Senator the Hon. Mathias Cormann
Minister for Finance and the Public Service
Leader of the Government in the Senate
Senator for Western Australia
Date: Friday, 26 October 2018
KIERAN GILBERT: Let’s go live to the Finance Minister and Leader of the Government in the Senate, Mathias Cormann live from Perth. Minister, thanks very much for your time. First of all this $3.9 billion to go to drought assistance, can you give us a sense of how it will work and where the money is coming from?
MATHIAS CORMANN: Essentially we currently have the Building Australia Fund with about $3.9 billion invested. We propose to introduce legislation to make that a Future Drought Fund, which with a changed investment mandate will deliver higher returns, similar to the Medical Research Future Fund. On the basis of that we will be able to allocate an additional $100 million in funding from 1 July 2020 on an ongoing basis, with a sustainable funding basis. Because of the increased investment returns, consistent with what is achieved through the Medical Research Future Fund, as well as being able to disperse the $100 million in additional funding, the capital in the fund is projected to increase to about $5 billion by 2028.
LAURA JAYES: Okay, so it is rebadged funding essentially from the Building Australia Fund. Any detail on the parameters in which this money can be spent under this new drought future fund?
MATHIAS CORMANN: We are having the drought summit. Part of the purpose there is for the Government to listen to relevant stakeholders and to finalise all of those arrangements in the context of the feedback from the drought summit. The nature of drought can evolve. The nature of the challenges and opportunities to make additional investments evolve. But what we will have here is on a fiscally sustainable basis an additional $100 million a year available from 1 July 2020 onwards to invest in drought proofing Australia for the future.
KIERAN GILBERT: Does it worry you that in terms of governance arrangements we see reports today in the Fairfax papers in relation to the National party treasurer, Mr Schwarz reportedly not spending all of the $850,000 that he received in the way that the agency had wanted and had envisaged he would spend that. Does that raise governance concerns for you in terms of how drought money is being spent?
MATHIAS CORMANN: I have read the story. This is a grant that I read was made in 2011. So seven years ago. Obviously any grant that is allocated ought to be spent as intended. There are mechanisms in place for that to be monitored and managed appropriately. From what I am reading there is a dispute that is going on that no doubt will be resolved. I am surprised that this is an issue that arises in 2018 in relation to a grant that was allocated in 2011. I am not across all of the details, but I am sure that the issue will be resolved in the ordinary course of events.
LAURA JAYES: Minister wouldn’t this summit that is being held in Canberra today would have been better being held in a regional centre like Tamworth. It could have given this huge economic injection, getting hundreds of people to a country town rather than Canberra.
MATHIAS CORMANN: These issues were all considered. In the end for logistical reasons, including to ensure that as many people from drought affected areas as possible would as easily as possible be able to participate, the judgement was made that it was best to hold this drought summit in a central location.
KIERAN GILBERT: Let’s, if we turn our attention now, we will have some more focus on the drought a bit later. I want to ask you about the volatility in the markets. The US market back, Wall Street up overnight. Is this a correction that we are seeing or are you worried that this could be the start of a bear market?
MATHIAS CORMANN: I am not a market commentator. I do not predict future market movements. The market can move around from day to day. What is important to us are the economic fundamentals. If you look at the economic fundamentals for Australia, not only do we have stronger economic growth in Australia than any of the G7 economies at 3.4 per cent over the most recent twelve months period. Our unemployment rate is at five per cent. Wages growth has started to pick up. Our Budget is in a strong and improving position. So if you look at what we inherited back in September 2013, when the economy was weakening, unemployment was rising and the Budget position was rapidly deteriorating, it is very clear that as a result of good economic and fiscal management we are now in a much stronger position with a much better outlook into the future. That is what we are focused on.
LAURA JAYES: Treasury is really concerned about slow wages growth at a ten year low. So what is the Government’s plan to boost wages in the absence of a higher corporate tax cut that you have dumped?
MATHIAS CORMANN: We have been implementing our plan across a whole range of areas to strengthen growth and create more jobs and that has been very successful. The Labor party sneered at us when we promised in the lead up to 2013 that our plan would deliver a million new jobs in the first five years in Government and of course we have delivered more than a million jobs now. The one million new jobs was reached in less than five years.
LAURA JAYES: But specifically on wages growth Minister?
MATHIAS CORMANN: Of course the way to increase wages is to ensure that the economy continues to grow and that more jobs are being created, that you continue to reduce the excess supply in the labour market so that increased competition for workers drives up wages. We have in recent times been observing a pick up in wages. If we can continue to keep the economy growing, if we can continue to keep employment growing and the unemployment rate go down, then wages will continue to increase. I will point you to the alternative. Bill Shorten is pursuing a reckless high taxing, anti-business agenda which will lead to less investment, lower growth, fewer jobs and consequently higher unemployment. If we go back into the situation that Labor left behind in 2013, wages will go down. Higher unemployment leads to lower wages. What is happening under our Government as a result of our economic plan is that the unemployment rate is now lower, down to five per cent. Lower than where it was anticipated to be. Labor thought it was headed for six per cent and a quarter when we came into Government in 2013. It is down to five per cent. If we go back to Labor’s discredited ways of the past, the economy will be weaker, jobs will be put at risk, unemployment will be higher and wages would be lower.
KIERAN GILBERT: The first three months of this financial year already $9 billion more than what the Budget forecast would be going into the Government coffers. That is quite some windfall. Chris Richardson, the respected economist believes that there will be room for a surplus this financial year, 2018-19. You would almost have to be spending like drunken sailors to not be heading for a surplus in this financial year. Are you more confident?
MATHIAS CORMANN: In the most recent Budget, we have forecast a return to balance for 2019-20 and a return to surplus from 2020-21 onwards and sustainable surpluses all the way over the medium term. Our next update to our Budget numbers is the half-yearly Budget update just before Christmas. We will continue to make decisions to put Australia on the strongest possible economic and fiscal foundation and trajectory for the future. We will continue to make them calmly and very much focused on our national interest. We will deliver the best possible Budget outcome at the right time.
LAURA JAYES: You argue that now is not the right time to implement these changes to negative gearing that Labor is persisting with. But what about timing, in terms of cutting penalty rates given wages growth has not risen in ten years, it is lowest in ten years?
MATHIAS CORMANN: The reason wages have been growing more slowly is because Labor left behind a weakening economy and rising unemployment. Labor made a mess of the Budget. Labor left behind a weakening economy and rising unemployment. Now we have been able to turn that situation around …interrupted
KIERAN GILBERT: Is that true though, because it is a global phenomenon, Labor cannot be responsible for all of it.
MATHIAS CORMANN: The economy in Australia is stronger now than any of the G7 economies in the world. Our economy is growing at 3.4 per cent, our unemployment rate is down to five per cent. If you look at what has been happening in the US in recent times, wages in the US are growing more strongly on the back of an unemployment rate that has a got a three in front of it. In Australia we will continue to work hard as a Government to give business the best possible opportunity to be successful, to hire more Australians. As businesses hire more Australians and the competition for workers increases, that is the way that wages will grow more strongly. That is economics 101. It is basic market fundamentals.
KIERAN GILBERT: Okay in relation to the Indonesia FTA, there is a suggestion today in the Financial Review that Malcolm Turnbull will have to try and smooth things over with President Jokowi when he is in Bali in coming weeks. Is that one of the reasons why Mr Morrison chose the former PM Malcolm Turnbull to undertake that particular visit because of his good, personal friendship with Jokowi?
MATHIAS CORMANN: Malcolm Turnbull does have a very good personal relationship with President Widodo. We are very grateful that Malcolm Turnbull is prepared in the national interest to continue to work for us to deliver the best possible outcomes in relation to some issues that are very important to us. Obviously a free trade agreement with Indonesia is a very important priority for us. Our relationship with Indonesia is a very important relationship. The oceans conference is a very important personal priority for President Widodo and he had invited Malcolm Turnbull personally to attend that conference. Given Scott Morrison was not able to attend, I thought it was a very good decision. We are very grateful that Malcolm has accepted to provide this service to Australia.
LAURA JAYES: The discussion around the slated embassy move in Israel threatened to destabilise this agreement at one stage. We now know Mathias Cormann that not one Government official was consulted about this before it was announced. Is that unusual?
MATHIAS CORMANN: Firstly, the trade minister in Indonesia has made absolutely clear that there is no suggestion that Indonesia is considering walking away from the free trade agreement. I think there was a bit of media commentary and speculation here, rather than any substantial decision on the side of our Indonesian friends. The second point is, all the Government has done is made a decision that we wanted to assess a current policy position, we wanted to review a current policy position. That is what the elected Government is absolutely, not only entitled to do, it is our job to do. We always must consider whether existing policy positions continue to serve our national interest or whether there is a better way forward. That is the process …interrupted
KIERAN GILBERT: But shouldn’t you brief the Defence Department, the Defence Chief first on that sort of thing, particularly how potentially volatile such an announcement could have been?
MATHIAS CORMANN: We made the decision through the normal processes of Government. All of the relevant officials were briefed once relevant decisions were made in the usual way.
LAURA JAYES: Okay the Indonesia Free Trade Agreement, as you say will be discussed with Malcolm Turnbull. Is he the man to get this over the line do you think?
MATHIAS CORMANN: Simon Birmingham as the Trade Minister is working very hard to build on the work that was done by Steven Ciobo in that job and indeed Scott Morrison and Marise Payne, all of us -I will be Jakarta next week incidentally - so all of us continue to engage with our friends in Indonesia. But Malcolm does have a particularly special personal relationship with President Widodo. He does have the opportunity to make a real difference and we are very grateful that he is prepared to do so.
KIERAN GILBERT: It has been a tough few months for your side of politics, we are probably six months or so away from the next election. Just an overall sense of where things are at within your party at the moment. Do you feel that the healing has taken place and that people are moving on because of course the party has been bitterly divided, not just in terms of personality but issues as well from climate change to religious freedom.
MATHIAS CORMANN: I will leave the commentary to you. We continue to make decisions to advance Australia’s national interest. We continue to make decisions to put Australia on a stronger economic and fiscal foundation for the future so that families around Australia have the best possible opportunity to get ahead. As I have indicated to you earlier in the program, we inherited a very difficult economic and fiscal situation. We have been able to turn that situation around to the point where today we have a stronger economy, a stronger economic growth outlook, more jobs being created, a lower unemployment rate and indeed a Budget that is on a stronger and improving trajectory for the future. Our focus is on making Australia stronger, making the economy stronger, making sure Australians are safe and indeed bringing Australians together. Whereas the alternative, in Mr Shorten, he is pursuing a reckless, high taxing, anti-business, class war, politics of envy agenda, which would make Australia weaker, which would make Australians poorer and which as part of his deliberate business model seeks to turn Australian against Australian. That is not the right way forward we believe. So we will continue to make that case pointing to our record, pointing to our plan for the future and pointing to the risk that a Shorten Government would present to Australians prosperity into the future.
LAURA JAYES: Minister last week we established that you were a very staunch monarchist and I apologise I have not yet read your maiden speech, but it is on my to do speech.
MATHIAS CORMANN: Really?
LAURA JAYES: So my question is, the Royals have been here this week, have you been able to meet them and do you have a favourite?
MATHIAS CORMANN: Sadly I have not had the opportunity to meet them. I was stuck in Senate Estimates all week. I spent most of my week with people like Senator Wong and Senator Keneally enjoying the interaction at that level. Look I am a great admirer of her Majesty Queen Elizabeth. I think she has provided amazing service, not only to her nation, but to countries around the world, including Australia. I think she is an absolutely amazing, very impressive lady.
KIERAN GILBERT: Okay, Finance Minister and Leader of the Government in the Senate, Mathias Cormann, we will talk to you next week.