Senator the Hon. Mathias Cormann
Minister for Finance and the Public Service
Leader of the Government in the Senate
Senator for Western Australia
DAVID SPEERS: Well let me bring in the Finance Minister, Mathias Cormann for more on this. Thanks very much for your time this afternoon Minister. Just on this poll in relation to negative gearing there are still far more people in support of Labor’s policy than opposed it, even if that gap has narrowed somewhat. What does that tell you?
MATHIAS CORMANN: It tells us that we need to continue to explain the bad impact that Labor’s agenda of higher taxes, $200 billion in higher taxes on investment, on income, on families, on retirees, on electricity would have on the economy, on jobs and on families. Clearly increasing the tax burden in the economy by about $200 billion over the next decade would harm investment, would harm the economy, would put jobs at risk, would lead to higher unemployment. As far as the negative gearing policy directly is concerned, it would drive down the value of established properties and it would increase the level of rent. As more and more people get to understand the very bad effect that this agenda has on families, I am sure that more and more will turn against it.
DAVID SPEERS: You mention there this argument that Labor’s plan will drive down property values. Can I ask you, house prices have come down about eight or nine per cent in Sydney so far, a little less than that in Melbourne, has that been a good thing?
MATHIAS CORMANN: There was a period, and Bill Shorten sought to capitalise on this, where the market in Sydney and in Melbourne in particular was somewhat overheated. APRA made very carefully calibrated decisions in relation to prudential standards and various other carefully calibrated measures were taken. The problem with Labor’s approach, a sledgehammer across the country is that it will have a uniform effect across Australia, including in markets where the situation is not the same as it has been in the past in Sydney and Melbourne. The problem here is that, what Bill Shorten does not remember seemingly is that about seventy per cent of Australians either own their own property or are paying off a mortgage and if he pursues a policy that reduces the value of those properties that will self-evidently have a negative effect on those families. In terms of people accessing the rental market, when there is less investment in increasing supply of residential properties through the rental market then that will drive up prices. As supply goes down and demand increases …interrupted
DAVID SPEERS: Labor contests some of that. I just want to establish, do you think the fall that has already happened, not what may happen, what has already happened is good or bad?
MATHIAS CORMANN: It is a matter of balance. There are always going to be developments in the market, but the point is, we should not through a higher taxing agenda, that is applied consistently across the country, pursue a change, which we know would drive down the value of properties of established homes for those many Australians who either have bought their home or who are paying off a mortgage on their home, which would drive the value of rent …interrupted
DAVID SPEERS: Is the fall that we have seen, is this the right balance, the amount it has come down?
MATHIAS CORMANN: I am not going to provide a value judgement. The value of properties is determined by the market and if the value is too high …interrupted
DAVID SPEERS: But this is the point, you are saying that Labor would drive prices down further, in other words you think that would be a bad thing to go any further down, correct?
MATHIAS CORMANN: Labor is driving down property prices through a blanket across the country tax grab …interrupted
DAVID SPEERS: And you are saying that is a bad thing? But the fall that has happened already, is it good or bad?
MATHIAS CORMANN: We should let the market operate. It is obviously good that the market appears to be rebalancing. If prices go up, that is a function of insufficient supply in the context of growing demand. If prices are elevated, that attracts additional investment into increased supply and what we are seeing here is that the market has somewhat rebalanced. That is a good thing …interrupted
DAVID SPEERS: And is that also as a result, what you pointed out earlier, the APRA intervention, the tighter lending rules? Has that contributed to this?
MATHIAS CORMANN: We certainly believe that the calibrated measures that APRA has taken in relation to, in particular investor loans and the various terms and conditions in relation to those, prudential standards in relation to those, that that has had an effect and it was done in a much more calibrated fashion.
DAVID SPEERS: But you see where I am getting at here? It is okay apparently for the prices to come down as much as they have, but you are saying any further fall would be bad?
MATHIAS CORMANN: We are not setting the prices. What what we are saying at a time where prices have already come down, Bill Shorten, by pursuing a reckless, high taxing agenda, seeking to go after middle income Australians, who are using some of their wages in order to leverage into investment into residential property, his approach would essentially drive down the value of properties by more. Let me tell you that 70 per cent of Australians who either own their own home or are paying off a mortgage on their own home would be very concerned about that and they should be concerned about that.
DAVID SPEERS: They are not concerned now, what has happened on your watch?
MATHIAS CORMANN: Again, the market operates in the usual way. It would not be appropriate, that is our argument, through a tax grab, that is only there to fund Labor’s reckless spending. The point with Labor is, when they run out of money, they come after the money of families. What we say to the Australian people is that whenever Labor runs out of money, they come after yours. This negative gearing policy is just one example of that.
DAVID SPEERS: Power prices Minister, we have heard a lot about the big stick that the Government wants to take to energy companies. Do you really think it is a good idea for the Government to break up private companies?
MATHIAS CORMANN: We have made certain decisions to ensure, because our commitment and our focus is to bring property prices down. We do believe it is important …interrupted
DAVID SPEERS: Power prices.
MATHIAS CORMANN: Power prices down. Sorry that is what I meant to say. It is important to bring power prices down. That is why we have made the announcements that we have made. We understand that some representatives in the electricity sector will not be supportive of that. We understand that, but we will continue to pursue the plan that the Prime Minister has announced.
DAVID SPEERS: But as a general rule, do you Mathias Cormann like the idea of Government intervening in the private sector like this?
MATHIAS CORMANN: As a general rule I support Government policy. We operate as a team. We operate under the Westminster system. We discuss policy options internally and it is very important that we do everything we can to bring power prices down for families around Australia, for business around Australia. There has been a level of …interrupted
DAVID SPEERS: Are we to read into that you took a different view internally?
MATHIAS CORMANN: That is not what you are to read into that. What you can read into that is that the Government discusses all of these issues internally and you can safely assume that I 100 per cent support Government policy.
DAVID SPEERS: What would be the circumstances under which the Government would break up a private company here?
MATHIAS CORMANN: These are not judgments for me to make. These are judgements for others to make …interrupted
DAVID SPEERS: You have agreed to the policy.
MATHIAS CORMANN: But these are not judgements that I make as the Minister for Finance. I will refer you to the relevant Minister in relation to those matters. That is assuming …interrupted
DAVID SPEERS: I am just asking a principle position here because we all get upset when power prices go up, be it petrol prices, power prices, the price of bread. What would it take for the Government to intervene and break up a company?
MATHIAS CORMANN: Our preference is that that is not going to be required. Our preference is that there would be an appropriate industry response. That has been our position all the way through. What we are saying here to the Australian community is that we are absolutely serious about doing everything we can, implementing all of the relevant recommendations out of the ACCC report in relation to these matters and also of course putting on the table the big stick that the Prime Minister and the Energy Minister have put forward. That is a matter for the Energy Minister even if it all comes to it, to make relevant judgements.
DAVID SPEERS: But are you aware of how the big stick works, that is what I am trying to get at? Do you understand what you have agreed to here?
MATHIAS CORMANN: Of course I understand what we have agreed to do. There is a divesture power here …interrupted
DAVID SPEERS: How does it work? What would it take to force a divesture?
MATHIAS CORMANN: I am not going to, despite your best efforts, I am not going to go into the details of another Minister’s portfolio in relation to something that has not as yet been legislated.
DAVID SPEERS: Alright, but as you know, the energy companies are threatening to take you to the High Court. Other businesses, I can tell you, right across the board are pretty worried about a Government doing something like this, intervening in a private company and it is still a little unclear what it would take for you to do that.
MATHIAS CORMANN: I can assure you that when the Government makes these judgements, that we rely on all of the necessary advice, including all of the necessary legal advice and that self-evidently the courses of action that we decide to take are based on propositions that we believe fall within our Constitutional powers.
DAVID SPEERS: Let me turn to another topic, do you, Mathias Cormann, think that Australia should shift its embassy in Israel to Jerusalem?
MATHIAS CORMANN: We have not made that decision. What we have announced is a process to review the current position. That is a process that will obviously now play out. At the end of it certain judgements will be made. All we have done … interrupted
DAVID SPEERS: The process, as I understand it is a Cabinet discussion, is that right?
MATHIAS CORMANN: Ultimately this will be a decision by Cabinet as to how we proceed into the future. That is right.
DAVID SPEERS: So what is your argument going to be? You are a member of the Cabinet.
MATHIAS CORMANN: Indeed, and I will be an enthusiastic participant in the discussion in the Cabinet. As you know, in the Westminster system Cabinet confidentiality is a very important feature to ensure that the right and the best possible decisions are made in the public interest. Again I note that today you are very keen to ask me about all sorts of things outside of my area of portfolio responsibility. That is fine, but I will resist to conduct a discussion that is yet to take place in a Cabinet context.
DAVID SPEERS: Alright, you do not have any long held views on this question? Plenty of people do.
MATHIAS CORMANN: I will put my views to my colleagues in the Cabinet. At the end of the Cabinet deliberation process there will be an announcement of the final position. I am very happy to have a conversation with you about that at that time.
DAVID SPEERS: Alright, let me ask you then, more within your portfolio. The economic fundamentals are pretty good at the moment. Unemployment, economic growth, we are seeing the budget bottom line improve month on month in the stats that we see. Why isn’t the Government in a better place politically on the back of all that?
MATHIAS CORMANN: We did, when we came into Government inherit a situation where the economy was weakening, unemployment was rising and the budget position was rapidly deteriorating. You are quite right, over the last five years we have been able to turn that situation around to the point where, today, the economy is stronger, the economic growth outlook is better, employment growth is much stronger, more than 1.1 million jobs having been created in the economy over the last five years. The unemployment rate, which Chris Bowen once said we needed to keep below 6.25 per cent is down to five per cent. So all of that has been as a result of our unrelenting effort to strengthen growth, create more jobs and to repair the Budget. Some of the decisions that we have had to make along the way were not necessarily spontaneously popular. But in the lead up, as we get closer to the next election, as people have to reflect on who they trust to run the economy, to continue to create more jobs and indeed to ensure that the funding is there to pay for the essential services Australians expect, I am confident that people will be very reluctant to trust Bill Shorten with that given his agenda.
DAVID SPEERS: Right now, most are saying the reason you are behind in the polls by 10 points is because of the fallout from the leadership change back in August. As you know, Malcolm Turnbull last week went onto the ABC, blamed you, amongst others, for his downfall. Chris Pyne also agreed it was up to those who plotted the downfall to explain themselves. So what do you say, 10 or so weeks on. Why did Malcolm Turnbull have to go?
MATHIAS CORMANN: David, you more than anyone should know that I explained my position openly and transparently before relevant decisions were made, after relevant decisions were made. I even read a book that you have written explaining all of the ins and outs of it. After the interview last week I have made further statements. I believe that I have said everything on the public record that there is to say in relation to these matters.
DAVID SPEERS: Fair enough. Finance Minister Mathias Cormann thanks for joining us this afternoon, appreciate it.
MATHIAS CORMANN: Always good to talk to you.