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






Company tax cuts, By-elections

ROSS GREENWOOD: Mathias Cormann is the Minister for Finance and also heads up the Government in the Senate and Mathias Cormann many thanks for your time.

MATHIAS CORMANN: Good evening Ross.

ROSS GREENWOOD: Look, the Government has got the Budget in a better position than it has been for many, many years. The Government is in a position where it can hand out personal tax cuts. The question is, really, if the public does not, with a Royal Commission on, like the idea of handing out big tax cuts to banks and others, why on earth would the Government persist with this?

MATHIAS CORMANN: Because it is the right thing to do by working families around Australia. If we put businesses in Australia at a competitive disadvantage with businesses in other parts of the world by imposing significantly higher tax rates, then that puts workers here in Australia at a competitive disadvantage with workers in other parts of the world. I think it is going to be very important for us not to overreact and react wrongly to a by-election result which was always the most likely outcome. All that has happened this weekend is that Labor in seats they held, essentially, had a small swing towards them, a smaller swing than the average swing at a by-election achieved and secured by an Opposition if you look at it in a historical context. In the last 100 years or so no Government has won a seat from an Opposition at a by-election. That is because people can vote safely in a by-election on a whole range of issues without impacting on who the Government is the day after the by-election…interrupted

ROSS GREENWOOD: But Mathias, you can also understand that people like Luke Howarth and other Members in Queensland and even the Government itself could be very much wiped out. What they are saying is if the public is not accepting the story the Government has told about company tax cuts, if the Labor Party has actually sold its opposition to company tax cuts, if GetUp has sold its opposition to company tax cuts better than the Government has sold the policy of cutting company taxes, well if that case you have been beaten in the story-telling, then why persist, why not drop them?

MATHIAS CORMANN: Well you cannot draw that conclusion. Firstly, you cannot draw that conclusion from the by-election result on the weekend because, as I have just indicated to you, the by-election result is actually worse than the by-election result for Oppositions on average at a by-election over the past 70 odd years. If you look at the average swing against a Government in a by-election in a seat where the incumbent Member resigned, it is about 4.9 per cent on average. There was hardly any swing towards Labor in Braddon at all. There was a swing well below that against the Government in Longman. So firstly, you cannot draw that conclusion from the by-election result and you cannot translate by-election swings to what would happen at a general election.

ROSS GREENWOOD: Okay, that’s the politics of it Mathias…interrupted

MATHIAS CORMANN: No, but that is what you have just asked me.

ROSS GREENWOOD: I understand, but that is the politics of it. So okay, now I am going to say to you “Alright I can actually go and take the Labor Party line” and that is “Why should banks, inside Royal Commissions, with their poor behaviour, be given tens of millions of dollars, hundreds of millions of dollars’ worth of tax cuts over the next ten years? They do not deserve it, they are still making plenty of money, they have still got a decent return to their shareholders, why should they be given a tax cut?” That is the line that the public appears to be swallowing. Otherwise, it might have been a different vote in these by-elections.

MATHIAS CORMANN: It is not a matter of what the banks deserve, it is a matter of what is in the best interests of working families around Australia. The truth is that if we keep the corporate tax rate in Australia as one of the highest in the world, the second highest in the world in fact, we will lose investment and jobs to other parts of the world. Now in relation to the banks, you mentioned the banks, to the extent that there has been bad behaviour and there clearly has been, that must be addressed and the Royal Commission is looking at all of these issues in great detail. The Royal Commission is doing a very good job and whatever recommendations and conclusions come out of that process will have to be dealt with. At the end of all of this it is still in the public interest, it is still in the interest of banking customers all around Australia for us to have strong, stable and profitable banks. It is in the interests of mum and dad shareholders and retirees for us to continue to have strong and profitable banks. The banks to the extent that they have done the wrong thing have to be dealt with and any systemic issues have to be dealt with. But that does not take away the fact that in Australia we are an open trading economy, we are globally exposed, we rely on foreign capital, we compete for capital with businesses in other parts of the world, we compete for access to markets in other parts of the world with businesses from other parts of the world and we compete even for access to our own market with businesses from other parts of the world. If we lock in a higher tax rate on businesses in Australia than is faced by businesses in other parts of the world, we are helping businesses overseas compete against us. We are helping them take investment and jobs away from Australia, which will lead to lower wages over time. Now, I think that it is going to be very important for us not to misinterpret and to make judgements on the basis of a by-election result, quite frankly, that was not a by-election that had any bearing  at all on who was going to be the Government on the other side of it, had no bearing at all as to who was going to be running the economy or economic strategy.

ROSS GREENWOOD: Couple of other bits and pieces because again, I will come back to you about the taxes. A lot of people out there struggling, cost of living, also wages not rising, they easily buy the line from Labor that says “Why should the big businesses get these tax cuts? Why don’t we hit the rich end of town and we will take away some of their perks such as negative gearing, we will change capital gains tax, we will not give the companies these tax cuts and what we will do is we will deliver more tax cuts to you as individuals because we know you are hurting with the cost of living”. It is not a bad political message, you have got to say and one that may resonate.

MATHIAS CORMANN: In the end it is about doing the right thing by families around Australia. The truth is, the job opportunities, the job security, the career prospects and the wage increases of nine out of ten working Australians depend on the future viability, the future competitiveness and the future profitability of the businesses that employ them. The biggest businesses around Australia are in many ways the most exposed to the pressures of global competition. They employ directly many Australians, they buy products and services from all of the many small and medium sized businesses around Australia. If we keep taxes on business in Australia high, if we keep taxes on big business in Australia high, we help big businesses in other parts of the world take business away from us. Those big businesses in other parts of the world will hire more people, will buy more products and services from the small businesses in their country.

ROSS GREENWOOD: Do you believe, do you believe Mathias that the population of Australia is going to buy that argument as compared with the very simple argument that Labor is putting out right now, that Getup! is putting out there right now?

MATHIAS CORMANN: Getup!, Labor, the Greens and others, they are running populist, politics of envy arguments. I do not believe that when it is all said and done, at a general election, when people are asked the question “Would you trust Bill Shorten to run the Government, to run the economy when he is pursuing an anti-business, anti-growth, higher taxes, politics of envy agenda, which will clearly leave every Australian worse off”. I do not believe that people will entrust him with the economy. Now that was not the judgment that they were asked to make in Longman or Braddon or in Mayo, where the Labor Party’s vote went down to about five per cent or something. This is the judgement that people will be asked at the next general election. That is why people’s voting behaviour and voting pattern is very different at a general election compared to a by-election. Let me just make this final point on this, Governments over the last 100 odd years have failed to win seats off Oppositions at by-elections and gone onto win the next general election. In fact, in 2001 the Howard Government lost a blue ribbon seat it held, the seat of Ryan, at a by-election and five months later won the general election, including winning back the seat of Ryan in Queensland…interrupted

ROSS GREENWOOD: Indeed, it was one of John Howard’s finest moments. This is the whole point about the political messages going out. What you are telling me right now Mathias, is that the Government is not for changing in its tax policy, in particular to company taxes. I have said earlier on, you are damned if you do, you are damned if you do not.

MATHIAS CORMANN: Having a lower globally more competitive business tax rate to help secure future jobs growth and future wages growth is a central part of our plan for the economy and jobs. We are committed to doing the right thing by working families, even if it is hard. We are persisting with doing what we fundamentally believe is the right thing to do.

ROSS GREENWOOD: The other final thing about it is, does the result over the weekend, does the way in which you have gone in the pre-election or the pre-by-election campaigning, does it mean or teach you anything in terms of your messaging, in terms of the way in which you pitch this sales job for the tax cuts and for the company tax cuts as well?

MATHIAS CORMANN: This was not an election just about company tax cuts. This was an election in which people at a by-election level passed judgement on the basis of a whole range of factors. There is a whole range of elements including local factors that feed into these sorts of things. As I have said to you, at a by-election people can safely vote against the Government without changing the Government. The question was not “Do you want Bill Shorten to be Prime Minister on Monday?” People knew that they were not going to get Bill Shorten on Monday. The question was “Who do you want to support in this seat?” It is a very different dynamic at a general election and the history actually bears that out.

ROSS GREENWOOD: Final one, the company tax cuts go back through to the Senate, presumably because One Nation at this stage have got opposition to it. It gets rejected. What happens to the company tax cuts at that stage, that extension of them? 

MATHIAS CORMANN: You are making assumptions. I am and the team is, we are continuing to work to secure the necessary support. Yes it is our intention to put this to the Senate during the next sitting fortnight. I am working, the whole team is working on the basis of securing the necessary support to get them legislated because that is what is in the best interest of working families around Australia.

ROSS GREENWOOD: Tell you what, Mathias Cormann, always great to have on the program.


Senator the Hon Mathias Cormann, Minister for Finance, Perth