Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
JON FAINE: Mathias Cormann is the Federal Finance Minister and our allotted Government champion for this morning’s post Budget analysis. Senator good morning to you.
MATHIAS CORMANN: Good morning Jon. Good morning to your listeners.
JON FAINE: A flat tax rate locks in huge revenue reductions but they are so far in the future do you really think people will today feel that they are better off?
MATHIAS CORMANN: Well it is an affordable seven year plan to provide tax relief to hardworking Australians. It is prioritising lower to middle income earners in the first instance. But what we were keen to do is to show the Australian people what the direction was that we wanted to go in. We are proposing to legislate the full seven year plan now, so that people can have certainty about their tax policy settings into the future.
JON FAINE: So you are tying the hands of future Governments? Everyone wants improved services, the Government every day is bombarded with requests for better health, education or other assistance of various kinds and you are forgoing over $140 billion of future revenue with these tax changes.
MATHIAS CORMANN: Whenever we put a Budget together, we have a whole range of priorities. Firstly, we want to ensure that our plan delivers stronger growth and more jobs. We also want to ensure that funding for all of the essential services that Australians rely on can be guaranteed and it is. We want to ensure that the Government lives within its means and we are projected to get back into surplus and to remain in surplus over the whole medium term period from 2019-20 onwards. So having done all of that we were able to afford income tax relief for hardworking families. In particular, at the low and middle-income end we believe that families needed support with their cost of living pressures. We think it is important to address bracket creep because bracket creep is a drag on economic growth…interrupted
JON FAINE: Well they hardly get anything now. They might get something in 2024.
MATHIAS CORMANN: Well firstly, we have already increased the top threshold for the 32.5 per cent income tax bracket from $80,000 to $87,000. We are increasing it further to $90,000 and then subsequently further. We are providing a low and middle income tax offset which will give Australians earning between $48,000 and $90,000 a year, a $530 tax refund, a lump sum tax refund at the end of the 2018-19 financial year, which for a family is more than a thousand dollars. It all helps and it heads in the right direction.
JON FAINE: Okay. There is nothing that I can see on housing affordability. In fact it is even worse than that. The pensions loan scheme where the Government does reverse mortgages, effectively means older people will be encouraged to stay in their empty, half empty family homes instead of move to something smaller and free them up for the market.
MATHIAS CORMANN: We had a very substantial housing affordability package in last years’ Budget and as that package is taking…interrupted
JON FAINE: It has not worked has it?
MATHIAS CORMANN: Actually, I beg to differ. I believe that it is working and that it continues to roll out. I think you will find that pressure is easing somewhat compared to where it was. But look in the end housing affordability is a function of supply and demand. We need to continue to increase the supply of housing to ensure that it can meet the demand out in the marketplace…interrupted
JON FAINE: So the Government doing reverse mortgages and I might say, fascinating that you do not trust the banks to do it. It is the Government that has got to do it. That makes things worse for people doesn’t it, by encouraging older people to stay in their homes?
MATHIAS CORMANN: We actually happen to believe that helping older Australians if that is what they want to do, to remain at home for longer is a good thing to do. To help them deal with their cost of living pressures by giving them access to an additional income stream, is also a sensible thing to do. So the measure is there for all to see. People can form their judgements in relation to it. But we believe that on balance it is an appropriate way forward.
JON FAINE: Well it is again more for the baby boomers rather than young up and coming families. But the pension work bonus is fascinating. An additional $50 a week before the age pension is impacted. This has long been called for. It is a welcome development but you do not match it with the same assistance for people on Newstart. Why give a tax break for the people on the pension and an incentive for them to do a bit a work, but not for people on the dole?
MATHIAS CORMANN: I tell you what we are doing for people on the dole and that is getting them off the dole and back in to work. Since we came into Government, we have helped 140,000 Australians off welfare and into a job. Newstart is a transitional payment. For most people on Newstart it is not the only welfare payment they receive from the Government, which is quite a different situation compared to the age pension. Newstart is a transitional payment pending the recipient getting back into a job and our focus is on helping all Australians have the best possible opportunity to get into a job and get a better job. We continue to work to get Newstart recipients off welfare and back into work.
JON FAINE: Well I do not quite see where the extra job creation is in this Budget.
MATHIAS CORMANN: Well I can tell you where the extra job creation is in this Budget…interrupted
JON FAINE: I would be grateful because I cannot find it.
MATHIAS CORMANN: Well it is a plan for stronger growth and more jobs. Our plan is working…interrupted
JON FAINE: What just by trying to hopefully cross your fingers if you get the tax system right?
MATHIAS CORMANN: Well making the tax system more growth friendly is certainly an important part of creating a stronger economy and we…interrupted
JON FAINE: Where is the evidence that company tax cuts mean more jobs?
MATHIAS CORMANN: Well you look at what has been happening in the United States, they have had significantly stronger jobs growth on the back of the Trump tax cuts. Look at what is happening in Australia. In 2017, 415,000 new jobs have been created, three and a half per cent employment growth…interrupted
JON FAINE: The jobs growth in America is because of a trade war and tariffs.
MATHIAS CORMANN: I totally disagree with you.
JON FAINE: Sorry, the reintroduction of tariffs I should have said.
MATHIAS CORMANN: I totally disagree with you. That is not right.
JON FAINE: Moving on to other things if we may please Senator. Banning cash transactions. What have you got against fruit shops?
MATHIAS CORMANN: We are not banning cash transactions we are just putting a $10,000 limit on them. This is part of our efforts to deal with the black economy…interrupted
JON FAINE: But they are legitimate parts of the economy, taxpaying businesses totally open about their financial affairs but they rely on cash. That is the culture of the whole, big parts of the economy.
MATHIAS CORMANN: If you look around the world, you will find that the practice in Australia to be able on an unlimited basis, to just bring in a bundle of cash, is quite unique. We believe in…interrupted
JON FAINE: I buy and sell old cars from time to time and it is all done by cash. Are you going to make that impossible?
MATHIAS CORMANN: Well we are going to say that if you want to transact to the value of more than $10,000 it should be done by a means that is traceable, so that there can be appropriate integrity in the revenue collections of the Government. Absolutely.
JON FAINE: The deal with the Victorian Government for an airport rail link, you announced five billion dollars, but it turns out it is some form of brainstorm to funnel money into, is it through merchant bankers to make a profit making business out of public transport? No one has ever been able to make money out of public transport.
MATHIAS CORMANN: Well we do believe that where there is an opportunity to secure a return rather than just provide a grant that is an appropriate way to protect the interests of taxpayers. Absolutely.
JON FAINE: Who says you can get a return on public transport? No one gets a return on public transport anywhere in the world.
MATHIAS CORMANN: That work is being done as we speak.
JON FAINE: By whom?
MATHIAS CORMANN: By the Government.
JON FAINE: Or by merchant bankers. This is a brainstorm. It is some sort of innovation on public transport funding that has, come what out of the Prime Minister’s head?
MATHIAS CORMANN: You are entitled to your views. Our view is that in some circumstances it is appropriate to provide grants, in other circumstances it is appropriate to provide a loan, in other circumstances it is appropriate to provide equity on an investment that can achieve a return over time.
JON FAINE: You are boosting the capacity of the Australian Tax Office to increase prosecutions for people who do not do the right thing and that is very welcome. But does that mean that the cutbacks that your Party brought in to the very same function of the very same organisation, the Tax Office, were they a mistake?
MATHIAS CORMANN: You are quite wrong when you say that we brought them in…interrupted
JON FAINE: Well no Tony Abbott did.
MATHIAS CORMANN: That is quite wrong. The 3,500 people reduction in staff at the Tax Office were a direct result of the efficiency dividend at the tail end of the Gillard and Rudd Governments…interrupted
JON FAINE: In the same way as you cut ASIC you also cut the Tax Office.
MATHIAS CORMANN: That is actually wrong. That is objectively wrong. The efficiency dividend that was applied by the Gillard and Rudd Governments towards the tail end of their period in Government led to the reduction of the staff at the Australian Tax Office…interrupted
JON FAINE: Senator I do not have the relevant document in front of me but there was $125 million or $135 million cut from ASIC and likewise the ATO.
MATHIAS CORMANN: I am quite happy to forward to you the evidence of the Tax Commissioner Chris Jordan in Senate Estimates where Labor was trying to prosecute precisely the argument that you are just prosecuting and where the Tax Commissioner very clearly spelled out that that was wrong.
JON FAINE: All right I am happy to look at it. You cut $80 million from the ABC by cutting out indexation but you splash $50 million on Captain Cook’s 250th Anniversary. Have you got your priorities right or wrong on that?
MATHIAS CORMANN: The ABC is one of a very small number of taxpayer funded organisations that has been fully exempt from the efficiency dividend for most of the last few decades. Over the next three year funding period the ABC will get more than $3.2 billion in funding and the $84 million efficiency is the equivalent of the efficiency dividend that applies to most other, nearly all other taxpayer funded organisations. We believe that there is opportunity for the ABC like other taxpayer funded organisations to pursue productivity improvements and operational efficiencies. We believe that taxpayers deserve their funded organisations to operate as efficiently and as effectively as possible.
JON FAINE: Oh look I am indebted to you for your time on a busy schedule. We will hear from the Opposition next. Thanks for your time today.
MATHIAS CORMANN: Thank you