Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Wednesday, 9 May 2018
BEN DAVIS: Finance Minister Mathias Cormann is the Coalition’s chief negotiator and salesman, Senator good afternoon. When will I get my tax cut?
MATHIAS CORMANN: Good afternoon. We are introducing the income tax package into the Parliament today and we are keen to pass it as swiftly as possible. In the Senate the Government does not have the numbers. So it will really come down to whether Bill Shorten wants to stand in the way of income tax relief for hardworking Australians, or whether he is prepared to let the Government get our agenda through the Senate.
BEN DAVIS: Well hearing what Mr Shorten has had to say today I reckon you are going to have to use all your negotiation powers and all your salesmanship because I want to play a bit of what he has had to say about those tax cuts.
BILL SHORTEN [EXCERPT]: Ten dollar a week tax cuts, which are possible from the 1st of July, we are up for that because we are the Party that stands up for working, middle class families. But as for this seven year mirage that the Government demands we just sign up to, well we want to understand it and see the detail.
BEN DAVIS: There we go, you want to see the detail, a seven year mirage he spoke about, and I guess this is what it comes down to Minister, it is about the ‘trust us for seven years’.
MATHIAS CORMANN: Well the detail is all out there. Bill Shorten knows precisely what we are proposing. We are proposing to provide income tax relief for hardworking Australians, to encourage them to work harder, to make sure the right incentives are there by making sure we do not tax them too much, helping people with cost of living pressures and address bracket creep. Bracket creep is a drag on economic growth and providing these tax cuts is good for the economy, but it is self-evidently good for those Australian who will receive them.
BEN DAVIS: We heard the Treasurer say and reinforce that this is going in as a one-piece of legislation, the whole kit and caboodle, if you want to pass the early tax cuts, you have got to pass the whole seven years. Are you going to have to rethink this or is that negotiable?
MATHIAS CORMANN: It is not negotiable. It is a holistic package. We want to provide income tax relief to all hardworking Australian families in the appropriate fashion, prioritising low to middle-income earners in the first instance, but making sure that 94 per cent of working Australians will not face a tax rate higher than 32.5 cents in the dollar. We think that is appropriate. We think that is important for the economy. We think it is appropriate for families around Australia. In the end, people across Australia will have the opportunity to make their voices heard if Bill Shorten decides to stand in the way. Bill Shorten believes in higher taxes. We believe in lower taxes. He believes in higher taxes, which will lead to less investment, lower growth, fewer jobs and higher employment. We believe in lower taxes, which will lead to stronger growth, more jobs and ultimately higher wages on the back of more competition for workers.
BEN DAVIS: I guess it comes down to your colleagues in the Senate, the Crossbench. They are the ones that really hold the key here, they are the ones you are going to have to negotiate with. Have you heard anything from them yet, when do those negotiations start?
MATHIAS CORMANN: I do not think you should let Bill Shorten get off the hook here. In the lead up to the next election, which is due in about a years’ time, people will choose between two alternative approaches to Government. Our approach and Labor’s approach. We are saying clearly to families, having inherited a weakening economy, rising unemployment and a deteriorating Budget position from Labor, we have been able to turn the situation around. The economy is now stronger, employment growth is much stronger and the Budget is back on track to surplus and we are paying down debt. We believe that there is opportunity here in a responsible and affordable fashion to provide income tax relief to families. If Bill Shorten wants to stand in the way of that, the Australian people will have the opportunity to have their say…interrupted
BEN DAVIS: Senator, with all due respect, we have been saying there has been a Budget emergency since 2014 and we know that this Opposition is just digging their heels in, they do not budge, they do not change. To expect them to actually all of a sudden go ‘oh yeah this seems like a good idea’, and we are not letting the Labor party off the hook here, the Opposition off the hook, but history shows it will come down to negotiating with the Crossbench to get this in.
MATHIAS CORMANN: Well essentially, we are one year away from an election…interrupted
BEN DAVIS: Are we or is it going to be sooner?
MATHIAS CORMANN: Well the election is due in the first half of next year and that this what we are working towards. If the Australian people want to secure this tax cut, they have to send Labor a message. They have to send Labor a message that they want income tax relief for hard working families around Australia, because they understand that this is appropriate to address cost of living pressures, to deal with bracket creep, to simplify our tax system and to ensure that we can continue to grow the economy more strongly into the future.
BEN DAVIS: Finance Minister, Mathias Cormann, my guest this afternoon. Minister how do we know that seven years down the track that we will actually be able to afford these tax cuts, you must have a fairly good crystal ball.
MATHIAS CORMANN: The numbers are there in the Budget for all to see. We do have a range of economic growth forecasts that are underpinning the Budget. As I have indicated earlier, when we came into Government the economy was weakening. We have been able to turn that around in a structural fashion, putting the economy on a stronger foundation and trajectory for the future. The Budget is projected, well is forecast to return to surplus by 2019-20 and projected to remain in surplus all the way over the medium term to 2028-29 and to reach and exceed surplus of one per cent as a share of GDP by 2026-27. So this income tax relief is factored into our Budget bottom line. It is fully funded. It is affordable and even after we have provided this income tax relief to families around Australia, the Budget remains in surplus all the way through to 2028-29.
BEN DAVIS: Sure, but we even heard from Peter Costello, who was our longest serving Treasurer saying it took him 10 years to pay down the debt as far as being in surplus for a decade. It is going to take a hell of a lot longer than that. When do you stop paying off the national credit card?
MATHIAS CORMANN: Well, here is the good news. As of this year, we no longer have to borrow in order to fund the day-to-day expenses of Government. Government net debt will now peak at 18.6 per cent this ,which was lower than previously anticipated and one year earlier. As of this year, we are paying down Government net debt and we are projected to pay down more than $230 billion worth of debt over the next decade, taking net debt as a share the GDP down to 3.8 per cent. We are getting very close to paying Government net debt off completely over the next decade.
BEN DAVIS: And again that is if the economy stays how it is now. I mean we have unexpected bump because of commodity prices, but we know we are so reliant on China and we have just seen in recent weeks that China can change their mind in an instant when it came to taking our recyclable goods. That was just a small dent and how it all effects rate payers at a local council, that is how reliant we are. If they make bigger decisions we can turn in a heartbeat.
MATHIAS CORMANN: Here is a very important point. Unlike the Labor Party when they were in Government, we have made very conservative assumptions when it comes to commodity prices into the future. For example, the price of iron ore in our half yearly Budget update was expected to be at $55 a tonne, well in fact it has been as high as $68 a tonne in recent days. Instead of lifting our assumption of iron ore prices in the future, we have maintained that assumption at $55 a tonne. Across the board we have not assumed continued elevated commodity prices into the future whether that is across iron ore…interrupted
BEN DAVIS: What if it dips though?
MATHIAS CORMANN: Well that is the whole point. we have made conservative assumptions and we believe that our assumptions are absolutely realistic and the opportunity is actually on the up side when it comes to commodity prices. When it comes to our economic growth forecast, when it comes to the assumptions on economic growth, our forecasts are broadly in line with the Reserve Bank of Australia, with international institutions like the International Monetary Fund. In fact, across a number of areas we are actually slightly more conservative.
BEN DAVIS: Minister, here is the sell point now and I will ask you a number of topics and a lot of people, this is going to affect their hip pocket in a different number of regions and in different number of ways. This is your chance to do the sell. When it comes to small business and I will be speaking the Chamber of Commerce here in Queensland next hour, tax cuts are on the table, we know that 25 per cent, but that’s going to take the best part of a decade to get there, is there any change of accelerating that? Or at least can you explain the strategy behind why it is going to be until 2027.
MATHIAS CORMANN: We want the business tax rate to be reduced for all businesses down to 25 per cent, which is important for small and medium sized business, because holding back and putting big business at a disadvantage is bad for small businesses who supply goods and services to them. Why are we doing it over a ten year period? Because that is what we could afford in a responsible fashion in the Budget, while still getting the Budget back into surplus. By legislating the business tax cuts in full now, we provide a signal to all of those businesses and they make investment decisions today based on their expectations of future profitability after tax. By locking the business tax cuts for all businesses into legislation now, we will drive additional investments today based on what they expect to happen in the future.
BEN DAVIS: Alright, some hit pocket stuff for the older members of my audience. You are allowing pensioners to work part time and earn a little bit extra, but it is only going to be $25 a week, about an extra $1300 a year. Could you have been a bit more generous than that? $25 a week?
MATHIAS CORMANN: It is $50 a fortnight, on top of the $300 a fortnight they are already able to earn. So we are now talking $350 a fortnight, that pensioners can earn without losing any of their age pension. It is a matter of making judgements on being as generous as you can afford to be in the circumstances and that is what we have done.
BEN DAVIS: Alright, big costs, not only for business, but for households, electricity. That downward pressure, we are still seeing a commitment to the targets of 26, 28 per cent, I mean could have you budged on that? These subsidies to renewables and trying to get this target up there, I know there are agreements in place, but there are agreements in place as we have seen across the Government spectrum, when it comes to fuel reserves, we are not meeting those targets, but we have to meet this one. And yet our electricity prices are going up.
MATHIAS CORMANN: We are phasing out subsidies for renewable energy by 2020 and we will focus on bringing electricity prices down. Our commitment to emissions reductions of 26 to 28 per cent, which was signed on to in Paris, is much more modest than the 45 per cent emissions reduction target that the Labor Party wants to sign on to. Under the Labor Party electricity prices will go up and up and up. They want to impose a 50 per cent renewable energy target, which would force prices up and up and up. We are pursuing reforms across the board to bring electricity prices down and indeed wholesale electricity prices are already coming down based on the decisions we have made so far.
BEN DAVIS: Minister, you have got this sell on, you have got to do this to not only the public, but also to the Senators as well, the crossbench. How difficult is that going to be if we are facing by-elections because of what the High Court ruling has handed down today.
MATHIAS CORMANN: Well, again it is what I said at the beginning of the interview. There are certain things we can control and we do our best in relation to those and then there are certain things outside of our control and we just have to deal with those as they come. As far as the Budget is concerned, we have put forward the Budget that we believe is appropriate and necessary for Australia to deliver stronger growth, more jobs and…interrupted
BEN DAVIS: It is going to muddy the waters though isn’t it? You are trying to get clear air and all of a sudden you could be dealing with by-elections.
MATHIAS CORMANN: There is always a lot of noise in politics. There are always other things that happen, but we will just focus on the mission. We will focus on the conversations that we need to have with our colleagues on the Crossbench and we will want to pass as much of the Budget as soon as possible.
BEN DAVIS: We know the history of by-elections, they do not really augur well for a sitting Government. Are you worried that they could hurt you?
MATHIAS CORMANN: The situation is what it is. People across Australia now have an opportunity to send a very clear message to Bill Shorten, whether they support our plan for stronger growth and more jobs or whether they want to go Labor’s way, higher taxes, lower growth, fewer jobs, higher unemployment and lower wages.
BEN DAVIS: Senator Cormann, I appreciate your time this afternoon.
MATHIAS CORMANN: Always good to talk to you.