Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
KIERAN GILBERT: Joining me now on First Edition now and our coverage of Budget 2018 is the Finance Minister Mathias Cormann, thanks very much for your time.
MATHIAS CORMANN: Good morning.
KIERAN GILBERT: Basically, when it comes to the tax plan, is it all or nothing in terms of the Labor Party, you will not compromise, you will not remove one phase and get that through?
MATHIAS CORMANN: Well this is a seven year holistic plan which prioritises low and middle income earners for tax relief, helping them with their cost of living pressures, helping to address bracket creep, but also making sure that we provide the right encouragement to work hard and reward for effort. It is a holistic plan, it prioritises low and middle income earners, but we do need to ensure we provide tax relief across the board.
KIERAN GILBERT: So, if the Labor Party says it will support phase one and not phase two and three, which does go up the income scale, will you negotiate?
MATHIAS CORMANN: Bill Shorten has a choice to make. Either he will support tax relief for hard-working Australians, or he will stand in the way of tax relief. That is going to be his choice. It is a seven year plan and we want to see 100 per cent of that seven year plan legislated now, so that people across Australia can know what is coming down the line in terms of the tax policy settings moving forward.
KIERAN GILBERT: With the offset payment for the low and middle income earners not happening until July of next year, you could still have the election and fulfil that commitment even if you do not get it through the parliament.
MATHIAS CORMANN: Our preference is to legislate it soon, so that hard-working Australians know what to expect. We believe that this is a responsible, affordable, fully-funded plan which is reflected in our Budget bottom line, which shows a return to surplus one year earlier and which shows that we remain in surplus all the way over the medium term, including exceeding a surplus of one per cent as a share of GDP from 2026-27 onwards.
KIERAN GILBERT: In terms of increasing that threshold from $87,000 to $90,000, there would be an immediate effect for hundreds of thousands of workers as well, this year as of July 1 this year. So, we talk about that effect next year, but there is actually an immediate effect as of July 1, albeit smaller.
MATHIAS CORMANN: It is a very small effect of $135 a year. The most significant effect is at the low and middle-income end, where anyone earning between $48,000 and $90,000 a year will essentially be able to get a $530 lump sum payment as they put in their tax return for the 2018-19 financial year.
KIERAN GILBERT: You are going to make it permanent, basically because in 2022-23 you want to increase the 19 per cent threshold from $37,000 to $41,000 and that would therefore make that boost permanent?
MATHIAS CORMANN: That is right, that is the intention. We would also, lift againthe top threshold for the 32.5 per cent tax bracket from $90,000 to $120,000. Then by the time you get to 2024-25, we would scrap the 37 per cent tax bracket altogether, simplifying the tax system and making sure that 94 per cent of Australians will not pay more than 32.5 per cent tax on their incomes.
KIERAN GILBERT: What do you say to those who are worried that this is the end, if you were to introduce that, that would be the end of the progressive tax system in this country? That is certainly the concern from the unions.
MATHIAS CORMANN: Well that is wrong. It would still be a progressive tax system and there would still be a 45 per cent top marginal tax rate for those on incomes above $200,000 a year. But for hard working Australians, low and middle income earners and the aspirational middle class of Australia, people wanting to get ahead, working families wanting to get ahead, 94 per cent of hard working Australians would not face more than 32.5 per cent tax on any of their income.
KIERAN GILBERT: Do you feel that that is enough tax reform, so to speak, in terms of getting some of the Crossbench and the Senate across the line when it comes to the company tax plan, because that was the concernfrom Tim Storer among others?
MATHIAS CORMANN: We will continue the conversations with the Senate Crossbench on all of our Budget measures, including and in particular the very important reforms to business taxation. We do need to ensure, workers around Australia need us to ensure, that the businesses that employ them, are not put at a permanent disadvantage compared to businesses in other parts of the world who pay less tax.
KIERAN GILBERT: This makes that argument a bit easier to make though, doesn’t it? Because your income tax plan is $140 billion over the decade, it dwarfs the company tax plan. So it does make that a more compelling case, doesn’t it?
MATHIAS CORMANN: What should be compelling is this. We have a plan for stronger economic growth. We have a plan for more jobs. We have a plan to fund all of the essential services that Australians rely on, to fully fund them within the Budget. We have a plan for Government to live within its means and the plan is working. The growth outlook is better, employment growth is much stronger, funding for all of the essential services in the Budget is guaranteed and Government is getting back into surplus. The plan is working and certainly we will be looking to the Senate to support the Government’s economic plan and the plan that we have for the Budget.
KIERAN GILBERT: So this isn’t locking in and just hoping that the revenues continue to flow? Because obviously so much depends on the international economic environment doesn’t it, China particularly?
MATHIAS CORMANN: Again, I have heard people make these sorts of comments, but the truth is that if you look at, for example, the forecast assumptions that we have embedded in the Budget on commodity prices, they are very conservative. We have not baked into our revenue forecasts an assumption of ongoing higher commodity prices. Our key commodity exports, our iron ore forecast for example, is down at $55 a tonne, even though right now the price is somewhat higher. We have not made an assumption that, somehow there will be rivers of gold into the future on the back of high commodity prices. What we have done, we have decided that in the context of stronger economic growth, delivering higher personal income tax revenues on the back of the hard work of families around Australia, we do believe that there is a case to provide some reward for that effort and also to help in particular middle income earners in the first instance with their cost of living pressures.
KIERAN GILBERT: And finally, the Business Council, an unlikely ally of the welfare groups, but it wanted an increase in the Newstart allowance. There have been calls from others including Chris Richardson, a respected Budget watcher. Why did the Government not? If you were looking at low and middle income earners, why wouldn’t the Government do that?
MATHIAS CORMANN: I tell you what, the Government’s priority is to get people off welfare into work and since we have come into Government we have been able to help 140,000 Australians off welfare into work. Newstart allowance is not a permanent, ongoing payment. Newstart allowance is a transitional payment pending people getting from welfare back into work and that is what we are focusing on with our plan for the economy and jobs. I would just make this point, most people on Newstart allowance do not just receive Newstart allowance. They receive income, welfare support payments from a range of other sources. Now, in all of the circumstances, we clearly made a decision that in this Budget it was not something that we would be able to accommodate.
KIERAN GILBERT: So they are able to supplement Newstart with other welfare?
MATHIAS CORMANN: They are. Most people on Newstart allowance, you will find, receive payments from other sources. Most people on Newstart allowance are not on Newstart allowance for a very long time. Really, it is designed to be a transitional payment, not an ongoing payment.
KIERAN GILBERT: Minister, thanks for your time, appreciate it.
MATHIAS CORMANN: Good to be here.