Senator the Hon. Mathias Cormann
Minister for Finance and the Public Service
Leader of the Government in the Senate
Senator for Western Australia
Date: Sunday, 14 October 2018
BARRIE CASSIDY: Minister, good morning.
MATHIAS CORMANN: Good morning.
BARRIE CASSIDY: So what do you say to that? That with your tax plans, you have no offset, whereas they can identify savings?
MATHIAS CORMANN: Actually, the offset rule in our fiscal strategy in our budget, requires that any new spending measures have to be more than offset with spending reductions in other parts of the Budget. What we are talking about here is a tax cut. Even though Labor is confused about the difference between a tax cut and a spending increase, it should be clear to everybody else that reducing taxes is not increasing government expenditure. We do not always pay for a lowering in the tax burden in the economy with an increase in taxes elsewhere. Labor stands for higher taxes, which we would argue would detract from investment, lead to lower growth, fewer jobs, higher unemployment and over time lower wages. We stand for lower taxes. If you look at what we did in the Budget when we put forward our proposal to provide income tax relief to hard-working Australians, the net effect of policy decisions on the revenue side led to an overall reduction in the tax burden in the economy of $15 billion or thereabouts. Chris Bowen was the outgoing Treasurer in the last Labor government. When we inherited the budget from him, the Australian economy was weakening, unemployment was rising, and the budget position was rapidly deteriorating. In 11 weeks from Labor's last budget to the election, the budget position deteriorated by $33 billion. Today, our budget position from Budget to budget update, from budget update to Final Budget Outcome, is on an improving trajectory. The last Final Budget Outcome was $19.3 billion better than when we delivered the Budget in May 2017.
BARRIE CASSIDY: You nevertheless are pleased, though, that this is happening? That you have got Labor support?
MATHIAS CORMANN: I would have wished that they had come to that position earlier. It would have made things easier in the Senate in March 2017 when we passed the first wave of small and medium sized business tax cuts. But nevertheless, it is good that they have finally seen the light. Though Labor is still proposing about $200 billion in higher taxes on families, on investors, on housing, on electricity, you name it. This is … interrupted
BARRIE CASSIDY: It is taking away tax incentives, rather than increasing taxes?
MATHIAS CORMANN: That is actually not quite right. They are proposing to increase taxes on retirees, putting their hands into the pockets of Australians who have worked hard all their lives and saved for their retirement, to look after their own needs in retirement, or to complement the aged pension in retirement. This is just one of many tax increases. By Labor's own admission, the tax burden under Labor would increase by about $200 billion over the next decade, which would have a negative effect on investment, on growth, on jobs and the opportunity for Australians to get ahead.
BARRIE CASSIDY: Alright.
MATHIAS CORMANN: They call tax increases savings. This is the big lie that the Labor party seeks to propagate. A tax increase is not a saving. A saving is a reduction in expenditure. That is the confusion that Chris Bowen is trying to promote again here.
BARRIE CASSIDY: Let's talk about this system that you will have in operation. It is a effectively now a two-tier tax system. You have spoken against that in the past. You worry that artificially creates an incentive to lay people off. We heard Scott Morrison say earlier Labor’s policy is to make big business smaller. Isn't that the impact of a two-tier system?
MATHIAS CORMANN: Firstly, the point that you have just made is a point that Bill Shorten used to make. But in relation to the $50 million … interrupted
BARRIE CASSIDY: But you have made this point? I was quoting you there.
MATHIAS CORMANN: My arguments are on the record. But I made that point very specifically in the context of a proposal at the time to put in a cap, to put in place a cap, which I believed at the time would have become a permanent cap at $500 million, where the effect is even more dramatic, because at that level, it would provide a significant perverse incentive for a business to structure their affairs accordingly … interrupted
BARRIE CASSIDY: Sorry, but doesn't that still exist, if somebody is on that margin of $50 million turnover …
MATHIAS CORMANN: I was about to get to that point.
BARRIE CASSIDY: Right okay, go on. Sorry.
MATHIAS CORMANN: In relation to small and medium-sized businesses with a turnover of up to $50 million, we had already crossed that threshold. We had already legislated to lower business taxes for small and medium-sized businesses with a turnover of up to $50 million, down to 25 per cent. The decision that the Prime Minister announced this week is that we would bring that forward by five years, and to deliver lower taxes for small and medium-size businesses sooner. But the threshold decision of reducing taxes for small and medium-sized businesses to 25 per cent had already long been implemented. Now that appears to be bipartisan policy.
BARRIE CASSIDY: Yes, now even if it was to happen, if somebody is getting close to the margin of $50 million turnover, where is the incentive to grow? If they will lose the benefit?
MATHIAS CORMANN: Everybody knows what our plan A was. The plan A was not able to get through the Senate. We are all about continuing to make decisions to take the Australian economy forward, to put Australia on the strongest possible foundation and trajectory for the future. We are backing in small and medium-sized business. We had a different plan initially. That plan was not able to get through the Parliament. So we are now pressing ahead, supporting more than 3 million small and medium-sized businesses across Australia, employing about 7 million Australians. That is very good news for them.
BARRIE CASSIDY: When you talked about the initial plan, that was a 10-year plan over three elections to cut company taxes. Peter Costello described that as weird. He said you were living in a parallel universe. How did you respond to that?
MATHIAS CORMANN: I disagree with him. These days we have lots of commentators around Australia, free to express their opinions. I do not agree with that particular opinion. We seek to make decisions that put Australia on a stronger trajectory for the future. We seek to make decisions that have a beneficial effect over the medium and long-term. Politicians are often criticised for being constrained or having a short-term view and only really focusing on the next election. We are trying to make decisions that put Australia on a stronger foundation trajectory for the future over the medium to the long-term as well as over the short term.
BARRIE CASSIDY: Peter Costello did say that even still, today, the Government lacks an economic narrative.
MATHIAS CORMANN: I completely disagree with him. Let me be very clear about our economic narrative. When we came into Government, Labor left behind a weakening economy, rising unemployment and a rapidly deteriorating budget position. That was very bad for families around Australia wanting to get ahead, because higher unemployment over time leads to lower wages and a deteriorating budget positions makes it harder to fund the essential services that Australians rely on. What we have been working to achieve is to make Australia stronger, to make the economy stronger, to deliver more jobs and to ensure that our budget is on a strong and sustainable foundation and trajectory for the future, so Australians can get a good job, a better job, have the best possible opportunity to get ahead. And you know what, we have been successful. Economic growth today is stronger, employment growth is much stronger, and the Budget position demonstrably is on an improving trajectory. If I can just make this final point. We have delivered the Final Budget Outcome for 2017-18. We had forecast employment growth of 1.5 per cent, or about 200,000 new jobs. The final outcome showed that we had created about 350,000 new jobs in the economy, 2.7 per cent employment growth, which is a significant reason why our budget bottom line improved so much on the back of higher personal income tax revenue and lower welfare spending because more people in Australia today are in work than ever.
BARRIE CASSIDY: I will go back to what Peter Costello said, because he still feels there is a lack of an economic narrative. He said, to quote him, that means that Liberals define themselves on social issues. Are we seeing again an example of that with religious freedom? That you have called for a review. So then that dominates the news. And you're having a public discussion around these issues, rather than on the economy?
MATHIAS CORMANN: We have a discussion on the economy all the time. I talk about the economy, the Prime Minister, the Treasurer, all of my colleagues. We talk about the economy, day in, day out. Our economic mission is to deliver more jobs so that more Australians have the best possible opportunity to get ahead and improve their living standards for themselves and their families … interrupted
BARRIE CASSIDY: Religious freedom was the issue this week. It wasn't the economy.
MATHIAS CORMANN: There are always issues. The Government always has to deal with a whole range of issues. This emerged in the context of the Government and the Parliament dealing with the issue of same sex marriage towards the end of last year. An issue that had been in the too hard basket for a long time, which had been left unresolved for a long time. At the time the Cabinet commissioned this review into religious freedoms, which was chaired by Philip Ruddock. That report was received in May. At some point when the Government has fully considered it, there will be some judgements in relation to this important matter. You can walk and chew gum at the same time Barrie, but let me tell you, the economy is always uppermost on our mind.
BARRIE CASSIDY: What the Prime Minister is now saying and so is Bill Shorten, you need to legislate to ensure that gay kids also not be discriminated against by the churches. Now, if that happens...
MATHIAS CORMANN: That is because Labor legislated to enable schools to discriminate against kids … interrupted
BARRIE CASSIDY: Sure, yep.
MATHIAS CORMANN: The schools themselves actually say they do not need that power. They do not use that power … interrupted
BARRIE CASSIDY: They don't want that power.
MATHIAS CORMANN: And they do not want that power.
BARRIE CASSIDY: Now you will legislate to ensure it's never abused, right?
MATHIAS CORMANN: We are fixing a problem that Labor left behind. That is right.
BARRIE CASSIDY: You're going to legislate. Do you think the right wing of your party will accept that?
MATHIAS CORMANN: The party is absolutely united behind that proposition …interrupted
BARRIE CASSIDY: On this? On that approach?
MATHIAS CORMANN: This is something that the Prime Minister did not announce unilaterally. It is something that he discussed with his leadership team and with his Cabinet. It is something that all of us in the leadership team and in the Cabinet have endorsed.
BARRIE CASSIDY: You don't think they'll look at the review and find other issues to run with?
MATHIAS CORMANN: This whole issue in relation to religious freedoms is an important issue. It is clearly a sensitive issue. It is an issue on which good Australians can have a diversity of genuinely and sincerely held views. It is very important that we carefully consider the report that has been put together by the expert panel under the leadership of Philip Ruddock. We will do that. In due course, we will make judgements that are appropriately balanced and appropriately calibrated. This is just government 101. Carefully consider the issues in front of you and make the best possible judgements about the way forward.
BARRIE CASSIDY: Just on one other issue, the decision to grant the $500 million to the Great Barrier Reef Foundation. Malcolm Turnbull says that decision was made by you and Scott Morrison. It seemed to suggest it was some sort of accounting trick to make future budgets look better in is that what happened?
MATHIAS CORMANN: No. Firstly, the decision was made first by the Expenditure Review Committee and then by the Cabinet. The Expenditure Review Committee and the Cabinet are chaired by the Prime Minister. I have read Malcolm's letter. I think Malcolm’s letter is an accurate reflection of the decision-making process. The situation was this. There was an identified need to make a substantial additional investment into the future health of the Great Barrier Reef. There was also advice in front of us that if we wanted to leverage additional private sector investment into the future health of the reef, then the best way to do this was through a non-government vehicle. The budget position in 2017-18 was substantially better than had been forecast. We were running at about $20 billion better in terms of the budget bottom line than what had previously been forecast. The Final Budget Outcome was a $19.3 billion improvement to the budget bottom line. Spending was about $6.9 billion less than what had been anticipated at Budget time. So, in all of the circumstances, the judgement was made that it was fiscally more responsible to make a one-off, up-front payment, using a partnership with a dedicated non-government body … interrupted
BARRIE CASSIDY: Because it makes the budget look better?
MATHIAS CORMANN: It meant we did not have an ongoing recurrent commitment, that we did not have an ongoing liability and we were able to pay for it in a year where payments were down substantially, where revenue was up substantially, and where the budget bottom line was $19.3 billion better than at the time of the budget forecast. I just remind you, in the 11 weeks after Labor's last budget in government, the budget position deteriorated by $33 billion. We delivered a $19.3 billion improvement to the budget bottom line in one financial year. In the first two months of this financial year, the budget bottom line so far is $6.6 billion better than what was forecast at Budget time in May this year.
BARRIE CASSIDY: Thank you for your time.
MATHIAS CORMANN: Always good to talk to you.