Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
MATT TAYLOR: Let’s get plenty more now and bring in the Finance Minister Mathias Cormann, joining us here in the courtyard at Parliament House. Finance Minister, pleasure to chat to you as always, thanks so much for joining us. The Budget really accelerating budget repair In the first few years, the surplus, wafer thin$2.2 billion. Are you confident that you are going to be able to get there, because a lot of people saying last night it will just take a small global shock or a change in commodity prices and that could be out the window?
MATHIAS CORMANN: We have been on an improving trajectory now for some time. We have been forecasting and projecting a return to surplus by 2020-21 for the last six economic updates. We are now getting the Budget back to balance a year early. As of this year, we are no longer borrowing to fund our recurrent expenditure. We are projected to pay down debt over the next decade by more than $230 billion, bringing it down to 3.8 per cent as a share of GDP. If you look at the surplus trajectory, not only are we projected to return to balance and then surplus from 2019-20 onwards, we are projected to remain in surplus all the way through and to reach a surplus of one per cent and exceed a surplus of one per cent as a share of GDP from 2026-27 onwards. So, the policy settings there are structurally sound.
MATT TAYLOR: Going forward of course, we are likely going to have another election before, perhaps before the next Budget, that of course remains to be seen. But if you are re-elected, will repaying that debt be a priority of a re-elected Turnbull Government?
MATHIAS CORMANN: We have set out our plan. We have set out our plan for a stronger economy, for more jobs and for a stronger Budget and as part of that plan, we are currently projected to pay down debt by $230 billion plus over the next decade, bringing government net debt down, to 3.8 per cent as a share of GDP.
MATT TAYLOR: Ratings Agencies have come out, S&P we know has a negative watch on Australia’s Triple A rating, they say that that is going to stay for a while. Moody’s has said, provided all the assumptions are okay, they say that the Budget essentially provides a positive step back into an improving fiscal outlook. What would your message to ratings agencies be, then?
MATHIAS CORMANN: The ratings agencies make their own judgements. We note that the ratings agencies that have spoken so far have maintained the Triple A credit rating for Australia and we also note that we are on an improving trajectory. Now, when it comes to economic forecast assumptions, they are broadly in line with those of the Reserve Bank of Australia, an independent organisation. They are broadly in line with international institutions like the International Monetary Fund, hardly a very out there organisation and in fact, in a number of areas, we are slightly more conservative than both the IMF or the RBA.
MATT TAYLOR: Let us talk about wages because that was one area that we always talk about, because the assumptions always seem to be running a little bit hot. Again, in the forward estimates they are above that three per cent level, yet we have wages growth still stuck around that low two per cent level. Are you now expecting to see, then, over the coming few years, a real pick up in wages and what is the Government doing with what it has announced in the Budget to help drive wages growth?
MATHIAS CORMANN: Wages growth has started to pick up and we have seen very strong employment growth in Australia. 415,000 new jobs created last year, employment growth of three and half per cent. If the United States of America had achieved the same employment growth in percentage terms, they would have added 5.3 million jobs to the US economy, instead of the 2.7 million jobs that were created there. So, very strong employment growth in Australia and as employment growth continues and there is more competition for workers, we expect wages growth to pick up.
MATT TAYLOR: Talk to us about the tax cuts. Obviously, Australians are going to be happy that they are receiving some sort of tax relief, but you did not go too hard given the windfall that you have had in the Budget. How did you resist not handing out too much given that we do have an election coming up?
MATHIAS CORMANN: We are making judgements based on what we believe to be right, right for the economy, right for the Budget, right for hard working Australians. We did believe that there was the opportunity to provide income tax relief, prioritising low and middle-income earners. That is good for them, it is good for the economy. It will help boost domestic consumption, but in the end, you have got to make a judgement of what is affordable and that is what we have done.
MATT TAYLOR: Interesting removing one whole tax bracket, the 37 per cent tax rate. Is there more to do when it comes to reforming income tax or are you comfortable with what you have outlined because it goes out for seven years out to 2024?
MATHIAS CORMANN: What we have put forward is a very comprehensive seven year plan. It does help, in the short term, low and middle-income Australians deal with cost of living pressures. It helps protect Australians from the effects of bracket creep and it does simplify the tax system moving forward. Essentially, by removing that 37 per cent tax bracket altogether, what we are doing is we are making sure that 94 per cent of Australians at that time will not pay more than 32.5 per cent tax on any of their income.
MATT TAYLOR: Do you hope that changing the income tax system, giving income tax cuts might help your case when it comes to corporate tax cuts both out there in the public perception that, perhaps, some areas of the community do not necessarily deem that corporate tax cuts are something that the Government should be embarking on, given we hear all of these scandals coming out of the Royal Commission when it comes to the banks?
MATHIAS CORMANN: We believe that both those tax cuts are actually important for working Australians. Providing income tax relief is self-evidently good for working Australians, but making sure that our businesses in Australia, who employ nine out of ten working Australians, are not disadvantaged compared to businesses in other parts of the world, including in the US, who pay significantly less tax. It is also important for them, because if we put Australian businesses at a competitive disadvantage, we put Australian workers at a competitive disadvantage compared to the businesses that they compete with in other parts of the world and the workers they compete with in other parts of the world.
MATT TAYLOR: You are obviously charged with trying to negotiate the passage of the corporate tax cuts through the Senate, which has been particularly hostile. Have you heard anything from your Senate colleagues in the wake of the Budget last night that this package that you have announced in the Budget might help get them across the line when it comes to the corporate tax cuts?
MATHIAS CORMANN: I never make a habit of talking about my communications with Senate Crossbenchers through the media, even with your august organisation. We will continue to talk to the Senate Crossbench. I do not agree with your characterisation that the response has been hostile. We already have the support of 37 out of the 39 Senators we need. We need two more and we will continue to work to secure those two additional supporters.
MATT TAYLOR: Finally, on infrastructure, we of course got $24.5 billion. What is the trajectory on infrastructure going forward? I know it is $75 billion over a significant period of time but do you see the Government reaching a limit when it comes to further funding of infrastructure, because there has been a big rollout, particularly in places like New South Wales, Victoria?
MATHIAS CORMANN: We are making a very significant investment in productivity-enhancing and congestion-busting infrastructure. We do want people to get to and from work faster and more safely and we want to get our products to market at a lower cost, faster and in a safer, more efficient way. So, that is why we are making this $75 billion investment over a ten year period. From Budget to Budget, you continue to review the opportunities, you continue to make judgements on what you can sensibly afford and what would should be supported into the future.
MATT TAYLOR: Finance Minister, thank you so much for joining us this morning.