2GB – Money News with Ross Greenwood

Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia






Personal income tax relief, business tax cuts

ROSS GREENWOOD: Let us go to a man who has helped to orchestrate this not only through the Senate but through our Parliament. That is our Finance Minister, Mathias Cormann. Many thanks for your time, Mathias. 

MATHIAS CORMANN: Good evening Ross.

ROSS GREENWOOD: Can I just ask a couple of bits and pieces, do you still believe that every aspect of your policy will be around in 2024, the first of July when the final stage kicks in. Do you still believe that ultimately those will survive our Parliament and survive two elections?

MATHIAS CORMANN: We believe they should. We have legislated the full long term plan to provide income tax relief to all working families around Australia, because we believe it is the right thing to do. It is the right thing to do to provide cost of living pressure relief to low and middle income earners. But it is also the right thing to do to address bracket creep, because bracket creep is a drag on economic growth and would keep Australia back. But ultimately that is going to be a matter for the Australian people. In the lead up to the next election and perhaps the election after that, it seems that Labor wants to go to the Australian people saying they want to increase taxes, impose more than $200 billion in higher taxes, which we would say would hurt the economy, would hurt families, would hurt jobs. We would go to the Australian people at the next election saying we have legislated in full, income tax relief for all working Australians who pay tax over the next seven years. We believe that that is the right thing to do by families, it is the right thing to do by our economy. 

ROSS GREENWOOD: Okay, but the ordinary person looking at this and certainly even the Opposition caught onto this as well, says it is a seven year package, it is a $144 billion, right now Australia has got net debt of close on $308 billion. Certainly you have a plan to get the Budget into surplus one year earlier, in two years time. But the truth is there could be downturns, there could be a range of things over the next four years, why not pocket that $144 billion and basically pay down the debts. 

MATHIAS CORMANN: The tax burden in the economy would increase beyond 23.9 per cent, which would impact on economic growth, which would lead to less investment, lower growth and fewer jobs. That would be bad for the Australian people. What we have said is that we would limit the tax burden in the economy to 23.9 per cent. In order to be able to do that over the medium term, we have to provide income tax relief to working families around Australia ... interrupted 


MATHIAS CORMANN: Let me just finish.


MATHIAS CORMANN: I would also just say that over the next four years we are paying off $30 billion worth of Government net debt. Over the next decade, the same period those tax cuts cost $144 billion, we are paying off $232 billion worth of Government net debt. So we inherited a weakening economy, rising unemployment and a rapidly deteriorating Budget position. We have been able to turn the economy around. Growth is stronger. Employment growth is much stronger. We have spending growth under control. We have debt under control. We are on track to pay off debt. We believe in those circumstances it was appropriate to provide income tax relief, to provide cost of living pressure relief and to address bracket creep. 

ROSS GREENWOOD: Okay, Mathias so you are telling our audience tonight, that so long as the economy keeps thriving and keeps going you believe in a decades’ time, not only will you have handed out $144 billion worth of tax cuts, that you will have actually remodelled the tax scales, but you will have in that time paid back the best part of two-thirds of the current Government net debt?

MATHIAS CORMANN: If you look at our Budget projections in our 2018-19 Budget, it will show that as of this year we are no longer borrowing to fund our day to day living expenses as a Government, that Government net debt is peaking as a share of the economy at 18.6 per cent this financial year. Over the next decade, over the period that these tax cuts cost $144 billion, Government net debt is projected to reduce from 18.6 per cent this year to 3.8 per cent in 2028-29, so over that decade. We have a plan that sees us pay off Government net debt quite substantially over that period as well as providing income tax relief to hard working Australians. The economy will be in better shape as a result of putting $144 billion worth of money that otherwise would have gone into Government coffers, back into the pockets of hard working Australians. We believe that hard working Australians are better at spending that money in our economy, generating stronger growth than what the Government is. 

ROSS GREENWOOD: So then you go to, not just the personal income tax cuts because of course a lot of people might confuse those sometimes with the company tax cuts that you have a plan for. Pauline Hanson and One Nation have given you the support, which allowed this to pass through the Senate today. But the company tax cuts seem to be more problematic for you. Do you believe you can get them through?

MATHIAS CORMANN: I am not a commentator. I do not speculate. I just …interrupted

ROSS GREENWOOD: You are a man who leads the Senate. You have got better observation of the numbers than any of us, you have got to say Mathias. 

MATHIAS CORMANN: Ross what I was about to say was I am not a commentator. I do not speculate. What I do is I put the Government’s case as to why that reform is so important to working families around Australia. Nine out of ten working Australians work for a private sector business. If we continue to keep businesses taxes in Australia high, when countries around the world are significantly lowering theirs, then we put businesses in Australia at a competitive disadvantage with businesses in other parts of the world, which means that we are putting the workers that those businesses in Australia employ at a competitive disadvantage with workers in other parts of the world. If we did not succeed in lowering our business tax rate here in Australia to a globally, more competitive business tax rate, we would be helping business in other parts of the world take investment and jobs away from Australia. That would be a very bad decision for working families around Australia, which is why we are so committed to giving it our absolute best to get that reform passed through the Parliament as well. 

ROSS GREENWOOD: I understand that philosophy, I understand that entirely …interrupted

MATHIAS CORMANN: It is not a philosophy. That is a fact. 

ROSS GREENWOOD: It is a fact, it is a philosophy, whatever. The question is, how are you going with Pauline Hanson right now? Clearly, there were cooperative conversations to get the personal income tax cuts through. It would appear to me however, that the conversations are less cooperative when it comes to getting the company tax cuts through. Is that a reasonable assumption?

MATHIAS CORMANN: I have had very good conversations with Pauline Hanson and her team. I have had very good conversations with all Senators on the crossbench in relation to our proposal to lower business tax rates for businesses in Australia so they can be globally competitive. But I am not going to go into the ins and outs of those conversations. We put our case. Ultimately it is a matter for every individual Senator to make a judgement on what they believe is in our national interest, what they believe is in the best interest of families around Australia. We hope, that ultimately when it is all said and done and when this comes to a vote in the Senate, that they will be persuaded by the merits of our argument. This is critically important. We have a relatively small population. We have a comparatively small domestic market by international standards. We rely on foreign capital. We compete for foreign capital in order to continue to grow our economy, to continue to develop our economy. If we have one of the highest business tax rates in the world, as we now do or will have as other countries continue to lower their business tax rates, we will find it harder to attract investment into Australia. You have a country like France, which has already legislated to lower their tax rate from 33 per cent to 25 per cent by 2022. The US is at 21 per cent. The UK is going to 17 per cent. Businesses in those countries will be able to get investment directed away from Australia into their countries to grow their businesses at our expense. Anyone in the Parliament who decides to stand in the way of a lower business tax rate is essentially standing to help businesses overseas take business and jobs and investment away from Australia. 

ROSS GREENWOOD: I hear all of that and I agree with you entirely, except for there is one small issue and that is observation is, that despite our very high company tax rates, our stock market tonight sits at ten year highs. So clearly the taxes that the companies are paying are not preventing them from making the profits that see investors propel our stock market to a ten year high. What sort of observational conclusions should I draw from that?

MATHIAS CORMANN: The worst thing that we can do is to look at our past performance or where we are right now and assume that all of that is going to continue no matter what into the future. We are engaged in global competition. Our businesses compete with businesses in other parts of the world. We need to look ahead. We need to look ahead and make judgements on what is required for our economy to continue to be strong. The truth is that we compete with businesses all around the world in terms of capital, in terms of access to markets overseas. We even compete with businesses from other parts of the world in terms of import competition. So domestic businesses in Australia supplying the domestic market compete with businesses in other parts of the world in terms of supplying the domestic market. If we put businesses in Australia at a competitive disadvantage. If we put more lead into the saddle bag of businesses in Australia, deliberately and on an ongoing basis, then that what is in the saddle bag of businesses in other parts of the world, we make it deliberately harder for our businesses to succeed against businesses in other parts of the world. Why would we do that? Why would we want to accept a situation where because of a deliberate policy decision in Australia we help businesses in other parts of the world take business away from us. That is completely counterproductive. Surely it is completely contrary to what we should be doing if we want to continue to be prosperous and successful into the future.

ROSS GREENWOOD: Okay, the Prime Minister said today that these tax cuts were aspirational and he also talks about realising people’s dreams. Now Aaron, who is in Lake Macquarie says ‘thanks Prime Minister the ten bucks is exactly what I needed to change my life, he said I would have preferred, rather than the $10 that they didn’t waste time pushing this through when they could have actually sorted out the electricity fast that is costing us a fortune, I wander what my wage growth would be like if electricity wasn’t costing a fortune!’ So in other word, some people are saying about priorities here, whether in fact the priority was the tax cut or whether the priority was fixing the electricity system, whether the priority was paying off that. So in other words people are looking at priorities I guess. 

MATHIAS CORMANN: We have an overall plan for a stronger economy and more jobs and it includes making sure our tax system is as growth friendly as possible. It also focuses on a very ambitious free trade agenda to make sure our exporting businesses get the best possible access to markets around the world. And it also of course focuses on making sure we can have cheaper, more reliable energy into the future. We cannot just focus on one at the expense of the other. We have to do all of the above. Making sure that we can have access to cheaper, more reliable energy supplies into the future is a very important part of making sure that we are competitive as an economy and that families around Australia have the best possible opportunity to get ahead. 

ROSS GREENWOOD: I will tell you what, great to have you on the program as always Mathias. It was a really good debating point, because the issue, as many people said that you would not get these tax cuts through under any circumstances and certainly not as a complete bill. Well they are through. They are law and become law very shortly and …

MATHIAS CORMANN: They are law. I went this afternoon with Senator Mitch Fifield to the Governor General. The Governor General signed it in front of us and it is now the law of the land. 

ROSS GREENWOOD: There you go. So the law is there. $144 billion worth of income tax cuts out until 2024. And as I say, many people said it could not be done, but through politics, you’ve got to say, Mathias Cormann in the Senate has done a terrific job in getting that Bill of course and it’s got to survive the elections as well, but we appreciate your time as always. 

MATHIAS CORMANN: Thank you Ross. 


Senator the Hon Mathias Cormann, Minister for Finance, Perth