Senator the Hon. Mathias Cormann
Minister for Finance
Leader of the Government in the Senate
Senator for Western Australia
KIERAN GILBERT: Good morning. Welcome to the program. As if the big banks needed any more headaches amid the ongoing Royal Commission, which has exposed corporate cultures in need of major overhauls. Now the Productivity Commission is chiming in. A report to be released today shows the industry exploits loyal customers offering better products to new customers to expand market share. But if you have been there, you have been loyal for years, bad luck. Let’s get some reaction to it with the Finance Minister, Mathias Cormann. Your thoughts on these Productivity Commission findings?
MATHIAS CORMANN: The Government has been working for some time now to improve the competitiveness in the banking sector. Our banking sector historically and now is highly concentrated with most of the market share held by the four major banks. Clearly, improved competitiveness is in the public interest and is in the interest of banking customers. That is why we have pursued reforms like the open banking reforms to help customers get easier access to their data and make it easier for them to switch banks. That is why we have pursued reforms with regulators to facilitate access to the market by new entrants. That is also incidentally why we pursued the major bank levy, helping to level the playing field between the major banks and the smaller banks. But there is always more work to be done. The Productivity Commission report is the next piece in that approach.
KIERAN GILBERT: I like how the banks sort of prove the point at the time when the report is being released. Just yesterday, ANZ announced its reduction in its variable rate, but only for new customers. Proving the point itself with its behaviour just yesterday.
MATHIAS CORMANN: The Government supports a more competitive banking system. That is what we have been working on over the last few years. That is what we will continue to work on. We want customers to get a better deal. We need strong and stable banks, but we also want to ensure that the system is competitive. We had the Financial Systems Inquiry and now the Productivity Commission review, there is of course the Royal Commission. The Government will continue to act on all of the recommendations as appropriate, that come out of these various processes to ensure that banking customers across Australia get a better deal.
KIERAN GILBERT: The Productivity Commission recommends an integrity officer to monitor mortgage brokers within banks. I have got to say I was surprised that they don’t have that sort of mechanism in place already. Are you?
MATHIAS CORMANN: The Treasurer Scott Morrison is going to have some more to say about all of these things later today. He will be addressing all of these things in great detail. This squarely falls into his direct area of responsibility.
KIERAN GILBERT: Okay, we will await his speech at lunchtime today at the British Chamber of Commerce. Let’s talk about something which you’re focussed on and in your area of responsibility in a big way and that is the company tax cut plan and to try and get the remainder through. You have been the strongest advocate for this to maintain the plan to reduce the corporate rate to 25 per cent for all businesses and that you will take it to the next election. Does that remain the case?
MATHIAS CORMANN: That is our position. This is all about protecting jobs and creating more jobs here in Australia. If we keep business taxes high by international standards, when countries all around the world have substantially lowered theirs, we are helping business overseas compete against us, take business, jobs and investment away from us. That would hurt our economy, it would cost jobs, it would hurt working families. Nine out of ten working Australians work in a private sector business. Their future job opportunities, their future job security, their future career prospects and wage increases depend on the future viability, competitiveness and profitability of businesses here in Australia. We cannot continue to put businesses here in Australia at a competitive disadvantage and think that that is not going to do harm to our economy over time and harm to Australians right around Australia. We want Australians today and into the future to have the best possible opportunity to get ahead. That is why we need to ensure that the businesses that employ them and pay their wages can be competitive, can be successful into the future. We cannot ignore the fact that countries around the world have made decisions to substantially lower their business tax rates.
KIERAN GILBERT: So you are not open to some sort of compromise with the crossbench, which has been speculated for weeks now with a threshold set, maybe at $500 million a year? You are not open to that sort of thing?
MATHIAS CORMANN: There are two different questions here. Are we prepared to engage with the crossbench as we always do? Of course. We have been and we will continue because we recognise that they have all been elected in their own right and it is our responsibility to try and work towards a consensus. But when it comes to the question of a cap, as Bill Shorten quite rightly pointed out, if you put a cap in place above which you are no longer eligible for a lower, globally more competitive business tax rate, that provides a perverse incentive to business to downsize. It provides a perverse incentive for bigger businesses to become smaller businesses to benefit from a lower business tax rate …interrupted
KIERAN GILBERT: But you have already done that with the $50 million turnover.
MATHIAS CORMANN: Actually no we have not. We always indicated very clearly that we were committed to the ten year plan of lowering the business tax rate for all businesses down to 25 per cent. Let me just finish, you interrupted me there. If you put in a cap that you want to stay in place, which is essentially what would happen if you legislated it up to $500 million. If you put a cap in place, what you are essentially saying is that if you are a bigger business, we want you to become a smaller business. Whereas what Australians need is for smaller businesses to have the right incentive to become bigger businesses, so they can hire more Australians. As businesses around Australia hire more Australians, more competition for workers leads to higher wages.
KIERAN GILBERT: But the reality is that you are not going to get it through the Senate and your colleagues want to be pragmatic about it and say do your best, when it hits the fence, let us rethink this, but you are not open to that.
MATHIAS CORMANN: You are quite wrong there. I am always, like my colleagues, all of us, we are always committed to giving it our best and that is precisely what we are doing. We have a responsibility to the Australian people to give it our best …interrupted
KIERAN GILBERT: So where is it wrong?
MATHIAS CORMANN: We have a responsibility to the Australian people to ensure that the businesses that employ them and pay their wages have the best possible opportunity to be viable, to be competitive and to be successful into the future. We will be taking this to the Senate again over the next sitting fortnight and we will be giving it our best.
KIERAN GILBERT: How is it wrong? I know for a fact some of your colleagues want to shelve this if you do not get it through. You are saying again this morning it is your position, you want to take it to the next election. Where was that assertion that I made wrong?
MATHIAS CORMANN: Your assertion in your question just now was that our colleagues wanted for us to give it our best I agree. We want to give it our best. We want to put it to the Senate and we want to ensure that we get our legislation through. As I have indicated to you, we always negotiate with the crossbench. We are always prepared to find a consensus way forward and these are the conversations that we have been having. Remember, we did have some success previously in relation to these matters convincing crossbenchers to come on board with things that people suggested that we had no chance. The media were telling us that we should split our legislation on personal income tax cuts because there was absolutely no chance that we would be able to get the personal income tax cuts through for those on the higher income tax brackets. They were proven wrong. We have a responsibility to give it our best because we want to ensure …interrupted
KIERAN GILBERT: You are still hopeful?
MATHIAS CORMANN: I am continuing to focus on getting a very important economic reform through that will help protect jobs and help secure more jobs for Australian families in the years to come.
KIERAN GILBERT: Minister, your colleague Matt Canavan is quoted today in The Australian suggesting that the National Energy Guarantee will be complemented by other measures including the Government’s Competition watchdog report. Your response to that? Focus on prices, it is being called the National Energy Guarantee plus approach. Can you give us a sense of where that is at and what your thinking is on it?
MATHIAS CORMANN: We have always had a National Energy Guarantee plus plus plus approach. The Government has been doing a whole range of things in the energy space to bring down electricity prices, including making sure that we had adequate supplies of gas into the east coast market and various other things that have helped to bring down electricity prices. The National Energy Guarantee is all about bringing down the price of electricity, about improving reliability of energy supplies and it is doing so in a technology neutral way, which is focused on bringing an end to Government subsidies and it is also focused on making sure that we get increased investment in energy generation and supplies, which will have to bring down the price of electricity. We have had the ACCC report, which is something that the Government is considering. Rod Sims incidentally endorsed the National Energy Guarantee as the best way forward to help bring electricity prices down. There are always a range of other things on the table that the Government is prepared to consider.
KIERAN GILBERT: When it comes to those other things, obviously there is a big focus on price. It is an issue for many of your colleagues. One of them, the former Prime Minister Mr Abbott this week saying the modelling cannot be believed, the Energy Security Board. He said pigs might fly when it suggested that prices will come down by 2030.
MATHIAS CORMANN: Prices have come down and prices will come down by more if government stops picking winners by providing subsidies to one technology or another. In the end, if the Government intervenes in the market and distorts the market it reduces the efficiency in the market and it means that prices end up higher than they otherwise would be. That is the reason we are taking the approach we are with the National Energy Guarantee, because taking a technology neutral approach and providing certainty to investors will boost the level of investment into energy generation. The laws of economics, the fundamental laws of economics remain that if you want to bring down the price of anything, you have to increase supply to meet any level of demand.
KIERAN GILBERT: And you have also got to give certainty don’t you, to the business community. Jennifer Westacott from the Business Council, she has written again in The Australian urging the states and the Federal Government to come up with some sort of deal next week when Mr Frydenberg meets, a week today with the State Energy Ministers. It is crucial she says to end these climate wars.
MATHIAS CORMANN: I agree with Jennifer Westacott. We have to get to the other side of this so that we can provide confidence again, in particular to investors into energy generation. So we can start boosting even more significantly the level of future energy generation and supplies, so that over time that will further reduce prices. We have already had an impact in terms of bringing prices down on the back of our reforms so far, but there is more work to be done. The National Energy Guarantee in particular, will be a very important next step in further reducing the price of electricity.
KIERAN GILBERT: Minister, I appreciate your time, as we do ever Friday. Catch you next week.
MATHIAS CORMANN: Always good to talk to you.