Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
SHARRI MARKSON: Welcome back, now I am going to speak to the Finance Minister Mathias Cormann, the man who is the strategic and economic brain behind much of the Government’s policy and he secured the passage of some very tricky legislation through the Senate, including the income tax cuts just a fortnight ago, which was a huge embarrassment for Bill Shorten. Thank you for joining me tonight Minister.
MATHIAS CORMANN: Good to be here.
SHARRI MARKSON: Now today you have announced a new funding carve-up for GST payments. No State, you say, will be worse off, but to do this, you have injected $7 billion in extra funds. Have you not taken the easy way out here by topping up the GST payments instead of embarking on true and real reform?
MATHIAS CORMANN: Well we are embarking on true and real reform. The truth is that this has been in the too hard basket for way too long. This is a problem that started in earnest as far back as the Gillard Labor Government, which is when WA’s share of the GST started to fall to unacceptably low levels. When we first came into Government we, as an interim short-term measure to address this, initiated additional Federal top-up payments to Western Australia to stop the drop in GST payments to WA. WA was on track to go below 30 cents in the dollar as there share of GST, which was unacceptably low. It was unfair. It was unsustainable in the Federation. So what we said at the time is that by way of short-term measure, we make these top-up payments, supporting additional investment into infrastructure in Western Australia, but that we would be working on a proper medium-to-long term reform proposal. We initiated the Productivity Commission Review, which made a whole series of recommendations. We have accepted all of those recommendations except one. We did not think it was realistic to equalise the GST to the average of all States. What we have come up with is an alternative model, which delivers a better, a fairer deal for Western Australia, which provides a better deal for our national economy, but which is also fair to all the other States in that they are all slightly better off as a result of how we have structured this.
SHARRI MARKSON: Still, aren’t you just throwing money at this problem? An extra $7 billion because you are gun-shy, one before the by-elections, but also in an election year, there have been accusations today that the Government is lacking political courage.
MATHIAS CORMANN: That is just wrong. We are focusing on fixing a problem that nobody before us has been able to fix. If it was easy to do it would have long been done before. Have we put additional Federal money on the table to help achieve a resolution that is fair for WA, that is good for the national economy and that is fair to all the other States? Yes we have. We have explained that very clearly. We are making initially in the short term, additional top-up payments to Western Australia to lift their share of the GST from 2019-20 effectively to 70 cents in the dollar. We then will establish a floor from 2022-23 onwards of 70 cents in the dollar for all States, but which will impact beneficially on Western Australia, and in 2024-25 that will go up to 75 cents in the dollar. In the meantime, we are also changing the distribution formula over a six year period from 2021-22 to 2026-27. In order to ensure that we can put our hand on our heart and say that no State is going to be worse off as a result of this reform, in fact all of the States will be slightly better off, we have decided to permanently boost the GST pool with additional non-GST federal revenues, so that the pie that is being distributed to all of the States is bigger than it otherwise would have been.
SHARRI MARKSON: Now Labor has today been questioning where this top-up funding is coming from, they have called it a magic pudding. We are just going to take a look at Chris Bowen and Annastacia Palaszczuk now.
CHRIS BOWEN [EXCERPT]: If he says that he is not going to increase taxes, that means he is either going to increase the Budget deficit or cut schools and hospitals. I mean which one is it Mr. Morrison? He may believe in magic pudding economics that he can do it all, Australians know better than that.
ANNASTACIA PALASZCZUK [EXCERPT]: It does seem to me to be highly ironic that all of a sudden there is a pie that gets bigger. Where is the money coming from? I will not stand to see any cuts to services, especially our hospitals and schools across Queensland. It appears that this is more of a magic pudding, than it is a pie that continues to increase.
SHARRI MARKSON: So Minister, what is your response to this? Where is the money going to come from?
MATHIAS CORMANN: Chris Bowen and Federal Labor clearly cannot read Budget papers. I mean in 2019-20 the Budget is already forecast to have returned to a small surplus, a surplus which grows over time. By 2026-27 we are projected to be in surplus in excess of one percent as a share of GDP. I am not sure what deficit he is talking about there. The truth is we have worked hard to put the economy and our Budget on a stronger foundation and stronger trajectory for the future. We inherited from Labor when they lost Government in 2013 a weakening economy, rising unemployment and a rapidly deteriorating Budget position. Today the economy is stronger, the economic growth outlook is stronger, employment growth is stronger and the Budget position and the trajectory is stronger. We are now projected to pay down $30 billion worth of Government net debt over the next four years, $232 billion worth of Government net debt, over the next decade. What I say to the Federal Labor Party is that when you implement a plan for stronger growth and more jobs and you deliver outcomes, when you work to turn around the Budget mess that you inherited to the point where you are now in a genuinely stronger Budget position, you can afford to pursue necessary and important reforms in the national interest like this one. The numbers are there for all to see. We are in surplus all the way through that period. We are projected to be in surplus all throughout that period that we are implementing this plan.
SHARRI MARKSON: But projections are always so volatile, you have built in personal income tax cuts to come through in six to seven years and now this as well. You can understand that people would question with certainty whether this all will be affordable.
MATHIAS CORMANN: The problem is you seem to be just remembering what the experience was under Labor. You’re right, Labor always outrageously over-estimated revenue forecasts. They spent money they thought they would collect from the mining tax before they had raised a dollar and then that money never came in and that caused the Budget all sorts of problems. I refer you to the most recent final Budget outcome, which is for the 2016-17 financial year…interrupted
SHARRI MARKSON: Trust me, I have read it.
MATHIAS CORMANN: …And what you can see is that we have performed better than Budget. If you look at the monthly financial statements that I put out every month, you can see that for the 2017-18 financial year, we are tracking well ahead of our Budget estimates. If anything our forecasts and our economic assumptions, our economic parameter assumptions underpinning our revenue and expenditure forecasts are prudent, they are appropriately conservative and we stand by them. But the truth is, we inherited a bad Budget position and a weakening economy, we have turned that situation around and we have given ourselves the fiscal room to be able to afford these sorts of necessary and important reforms that we have announced today.
SHARRI MARKSON: If the position is so good, could you have a mini-surplus before the next election and an early Budget?
MATHIAS CORMANN: The Budget is to be delivered on the second Tuesday in May. We have just had one, there is going to be a half-yearly Budget update later…interrupted
SHARRI MARKSON: You will be in an election then, if that is what Malcolm Turnbull says is true.
SENATOR CORMANN: Of course what Malcolm Turnbull says is true. The election will be next year, but the next Budget update will be before Christmas. It will be the half-yearly Budget update. On a monthly basis, I release monthly financial statements, which show how we are tracking in terms of expenditure, in terms of revenue and what you can see is that our revenue is running above expectations and expenditures are running below expectations.
SHARRI MARKSON: Now, I just want to move on to some other topics away from the GST. As Finance Minister, you meet with a lot of CEOs and business leaders. It is a community that Bill Shorten has antagonised over the past few years through his personal interactions with them and through his policy positions. What are you hearing about just how difficult that relationship is between the business leadership and the Opposition Leader?
MATHIAS CORMANN: Bill Shorten cannot be trusted with our economy. Bill Shorten has been running an anti-business, class warfare, politics of envy agenda of higher taxes, more red tape, higher electricity prices. If he ever got the opportunity to implement this, all Australians would be poorer. It would be bad for our economy, it would be bad for families. It would cost jobs. Our message to all Australians is we turned the disastrous situation around that Labor left behind when they last lost Government in 2013. Do not give Bill Shorten and others the opportunity to take us back there. Bill Shorten is running on a class warfare agenda…interrupted
SHARRI MARKSON: But his relationship with the community, what are the business leaders telling you?
MATHIAS CORMANN: Nine out of ten jobs around Australia are in the private sector. The future viability, the future success, the future profitability of businesses in Australia is incredibly important to the future success and opportunity for working families around Australia to get ahead. Bill Shorten is trying to win votes on the basis of good old fashioned class warfare. It is completely unproductive. It is not in Australia’s national interest. It will not help us be a stronger, more resilient economy into the future. What we need is, we need businesses across Australia to continue to thrive, to continue to be competitive, to continue to be able to offer opportunities for all Australians to get a job, to get a better job, to build a career, to get better wages…interrupted
SHARRI MARKSON: But do you think his class warfare message and his policies about wealth redistribution, while of course it does not create jobs, but do you think it is working? Do you think that message resonates with people who are doing it tough?
MATHIAS CORMANN: He thinks that it will help him win the election even though he knows what he is promoting will be bad for the country and it would be in particular bad for low and middle-income earners across Australia. The reason he is pursuing the agenda he is pursuing is cynically, because he believes it will win him votes…interrupted
SHARRI MARKSON: Of course, it is a political one.
MATHIAS CORMANN: …I think that Australians are better than that. I think that overwhelmingly aspirational Australian families who want the best for their families, for their kids, for their grandkids, who want their kids and their grandkids to have the best possible opportunity to get ahead in the years to come, they see through what Bill Shorten is putting forward. They understand that if we make it harder for business in Australia to be successful, that means that there would be fewer jobs than there otherwise would be. Higher unemployment would mean less competition for workers, would mean lower wages. Bill Shorten’s agenda of higher taxes would lead to less investment, lower growth, fewer jobs and higher unemployment. Whereas what we are pursuing is an agenda of lower taxes for more investment, stronger growth, more jobs and higher wages over time. That is going to be the choice at the next election. That will be the choice in front of the Australian people at the next election.
SHARRI MARKSON: Look, Minister you are very heavily involved in Government strategy and I know you cannot talk about it publicly, but I can say with some authority because I know from people I speak to in Cabinet…interrupted
MATHIAS CORMANN: Not from me.
SHARRI MARKSON: …. That you were very strong when it came to insisting the Government sticks with its company tax cuts for businesses with a turnover of higher than $50 million, because I know that there was an argument to convert those into personal income tax cuts. I am not asking you to comment on that because it would just be a waste of time. What I am asking is, why were you so keen to stick with the company tax cuts for big businesses, for banks when Labor has got such a lethal argument that they are playing in Longman, that they are using in robocalls everywhere, that the Government wants to give a tax cut of $17 billion to banks. This is at a time when the banks are the most hated industry in the country. Why were you so keen, why did you convince your colleagues to stick with this path?
MATHIAS CORMANN: Firstly, we have delivered record personal income tax relief for hardworking families to the tune of about $144 billion over the next decade, prioritising low and middle-income earners and then providing income tax relief to all working Australians…interrupted
SHARRI MARKSON: We all know that, all of the Sky viewers know that.
MATHIAS CORMANN: … The second point in relation to business tax cuts is that this is an absolute centrepiece of our plan for stronger growth and more jobs which we took to the 2016 Election. Let me tell you, if the Australian Senate ultimately were to vote against a lower, globally more competitive business tax rate in Australia, what we would be doing is we would be helping businesses overseas compete against businesses here in Australia. By helping businesses overseas compete against businesses in Australia, we would be sending investment and jobs overseas. It is because we are so committed to do the best we can for working Australians to get ahead that we are doing everything we can to help ensure that the businesses that employ them, that pay their wages have the best possible opportunity to be viable, competitive and profitable into the future. As I say, nine out ten working Australians work for a private sector business. Their future job opportunities, their future job security, their future wage increases depend on the future viability, the future competitiveness and the future profitability of the businesses that employ them. It would be absolutely reckless if we made a decision here in Australia to lock in a competitive advantage for the big end of town overseas at the expense of businesses and workers here in Australia. That is why it is so important for the Australian Senate to pass this very important reform.
SHARRI MARKSON: Now Minister, very quickly, you have struggled to pass these tax cuts for big business. Pauline Hanson was the main Party, her and Peter Georgiou standing in your way. She is very keen to get a good result in Longman, even though she will end up most likely preferencing the Liberal Party. Do you think you will have a better chance of passing them afterwards? Have you spoken to her? Has she given you an indication that she might be willing when Parliament return in August to have a look at passing these company tax cuts?
MATHIAS CORMANN: As I always make very clear, I do not communicate with crossbenchers through the media and I am not a commentator on private conversations with crossbench Senators through the media. As I have also made clear, on Sky incidentally, in an interview with Kieran Gilbert, there is absolutely no secret deal as Labor as part of its conspiracy theories was suggesting in relation to what may or may not happen on the other side of by-elections. What I would say though and nobody would be surprised by this, the Government will continue to make our argument strongly, that passing these reforms to deliver a lower, globally more competitive business tax rate for all businesses across Australia is critically important for the future success of working families right across Australia. In particular low and middle-income earners. Low-income earners who are looking either for their first job or for a better job or for more hours work, they more than anyone need businesses to grow and expand so that there is more opportunity for them to go up that ladder of opportunity.
SHARRI MARKSON: Minister, thank you so much for your time tonight and I appreciate you joining me on my very first show as well.
MATHIAS CORMANN: Excellent, I loved it.