Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
Date: Wednesday, 9 May 2018
MICHELLE GRATTAN: Mathias Cormann, legislation has already been introduced into Parliament for your three step income tax plan and you will be shepherding this through the Senate. Is it an all or nothing proposition or when the time comes will the Government be flexible about discussing amendments or a breakup of the package?
MATHIAS CORMANN: We are committed to the whole seven year plan. To encourage hardworking Australians. To reward hardworking Australians. To provide income tax relief, to help in particular low income and middle income Australians with cost of living pressures, to help address bracket creep, which is a drag on economic growth and also over time to simplify the tax system. We have put it forward as a seven year package. We are committed to the whole package. We want to see the whole package pass the Parliament. It is now a matter for Bill Shorten to determine whether he wants to stand in the way of tax relief for low and middle-income earners and whether he wants to stand in the way of our plan for a stronger economy, more jobs and to continue to put the Budget in a stronger position for the future.
MICHELLE GRATTAN: But you are a practical man, you would not want the perfect to be the enemy of the good would you?
MATHIAS CORMANN: This is a very important package. It is a $13.4 billion package over the Budget forward estimates period. It is a $140 billion tax reform package over the medium term. We are now just under a year away from the next election. Ultimately, it is going to be a matter for the Australian people to determine whether they support our plan for lower taxes, stronger growth, more jobs and higher wages. Or whether they are happy with Bill Shorten’s consistent tax hikes, tax attacks on anyone across Australia. More than $220 billion in higher taxes under Bill Shorten, which would lead to less investment, lower growth, fewer jobs, higher unemployment and on the back of higher unemployment, lower wages.
MICHELLE GRATTAN: You have said you want the legislation through by July 1, at least the Government said, but the Crossbenchers in the Senate have indicated that they will take their time. They do not want to be hurried. How realistic is your time frame?
MATHIAS CORMANN: In the House of Representatives, I suspect that the House of Representatives will deal with this tax reform package quite swiftly to provide income tax relief, prioritising low and middle-income earners in the first instance. In the Senate, it is going to be a question for the Labor Party. Is Bill Shorten going to stand in the way of income tax relief for low to middle income Australians? Is he going to stand in the way of the Government’s efforts to help hardworking families around Australia deal with cost of living pressures, to help the Government’s efforts to address bracket creep and to simplify our tax system?
MICHELLE GRATTAN: Well, if he does stand in the way of the package, you have to deal with the Crossbench…interrupted
MATHIAS CORMANN: No, no, no. If he does stand in the way, then Bill Shorten will have to deal with the Australian people.
MICHELLE GRATTAN: That too perhaps, but you…interrupted
MATHIAS CORMANN: No, that in particular.
MICHELLE GRATTAN: You will have to deal with the Crossbench if you want to get it through…interrupted
MATHIAS CORMANN: The ultimate arbiter of whether the Parliament legislates lower taxes or higher taxes for working families around Australia will be the Australian people.
MICHELLE GRATTAN: But on this question of hurrying the Crossbench or hurrying the Senate, surely you need to give them time if they want time.
MATHIAS CORMANN: This is a matter for Bill Shorten. I am not sure how many other ways I can put this for you. We are not going to let Bill Shorten off the hook. Our commitment is to implement our plan for stronger growth, for more jobs, to provide income tax relief to hardworking families across Australia because we want to reward them for their efforts. We want to encourage them to work harder into the future. We want to help them with their cost of living pressures. We want to address bracket creep, which is holding our economy back. We want to simplify the tax system. It is entirely a matter for Bill Shorten to decide whether he wants to stand in the way of this important reform and if he does, he will have to deal with the Australian people.
MICHELLE GRATTAN: One question that has come up particularly today is the question of the year-by-year cost of this package. Isn’t that a reasonable question for the Government to be asked? Why is the Government not giving those figures?
MATHIAS CORMANN:We are providing costings in the usual way. We are in 100 per cent compliance with the Charter of Budget Honesty requirements. What we have indicated openly and transparently is that the cost over the forward estimates is $13.4 billion and we have even been helpful enough to provide a cost projection over the medium term, which is not actually something that the Labor Party in Government used to do. That is the $140 billion cost over the medium term.
MICHELLE GRATTAN: Wouldn’t you clear away some issues though if you just gave those other costing? What is the downside there?
MATHIAS CORMANN: We are going to have Senate Estimates the week after next. The Labor Party can ask whatever questions they want to ask in the Senate. This is just Bill Shorten looking for excuses. He is incredibly shifty, his instinct is to go for higher taxes, which would damage the economy, which would cost jobs. He is now trying to go for cover and avoid making a decision because he knows that the Australian people will be very unhappy with him if he stands in the way of income tax relief for them.
MICHELLE GRATTAN: On that other big arm of your tax program, you said in the last session that you would bring back the company tax package in the wake of the Budget. How hopeful are you now that you can get the numbers for that?
MATHIAS CORMANN: We continue to work to secure the necessary support in the Senate to pass what is a very important reform for working families around Australia. Higher company taxes in Australia are taxes on jobs. If we continue to disadvantage businesses in Australia compared to businesses in other parts of the world by forcing them to pay higher tax, we put jobs in Australia at risk. Nine out of ten working Australians work in a private sector business. If the businesses that employ them is at a disadvantage compared to businesses in other parts of the world and workers in other parts of the world they compete with, then we will lose investment and jobs to other parts of the world. Reducing job security in Australia, when what we need is to create more jobs, so we can have more competition for workers, which is the necessary ingredient for stronger wages growth.
MICHELLE GRATTAN: There have been many calls recently for the Newstart unemployment benefit to be increased. Even John Howard has said that the freeze has probably gone on too long and I quote his words. There was a lot of revenue around in this Budget, why not make that payment more adequate?
MATHIAS CORMANN: We need to keep expenditure growth under control, which is what we are doing. It is an important part of getting the Budget back into balance and into a sustainable surplus. Importantly our focus is on strengthening economic growth so that more jobs can be created so that more Australians can get off welfare into a job. If you look at our track record since we came into Government, we have been able to help 140,000 Australians to get off welfare into work. Newstart allowance, firstly is a transitional payment. It is not designed to provide an ongoing income, that is number one. Number two, most people who are on Newstart allowance receive welfare payments from other sources as well as their Newstart allowance. So this proposition that somehow, overwhelmingly, people on Newstart allowance, that that is their only source of income in not accurate.
MICHELLE GRATTAN: Can I ask you to unravel the spending in your More Choices for a Longer Life package for older people. You are spending some $1.6 billion on more home care places, but the figures suggest that the net cost for this whole package is in fact quiet modest. Isn’t this in fact a rearrangement of funds between residential and home care?
MATHIAS CORMANN: It is a significant package and we are acknowledging the choices and the preferences of the Australian people. Increasingly people across Australia prefer to live their older years, including when they have higher care requirements, in their own homes. What we have done here is announce 14,000 additional high care in the home places, which bring the total number that we have committed over the last 12 months to 20,000. All up by 2021-22, we will have increased the number of available places by 86 per cent. Yes, there is a level of additional funding in net terms and there is also reprioritisation of existing resources. There is continued strong investment in residential aged care as well.
MICHELLE GRATTAN: So what is that net figure, just to clarify?
MATHIAS CORMANN: You have indicated the figures. We are making a $1.6 billion significant investment prioritising additional places in the home high care, which is clearly based on what is happening in the community, based on the preference of people across Australia, which is what they want the Government to do.
MICHELLE GRATTAN: Now this Budget does not have swinging spending cuts. Some of your conservative supporters think you have gone soft on spending. Indeed the IPA, the Institute of Public Affairs, and I quote ‘this is the highest taxing, highest spending and highest debt Budget in Australian history’. What is your response?
MATHIAS CORMANN: That is a ridiculous proposition. They clearly do not know how to read Budget papers. The spending growth under our Government is the lowest in 50 years. If you look at the records, the historical tables at the back of the Budget Papers you will see that spending growth in real terms, above inflation under our Government in the forward estimates of this Budget are down to 1.6 per cent. That is less than half of the spending growth on average per year over the period of the Howard Government. It is significantly less than the spending growth under Labor. Labor left behind spending growth on average of about four per cent in real terms, that is above inflation and locked in a spending growth trajectory into the future of about four per cent above inflation. We have more than halved the spending growth trajectory that we inherited. If you look by any objective measure, spending as a share of the economy is now on track to come down to 24.7 per cent, which is below the 30 year historical average of 24.8 per cent. Just to put that into perspective, when we came into Government, we inherited spending growth in terms of spending as a share of the economy headed to 26.5 per cent within the decade and rising. We are now heading for 24.7 per cent, below the historical 30 year record and that is the direct result of the fiscal discipline that we have demonstrated on the spending side of the Budget. When it comes to tax, we have imposed a tax as a share of GDP cap on ourselves of 23.9 per cent. Labor in the lead up to the last election was already at 25.7 per cent and have made further announcements of higher taxes since. If the IPA and others want to make a comparative judgement between our side of Government and the alternative, then it is clear that we stand for lower taxes, Labor stands for higher taxes. We stand for policies that support stronger growth, more investment, more jobs, whereas Labor’s agenda would lead to less investment, lower growth, fewer jobs, higher unemployment and on the back of higher unemployment and less competition for workers, lower wages.
MICHELLE GRATTAN: In the wake of the citizenship decision by the High Court we now have multiple by-elections coming up. These will be something of a referendum on the tax cuts won’t they? On the tax package?
MATHIAS CORMANN: They will certainly be a referendum on the relevant Members of Parliament who decided to remain in Parliament even though it was clear that they were not eligible to be in Parliament. Clearly, if you take Susan Lamb for example, she knew that she was a dual citizen and she knew that, as a dual citizen she was not entitled under our Constitution to sit in Parliament. Yet supported by Bill Shorten, in defiance of very clear rulings of the High Court in the past, in particular the High Court ruling in October in the Canavan case, they decided to drag this along. The people in the relevant electorates will have the opportunity to pass judgment on those things.
MICHELLE GRATTAN: As well as being Finance Minister, you somehow fit in being Special Minister of State, so can I ask you whether you think there needs to be a Referendum to change Section 44 of the Constitution to try to deal with the citizenship problem for the future?
MATHIAS CORMANN: Well I do not accept there is a problem to the extent that I am not personally persuaded that the Australian people disagree with the proposition that a Member of the Federal Parliament should be an Australian citizen only.
MICHELLE GRATTAN: But you could clarify the situation, but still say that you should be an Australian citizen only. You do not have to change it to make provision for dual citizens.
MATHIAS CORMANN: Well the requirement to be an Australian only means that you cannot be a dual citizen and that is the current provision in the Constitution in Section 44 of the Constitution, which is widely understood, perhaps better understood now than it might have been in the past. If this was put to a test with the Australian people, I am not personally persuaded that people would disagree with the current arrangements.
MICHELLE GRATTAN: But in some cases this goes to the question of grandparents and there seems to be difficulty for some people finding out about their ancestors and so on. Wouldn’t it be simpler to somehow put this beyond doubt, just clarify the intent, the present intent, of the Constitution?
MATHIAS CORMANN: Well changing the Constitution requires a majority of eligible voters in a majority of states voting in favour…interrupted
MICHELLE GRATTAN: Too hard you think?
MATHIAS CORMANN: Well I have indicated to you that I am not personally persuaded that people across Australia, that a majority of people in a majority of states disagree with the current arrangements under our Constitution, which by now should be very well understood by anyone who intends to put their hand up to run for Federal Parliament.
MICHELLE GRATTAN: So you think the answer is for people to be more careful perhaps, for more legal assistance to be given?
MATHIAS CORMANN: All of us who put our hand up to run for Parliament sign a piece of paper certifying that we comply with all the relevant eligibility requirements and it is incumbent on all of us as candidates to satisfy ourselves that the certification we provide is accurate.
MICHELLE GRATTAN: Now just to finish on the Budget. You have now been central in the preparation of the five Coalition Budgets, which is more than the Treasurer has been involved in. Of these Budgets, was this one the easiest for you?
MATHIAS CORMANN: Well look when we came into Government in 2013 we inherited a weakening economy, rising unemployment and a Budget position that was rapidly deteriorating. When Bill Shorten and Chris Bowen left Government, when Chris Bowen as Treasurer left Government in 2013, he left behind a weakening economy, rising unemployment, and a Budget position that was deteriorating by about three billion dollars a week. When it comes to the economy, the economy was weakening under Labor on the back of their mining tax and their carbon tax at a time when prices, commodity prices were significantly higher than what they are now. Significantly higher than what is reflected in our Budget forecasts and projections now. So we have been implementing a plan to put the economy back on a stronger foundation and trajectory for the future. We have been implementing a plan for more jobs and to get the Budget back on a stronger foundation and trajectory for the future and that plan is working. We have made progress and as you continue to make progress your options to do things like provide income tax relief to hardworking families, in particular, prioritising low and middle income families improves. That is what we have been able to demonstrate in this Budget.
MICHELLE GRATTAN: So this one was less difficult than the earlier ones?
MATHIAS CORMANN: Well it is a Budget that comes after four and half years of hard work to turnaround the terrible situation we inherited from the Labor Party. But what I am troubled to say and what saddens me is that Labor has not learned from their past mistakes. Labor’s high taxing agenda that Bill Shorten and Chris Bowen are promoting now, would take us back to where we were when Labor last lost Government. It would take us back to a weakening economy, rising unemployment and a Budget position that would be rapidly deteriorating.
MICHELLE GRATTAN: Mathias Cormann, thank you very much for talking with us.
MATHIAS CORMANN: Always good to talk to you.