Sky News – AM Agenda

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






GST, National Energy Guarantee

KIERAN GILBERT: Let us go to the Finance Minister Mathias Cormann. Lots to talk about, I want to start with the major announcement on the Budget terms this week and that is the GST carve-up. Obviously, in WA it has been such a thorny issue, do you feel now that in a political sense you have neutralised that as an issue?

MATHIAS CORMANN: The people of Western Australia have long expected that this unfairness of the extremely low share of the GST coming back to Western Australia would be addressed. The reform proposal that Scott Morrison has put together with the whole team is a very significant reform, which does ensure that WA gets a fair deal on the GST in a way that is good for the country and it is also fair for every other State in that it leaves every State better off.

KIERAN GILBERT: What do you say to the New South Wales Government who are the largest State in terms of population, economic growth, the size of the economy. They say that they are benefiting least in terms of the numbers, they are from this particular overhaul.

MATHIAS CORMANN: The WA share of the GST when we came into Government was headed to less than 30 cents in the dollar. At the end of this reform period WA will get 83 cents in the dollar as its share of the GST, the same as New South Wales. Obviously this does benefit WA the most, but that is because WA has been so far behind for so long. In the end, horizontal fiscal equalisation is a very important part of any Federation. The principle that stronger States support those States that are fiscally less strong so that in all parts of Australia people can receive a similar level of service from their State Government, that is an important principle. At the end of this period WA will only just catch up with where New South Wales will have been.

KIERAN GILBERT: I copped flak from some WA viewers yesterday when I spoke to the Treasurer and asked him about the economic management of the WA Government through the mining boom. But I will ask you again this morning, is that partly the reason why there was such a fiscal cliff? Obviously, the share was not appropriate, it should have been greater than that, but was a mismanagement of the boom also part of the story?

MATHIAS CORMANN: That is a partisan Labor myth Kieran and you are better than repeating inaccurate partisan Labor myths…interrupted

KIERAN GILBERT: I am not repeating it, I am asking you a question. I was not asserting it.

MATHIAS CORMANN: What was happening during the mining investment boom is that there was massive numbers of people moving to Western Australia to be part of that journey. It put massive strain on hospitals, schools and on road infrastructure. In Western Australia significant costs were incurred in order to help facilitate the opportunity of significant economic growth which benefited the country as a whole. But the burden of financing the growth opportunities here in Western Australia was essentially carried by Western Australia. At some point, for every dollar in additional royalty revenue from expanding the iron ore production and export opportunities, which benefited the country overall, for every dollar of additional royalty revenue into the State Western Australia was losing three dollars in GST revenue. Obviously that is a significant disincentive for a State to expand its economy to its full potential. When you lose three dollars in revenue to your Government for every dollar in additional revenue you generate from growing your economy in a way that benefits the nation.

KIERAN GILBERT: Do you feel that it helps encourage other States, that you have said have been sitting on resources and your colleagues have been accusing Victoria for example of sitting on their gas resources. Do you feel that these changes might encourage them on that front to utilise their resources?

MATHIAS CORMANN: As I said at the outset, the reform proposal that we have put forward delivers a fair deal for Western Australia when it comes to GST sharing arrangements, but it does so in a way that is good for the national economy, that will help incentivise stronger national economic growth and in a way that is fair to every other State in that it leaves every other State better off. So yes, we do believe that the reforms that we have put forward, I mean we have adopted all of the recommendations of the Productivity Commission with the exception of the one to equalise GST to the average. We have adopted all of the other recommendations. By changing the formula, by putting in the floor, by doing the things we are doing, we are encouraging all States to do even more to strengthen our national economic growth potential.

KIERAN GILBERT: Do you feel comfortable in terms of the funding of all of this? Because obviously the Government is topping up the GST pool to the tune of $7 billion dollars across eight years, $9 billion across the decade and Labor, they are asking the question of where the money coming from?

MATHIAS CORMANN: Labor clearly is unable to read Budget papers. As a result of our hard work to strengthen the economy, create more jobs and get the Budget back on a stronger foundation and trajectory for the future we are able to afford what we are proposing to do here. When you get the budget back under control you can pursue these sorts of necessary and important reforms. Our Budget is forecast and projected to be in surplus over the whole period that we are proposing to implement our eight year plan to fix GST sharing arrangements. We are, as you know, forecast to return to balance in 2019-20 and by the time that the GST reform plan is in full effect, in 2026-27, we are projected to be in a surplus of more than one per cent as a share of GDP. So our message to the Labor Party is that when you get your Budget under control because you got your expenditure growth under control and the revenue growth is strengthening because your plan for a stronger economy and more jobs is delivering you more revenue, when more than 400,000 jobs are created in the economy in 2017, more than one million jobs created since we got into Government, that means more income tax revenue, it means less expenditure on unemployment benefits. When you put yourself in a position like that, that is how you afford to pay for necessary and important reforms.   

KIERAN GILBERT: Let look at something else in terms of paying for reforms. Is the Government open to this idea that the Nationals MPs are pushing of a $5 billion fund to enhance baseload and dispatchable power? They want to see that alongside the National Energy Guarantee. Is the Government, is the economic team, open to that?

MATHIAS CORMANN: We are pursuing the National Energy Guarantee which facilitates investment in all energy sources in a technology neutral way. Under the National Energy Guarantee our focus is on bringing down the price of electricity and improving the stability and reliability of our energy system. Under the National Energy Guarantee of course coal will continue to play and incredibly important role. In fact the projections by the Energy Security Board are that by 2030 about 60 per cent of our electricity supply will come from coal-fired power generation. We are united in the Coalition in our resolve to ensure that the energy policy framework moving forward facilitates more affordable, more reliable energy supplies. The Energy Minister, the Prime Minister, all of us, we always engage in conversations across our party room, across our Coalition, but that is our focus.  

KIERAN GILBERT: And on that $5 billion fund, you are open to it?

MATHIAS CORMANN: We are focused on delivering the National Energy Guarantee. That is the policy framework that will help facilitate the necessary investment in coal-fired power generation and in all other forms of energy generation in a technology neutral way and without the subsidies that have been a feature of the energy policy framework of the past.

KIERAN GILBERT: To another issue now and ahead of the Pacific Islands Forum in September the Government, along with the New Zealand Government, are going to secure a pact with the Pacific Islands for security, law and order and humanitarian efforts. Is this part of the Government’s approach to try and push back at Chinese assertiveness in our region?

MATHIAS CORMANN: You are taking me well beyond my areas of responsibility now. Let me just say that in relation to China, our relationship with China is a very important one. They are our most important trading partner and indeed China has made a significant contribution to the economic growth and development across our broader region. That being said, there are issues from time to time that need to be worked through and that is not surprising anyone.

KIERAN GILBERT: Finally, your thoughts, outside of your area of expertise as well but Jenny Macklin, after two decades in the Parliament, she is a hero within the Labor Party, that is for sure and certainly some areas of the Labor movement. Seen as one of the great policy thinkers of their Party. She leaves a legacy, even if you did disagree with her on many occasions.

MATHIAS CORMANN: We did not agree with Jenny at all times, but it is very important to have high quality individuals, high quality people in all parties. There is no question that Jenny Macklin for her party has made a very significant contribution over a very long period of time. Certainly at a personal level I congratulate for her significant contribution to public life, for her significant contribution to policy development and implementation in Australia for a long time and I wish her all the best in her retirement.  

KIERAN GILBERT: Yep, likewise. Thanks very much for that Finance Minister. We will talk to you soon.


Senator the Hon Mathias Cormann, Minister for Finance, Perth