Senator the Hon. Mathias Cormann
Minister for Finance and the Public Service
Leader of the Government in the Senate
Senator for Western Australia
Date: Wednesday, 14 November 2018
TICKY FULLERTON: Joining me for more is the Minister for Finance and Leader of the Government in the Senate, Mathias Cormann. He joins me live from our Canberra studio. Minister, welcome there. Before we go to this new initiative you must be a pretty happy sandgroper having got that GST through the Senate this afternoon?
MATHIAS CORMANN: Very happy. It is a great day for Western Australia. It is a great day for Australia. The GST sharing arrangements were broken. They needed to be fixed. We put forward a plan to make the GST sharing arrangements fairer for Western Australia in a way that is good for national economic growth and which is fair to every other State in that it leaves every other State better off. It was good to have that unanimously passed through the Senate today, yes.
TICKY FULLERTON: Let us move to the $2 billion small business pitch you’ve got. Now it’s very interesting, mixed reviews I think on whether this is actually the right way of fixing lending to small business Mathias.
MATHIAS CORMANN: Well we obviously believe it is the right way. We very carefully considered all of the options. Everybody knows what the problem is. Small business finds it difficult to access finance other than on the basis of a secured loan, typically by putting up their family home. Even then the experience in the market is that the cost of financing is higher than what it should be. What we are proposing to do here is by putting $2 billion of funds forward to be administered through the Australian Office of Financial Management as part of this securitisation fund, is not to directly lend to small business, but to provide more liquidity, more depth into the securitisation market in order to facilitate stronger competition in the small business lending market.
TICKY FULLERTON: So you have certainly got the support of COSBOA there and indeed Kate Carnell, the Small Business Ombudsman. My colleague at The Australian, John Durie calls this populist rubbish. Of the critics the concern seems to be that the problem is the current risk weighting, that banks big and small, have to lend to small business. Why not just get APRA to look at changing the risk weighting.
MATHIAS CORMANN: He is entitled to his opinion. We very carefully considered all of the options … interrupted
TICKY FULLERTON: He is not alone.
MATHIAS CORMANN: In the end, it is our job to make judgements on the right way forward. We have identified a problem for small business. We have come up with a solution. There clearly is a market failure here because we do not have a sufficiently developed securitisation market in this space with sufficient liquidity or depth. The Government is in a very sensible fashion able to support competition in that market, which will lead to increased small business lending … interrupted
TICKY FULLERTON: But it is another layer of regulation isn’t it?
MATHIAS CORMANN: It addresses market failure in the securitisation market in this part of the market. What it will do is it will help facilitate access for small business to debt financing, it will do so at more competitive prices. Over time this will lead to a securitisation market that is more liquid, that has more depth and it will ensure that small banks and non-bank lenders will be in a position to better compete with the bigger banks.
TICKY FULLERTON: $2 billion committed by Government toward this. Does Government have any risk?
MATHIAS CORMANN: This is administered by the Australian Office of Financial Management, which incidentally has got experience in this. They have previously operated in this space in the context in 2008 of the Government’s response to the Global Financial Crisis, in terms of residential mortgage backed securities. So there is a precedent here. It will be done with the appropriate levels of due diligence. The Government is not providing any loans to business directly. What we are doing is providing additional support to the securitisation market through this mechanism. It will provide more depth to that market, it will provide more liquidity, it will facilitate competition from smaller banks and non-bank lenders and it will help small business get access to financing at more competitive prices.
TICKY FULLERTON: Business lending has been growing in the big small business lender NAB. Now, some people would say well the Government’s bank levy took some liquidity out of the market anyway. I am just wondering would you rule out now Minister any further raising of the bank levy because the Shadow Treasurer Chris Bowen has done so.
MATHIAS CORMANN: We have already legislated the major bank levy. We have made very clear that was it, that was our position. We have absolutely no plans to revisit the major bank levy. It has been legislated. That is it.
TICKY FULLERTON: But you will not rule it out?
MATHIAS CORMANN: What do you mean? I have just told you that we have absolutely no plans to revisit the major bank levy. It has been legislated and that is our policy position.
TICKY FULLERTON: Alright, more broadly the level of Government intervention at the moment Mathias Cormann, foreign ownership, bank levies, price cap threats and resale electricity, threats of breaking up companies. Peter Coleman, who runs Woodside, yesterday at the Mining Club was saying where is the leadership in this country, where is the vision, where is the policy beyond the election?
MATHIAS CORMANN: As a result of the plan that we have implemented over the last five years, our economic growth is stronger, our employment growth is much stronger and our Budget position is on an improving trajectory. When we came into Government in 2013, you have to remember, the economy was weakening, unemployment was rising and the Budget position was rapidly deteriorating. We have pursued that …interrupted
TICKY FULLERTON: Where is the plan going forward beyond intervention?
MATHIAS CORMANN: We are pursuing a very ambitious free trade agenda, continuing to position Australia as an open trading economy, committed to free trade and open market access. You mentioned foreign investment. We are committed to foreign investment, but foreign investment is so important to Australia that we need to ensure that the regulatory framework is such that the public continues to have confidence, that when there is a proposal that is contrary to the national interest, it will not proceed. If we did not have a regulatory system in place like that, it would actually undermine foreign investment into the future.
TICKY FULLERTON: Minister you mentioned free trade there, the free trade deal with Indonesia appears to be on ice at the moment. Hasn’t the announcement to consider moving the Australian embassy to Jerusalem, right in the middle of the Wentworth by-election been a rather costly stunt?
MATHIAS CORMANN: I do not agree at all that it is on ice. The agreement in relation to the Indonesia-Australia Comprehensive Economic Partnership agreement was substantively concluded on the 31st of August, with President Widodo and Prime Minister Morrison confirming the substantial conclusion of that agreement. But as is always the case, there is a process now underway to finalise the text in both languages of the treaty text. All of the i’s have to be dotted and the t’s got to be crossed. That is a usual process and both sides are committed to reach the final conclusion… interrupted
TICKY FULLERTON: So you do not see this as costly stunt, this announcement that actually occurred in the middle of the Wentworth by-election?
MATHIAS CORMANN: I completely reject that characterisation out of hand. Australia is not only entitled to, we have a responsibility to assess policy matters in the national interest. That is what we are doing in relation to the matter of the Australian embassy to Israel. That is our job as a national government. We are not conflating those two issues.
TICKY FULLERTON: Can I move to negative gearing? Now we have got Labor’s reforms there on the table. Newspoll show that Australians still think Labor has a better policy in relation to housing affordability, 47 to 33. Now, Chris Bowen when I spoke to him last week …interrupted
MATHIAS CORMANN: The trend is our friend. The trend is our friend. It is heading in the right direction. We have to keep talking.
TICKY FULLERTON: Well slowly it might be. Chris Bowen says it is a good time to do this reform because the market is actually coming off and there are actually less people in the market. Why won’t you consider that it is actually a good idea?
MATHIAS CORMANN: Because it is a bad idea. Chris Bowen is just coming up with fancy language to whack Australian families with a higher tax. All this is about is about increasing the personal income tax payment of hard working Australian families. Whatever way he wants to dress this up …interrupted
TICKY FULLERTON: Might help new buyers get into the market?
MATHIAS CORMANN: What is negative gearing? Negative gearing is working Australians leveraging their existing income and the existing value of their existing assets to invest in new either income producing or capital appreciating assets. This is about working Australians being able to deduct the cost incurred in generating additional income or generating additional capital appreciation. Capital appreciation, which of course is taxed once capital gains are realised. It is bad economic policy. We do not support it. Bill Shorten and Chris Bowen can go to the next election telling Australians that they will increase taxes by $200 billion over the next decade, which they are. Our point is that would harm the economy, it would put jobs at risk and it would hurt working Australians.
TICKY FULLERTON: Well will see how the trend goes, I am sure there will a few rounds on this. Minister, I thank you so much for your time.
MATHIAS CORMANN: Always good to talk to you.