Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
PAUL ALLEN: Well I am joined with one of the men who will have all the answers to those questions, the Finance Minister, Mathias Cormann joining us here on the front lawn of Parliament. Minister, thank you very much for joining us today. Now let’s start with those wage growth assumptions. I believe we have an assumption of two and three quarter per cent growth for 2018-19 rising to three and a quarter per cent, where are you getting those numbers from? They do sound very optimistic.
MATHIAS CORMANN: We disagree. They are realistic assumptions. Our economic forecasts are based on assumptions that are broadly aligned with the independent Reserve Bank of Australia, broadly aligned with the international institutions like the International Monetary Fund. What I would just say about your observations in relation to the Opposition spokesperson’s comments, Labor over the last few years have consistently said that we were somehow making overly optimistic assumptions, yet again and again we have outperformed. The actual performance of the Budget has been better than what we forecast.
PAUL ALLEN: Well it is not just the Labor Opposition spokesperson that is making the criticisms, you would expect also the ANZ’s Paul Dales, AMP’s Shane Oliver, they point out the wages growth question, there is a weaker housing market, the optimistic GDP numbers, that the revenue boosts may not be sustainable. Are these numbers sustainable going forward?
MATHIAS CORMANN: We believe they are. Our economic growth forecasts are actually in part more conservative than those by the Reserve Bank or the International Monetary Fund and they are hardly overly optimistic organisations. We have made realistic assumptions. The track record is there for all to see. The 16-17 Budget, the performance against Budget was a four billion dollar improvement to the bottom line, compared to what was projected at Budget time. If you look at the situation for the 2017-18 Budget, there is a significant improvement compared to what was forecast last year. The deficit for 2017-18 was $18.2 billion, the best bottom line in Australia now since 2007-08. We are projected to get back into surplus from 2019-20 onwards.
PAUL ALLEN: Well that revenue booster also giving you the option or the opportunity to offer some responsible looking tax cuts, $530 per year at the beginning for low to middle income earners, but that is just part of the plan isn’t it? The idea down the track to get rid of one tax break at a time. Is this the first step towards a flat tax rate in Australia?
MATHIAS CORMANN: Well this is a seven year plan and it is a seven year plan to provide income tax relief in the first instances to low and middle income earners. It is a plan to address bracket creep, because bracket creep is a drag on economic growth and it is also a plan to simplify our tax system. It is affordable. It is responsible. The reason we have to do it is to be able to achieve stronger economic growth in Australia. On the back of our economic performance and also we have been able to get spending growth under control, we have been able to get government net debt under control. Government net debt is now expected to peak this financial year than we are projected to pay off $230 billion plus in Government net debt over the next decade, we are going down the 3.8 per cent as a share of GDP.
PAUL ALLEN: So you are confident you have done enough to protect that Triple A rating going forward?
MATHIAS CORMANN: The Triple A credit rating is always a matter for the rating agencies. We leave those judgements to them. We always do the best we can to put Australia on the strongest possible economic and fiscal foundation and trajectory for the future.
PAUL ALLEN: I just want to return to that tax question for a moment, you already have bi-partisan support for that first step, but not for the rest of it. How are you going to get across those political hurdles?
MATHIAS CORMANN: Well it is a seven year plan. It is a holistic tax reform package. We will be putting it to the Parliament as a whole package and we will want to see it passed as a whole package.
PAUL ALLEN: This is the sort of thing obviously you are preparing to take to an election right?
MATHIAS CORMANN: Well our preference is to give Australians certainty about income tax relief now, rewarding them for their hard work, encouraging them to work harder into the future so that we can continue to grow our economy more strongly. Bill Shorten will have to make a decision whether he wants to stand in the way of income tax relief for hardworking Australians.
PAUL ALLEN: Well there are a lot of announcements here, this is obviously a pre-election budget. Can we expect to see some announcements for further spending down the track? Can you give us any hints there?
MATHIAS CORMANN: We have released the Budget last night and the Budget we released last night is our plan for the next 4 years. It is our plan for a stronger economy to deliver more jobs and to ensure that all of the essential services that Australians expect can be guaranteed within the Budget. It is a plan to ensure the Government lives within its means.
PAUL ALLEN: We have all been here before, this is obviously not the end of it, is there more coming down the track? More announcements?
MATHIAS CORMANN: Well after every Budget there is a Budget update and then there is another Budget. Every year we have a Budget and every year the Government continues to review what the challenges are, what the opportunities are, how we can ensure that the Australian economy is as strong as possible and as many jobs as possible are created and making sure that our expenditure is on a sustainable and affordable trajectory for the future.
PAUL ALLEN: Just one final question, you have set this revenue speed limit, you call it, 23.9 per cent of GDP revenue, will not rise above that. It seems such an arbitrary figure, how did you arrive at that?
MATHIAS CORMANN: It is the average between the introduction of the GST and the Global Financial Crisis. If you want to ensure that you keep discipline over your expenditure, you have to keep discipline on the taxes you take out of the economy. We want to keep the economy strong. We want to keep employment growth strong. So we got to balance all these different objectives. If you keep increasing the overall tax burden in the economy, you put pressure on investment, you put pressure on economic growth and you put jobs at risk.
PAUL ALLEN: Alight, we will have to leave it there. Finance Minister Mathias Cormann, thank you very much for joining us here this morning.