, which is what Tony Shepherd said we have to do by 2020, which is what Costello said…interrupted
MATHIAS CORMANN: Again, spending growth under our Government is lower than it was under the Hawke/Keating Governments. The data is absolutely unequivocal. We have run a much tighter fiscal discipline on the spending side of the Budget than any of the Governments over the last fifty years. That is the absolute reality.
ALAN JONES: But Mathias the reality is that you are coming in with deficit of $18 billion. You are living beyond your means…interrupted
MATHIAS CORMANN: The reality is that we had some challenges on the revenue side in the first few years of our period in Government and we could have made decision that would have hurt…interrupted
ALAN JONES: This is the fifth deficit in a row. This is the fifth deficit in a row for Morrison. He had $444 billion last year and he spend $464 billion…interrupted
MATHIAS CORMANN: This is the best Budget bottom line since John Howard lost Government in 2007.
ALAN JONES: Well he $444 billion last year and he spent $464 billion. I cannot work that out. You wife would…interrupted
MATHIAS CORMANN: We are on an improving Budget trajectory and we are on track to return to surplus.
ALAN JONES: Just a quick one before we go because we will talk forever. Nothing in this Budget in terms of tax cuts for people over $80,000 and up to $180,000. They provide 40 per cent of the personal income tax take. They are only 25 per cent of taxpayers, nothing for them.
MATHIAS CORMANN: Firstly, as of 1 July 2018, we will be lifting the top threshold for the 32.5 per cent tax bracket to $90,000, from $87,000 to $90,000. That is after we have increased it from $80,000 to $87,000. We have a plan over seven years to provide further tax relief, including abolishing from 1 July 2024 the 37 per cent tax bracket.
ALAN JONES: Will you be here in 1 July 2024? That is three elections away.
MATHIAS CORMANN: That is a fair observation Alan. Our intention is to lock this trajectory into legislation now…interrupted
ALAN JONES: You would not mind if I cut you off would you, I have got to go to the news.
MATHIAS CORMANN: All good.
ALAN JONES: Good to talk. Talk again soon.
MATHIAS CORMANN: Will do.