Senator the Hon. Mathias Cormann
Minister for Finance and the Public Service
Leader of the Government in the Senate
Senator for Western Australia
PATRICIA KARVELAS: The Senate is this week expected to pass changes to the redistribution of the Goods and Services Tax. The Government won support for the bill by agreeing to legislate a provision that no State will be worse off under the new model. The Australian economy continues to be a good news story, but a stark warning from investment bank UBS has raised the prospect of storm clouds on the horizon. Mathias Cormann is the Finance Minister. Welcome back to RN Drive.
MATHIAS CORMANN: Good to be back.
PATRICIA KARVELAS: Mathias Cormann I am going to play you something your Prime Minister said just last month.
PRIME MINISTER [EXCERPT]: Our Government is not in the habit of writing blank cheques to anybody. What we are in the habit of doing is setting out very clearly well researched plans which demonstrate, demonstrate clearly, that every single State and Territory is better off under this plan.
PATRICIA KARVELAS: Okay, so why have you written a blank cheque after the Prime Minister said that.
MATHIAS CORMANN: We have not.
PATRICIA KARVELAS: You have. You have written into the rules that no State will be worse off.
MATHIAS CORMANN: That is part of the plan that we announced in July.
PATRICIA KARVELAS: Sure.
MATHIAS CORMANN: That is a plan that we are now legislating.
PATRICIA KARVELAS: Okay, but it is different actually because you said in that plan that it was a model. You did not want to run two sets of books. Now you are running two sets of books, because you are going to guarantee that no State is worse off. You are going to write that into the legislation. Why do that?
MATHIAS CORMANN: We are very confident that no State will be worse off. In fact every state will be better off … interrupted
PATRICIA KARVELAS: But you did not want to write it in because you said that it was running two books.
MATHIAS CORMANN: In order to secure passage of the legislation, what we have agreed to was a transitional arrangement. What we did not want to do and what we are not doing is to forever and a day on an ongoing basis, to run two books into the future. We are not. What we are doing is we are transitioning to a new methodology for the GST sharing arrangement, which will make the system fairer, which will make the system better for everyone, better for every State in fact … interrupted
PATRICIA KARVELAS: So for how long will you run the two sets of books?
MATHIAS CORMANN: Consistent with the legislation for six years. That is the transitional period. At the end of that period we have committed to conducting a further Productivity Commission inquiry, reviewing the way the system has been operating and to ensure that it has operated as intended.
PATRICIA KARVELAS: The investment bank UBS has warned that the credit crunch we are seeing as a result of the banking Royal Commission is likely to intensify as banks tighten lending, are you worried about the impact that that could have on the economy?
MATHIAS CORMANN: It certainly is true that banks are important facilitators in our economy. But if you look at the way that our economy is performing, having inherited a weakening economy and rising unemployment from Labor back in 2013, today economic growth is stronger, employment growth is stronger, our Budget position is improving. Only last week the Reserve Bank of Australia actually upgraded its growth outlook for 2018-19 to 3.5 per cent for those years. There were always going to be some implications of the Royal Commission into the banks. But public confidence in the banking sector more broadly is a very important part of making sure that into the future the banks are in the best and the strongest possible position to be the important facilitators in the economy that they are.
PATRICIA KARVELAS: UBS has suggested the intensity of the fallout will hinge on the extent of the regulation imposed on banks in the wake of the Hayne Royal Commission. Should that be a consideration in how you implement the recommendations?
MATHIAS CORMANN: In relation to all policy matters, it is always a matter of making sure that the balance is right …interrupted
PATRICIA KARVELAS: So you will be considering that, you are concerned about that?
MATHIAS CORMANN: We will be considering the public interest. There are always a range of matters that come into these sorts of considerations. Making sure that we have the policy settings right to ensure that there is appropriate access to finance in the Australian market, yes is one consideration. Making sure that consumers interests are appropriately protected is a very important consideration. Making sure that banks are competitive, stable. There are a whole range of different considerations that ultimately feed into the policy decisions of Government. What is always important is to ensure that with your decisions you get your balance right.
PATRICIA KARVELAS: West Australian Liberal Dean Smith, who is of course a colleague of yours because you are from Western Australia as well, has warned that the collapse in the party’s appeal to young people could cost the Coalition at the next election. Particularly he talks about credible policies in relation to climate change and the cost of housing to regain the trust of voters younger than 35. What are you doing to get their trust?
MATHIAS CORMANN: It is very important that we gain the trust of younger Australians. Everything that we do is about making Australia stronger for the future, including making sure that young Australians have the best possible opportunity to get ahead, to get a job, to get a good job and to build a career here in Australia. So there are a whole range of issues that we understand young people are particularly interested in. Yes, of course we have to ensure that we continue to respond to those. But ultimately, it is as I said in response to the previous question, it is always a matter of balance.
PATRICIA KARVELAS: Yeah okay, but Dean Smith is one of your colleagues, he obviously thinks you are doing a pretty bad job of appealing to young voters. This is a demographic time bomb isn’t it?
MATHIAS CORMANN: You decide to take a negative view. I prefer to take a positive view …interrupted
PATRICIA KARVELAS: I am quoting Dean Smith.
MATHIAS CORMANN: No, no no, you said he obviously thinks we are doing a bad job. I do not believe that that is what he…interrupted
PATRICIA KARVELAS: He says you need to do more to appeal to young voters. That is what he means.
MATHIAS CORMANN: The way I take Dean’s comments is that he is encouraging us to do even better. We always are very welcoming of encouragement for us to do even better than what we are doing.
PATRICIA KARVELAS: So do you want house prices to come down so that people under 35 get access to housing?
MATHIAS CORMANN: We want to make sure that there is appropriate balance in the housing market so that increases in demand for housing can be responded to with increased supply. As you would see in the market now, compared to what was the case last year or the year before, in recent years, in Sydney and Melbourne in particular, supply now is exceeding demand. That has been having an impact on prices across capital cities.
PATRICIA KARVELAS: Okay, so it has had an impact and you are saying essentially prices are going down. Is that a good thing?
MATHIAS CORMANN: It is always a matter of making sure that the market is in the appropriate balance. I am not going to …interrupted
PATRICIA KARVELAS: But do you think it is a good thing, I am asking you.
MATHIAS CORMANN: What is a good thing is that to the extent that the market was overheated, it is now no longer overheated. It is very important that we do not make decisions that drive prices down excessively, because you have to remember that 70 per cent of Australians either own their own home or are paying off a mortgage on their own home. So you have always got to make sure that you make decisions with the appropriate level of balance.
PATRICIA KARVELAS: The Australian Energy Council is seeking legal advice on whether the Government’s powers to forcibly break up energy retailers is Constitutional. Does that suggest that they will not cooperate with your attempt to force them to lower power prices?
MATHIAS CORMANN: Our focus is, we are on the side of consumers and business and we want to ensure that power prices are as low as they can be. We understand that some of the businesses selling electricity would rather keep record profits going onto the future. But we are concerned about that. We want to ensure that to the extent that there are rip offs, that we can effectively address them. But in the end, whatever we do as a Government in responding to these sorts of issues is based on legal advice, it is based on appropriate advice. We will always make decisions that are consistent with our Constitutional powers.
PATRICIA KARVELAS: Do you have a plan b if it is found to be unconstitutional?
MATHIAS CORMANN: We do not concede that what we are planning to do is unconstitutional. Some of the commentary is a bit premature. We are working our way through the legislative drafting as we speak. There is a consultative process underway. Some vested interests will express certain views. That is a normal part of the process. However, I think it is somewhat premature for people to make conclusive Constitutional judgements. What I want to say to you and to your listeners is that everything we do is always based on the appropriate advice to ensure that we act within the law and that we act within the framework of our Constitution.
PATRICIA KARVELAS: The latest polls have the Coalition trailing Labor by 10 points. Is it time to acknowledge that replacing Malcolm Turnbull was a mistake?
MATHIAS CORMANN: I have well and truly said everything that I have to say in relation to the leadership transition, which is not something …interrupted
PATRICIA KARVELAS: I am asking you a new question on this show. I know you may have said it on other shows but I am asking you, was it a mistake?
MATHIAS CORMANN: Not a new question. These events emerged in certain circumstances which are a matter of public record. We are where we are …interrupted
PATRICIA KARVELAS: Was it a mistake?
MATHIAS CORMANN: No. It is not something that I would have initiated. It was something as I have said on the public record now for many times, it was initiated by Malcolm during that week and we are where we are. Onwards and upwards. …interrupted
PATRICIA KARVELAS: You swung your vote, you swung your vote behind changing the leader, so you have to take responsibility.
MATHIAS CORMANN: And I have. I have publicly explained my position before and after those events.
PATRICIA KARVELAS: So was it a mistake?
MATHIAS CORMANN: No. I stand by the judgements that…interrupted
PATRICIA KARVELAS: Why was it, why was it not a mistake?
MATHIAS CORMANN: I have said everything that I have to say in relation to that.
PATRICIA KARVELAS: I just want you to explain to me now, why wasn’t it a mistake?
MATHIAS CORMANN: And Patricia I have explained that well and truly, sufficiently, on many occasions …interrupted
PATRICIA KARVELAS: I do not know if all my listeners will agree that you have sufficiently answered it. Why wasn’t it a mistake? Just answer it.
MATHIAS CORMANN: I have made extensive comment. I am not going to continue to go through what is now well and truly in the past of what I have addressed on many occasions …interrupted
PATRICIA KARVELAS: It is not well and truly in the past, it is not well and truly in the past, it is a couple of months ago.
MATHIAS CORMANN: Indeed.
PATRICIA KARVELAS: That is not, I mean this is happening, this has happened, you have to answer questions on it still. Was it a mistake?
MATHIAS CORMANN: And I have already said no. I have addressed …interrupted
PATRICIA KARVELAS: But can you tell us why you don’t think it was a mistake? Why?
MATHIAS CORMANN: I have explained that in some detail on many occasions. I am not going to continue to comment.
PATRICIA KARVELAS: Why is it better now? Why is your Government any better now?
MATHIAS CORMANN: I am not going to continue to comment on the events of two months ago. Our party room made a decision which I support 100 per cent, that we will be in the best possible position to deliver strong, united and effective Government and to be competitive at the next election under the leadership of Scott Morrison and Josh Frydenberg. It is a position that I 100 per cent support.
PATRICIA KARVELAS: Mathias Cormann, thanks for joining us.
MATHIAS CORMANN: Always good to talk to you.