Sky News – AM Agenda

Senator the Hon. Mathias Cormann
Minister for Finance and the Public Service
Leader of the Government in the Senate
Senator for Western Australia






Middle East, Australia’s relationships with the US and China, housing market

KIERAN GILBERT: The Prime Minister has been in Singapore for the ASEAN summit. But the focus has been on a different region altogether, that being the Middle East and Australia’s review of its embassy in Israel. The implications of course for the free trade negotiations with Indonesia, it wasn’t the warmest of meetings it has to be said with the Indonesian President. And now warnings from the Malaysian leader that this could be the source of a terror threat. A warning which has also been reiterated by figures out of the Indonesian political system as well that Australia is insensitive to Indonesia and its Asian neighbours is the warning from some representatives in Indonesia. Comments as I say come as we saw the Malaysian Prime Minister warn that the decision to move our embassy if it were to be pursued could increase the risk of terrorism.

LAURA JAYES: Let’s go live now to Brisbane the Finance Minister, Mathias Cormann joins us. Minister thank you for your time. The comments from Mahathir Mohamad among others have certainly got some headlines. Do you heed that warning?

MATHIAS CORMANN: No. We respectfully disagree with him. Australia is going through a process of assessing our position in relation to the location of the embassy of Australia in Israel. We are long standing supporters of a two-state solution. It is clear that not much progress has been made on that front. We think that it is entirely appropriate for us to assess whether a different approach might help facilitate what is long standing Australian policy in relation to Israel and Palestine.

KIERAN GILBERT: It is interesting though that some of your colleagues say they want to see a subsequent Palestinian state have its capital in East Jerusalem, with the Israeli capital in West Jerusalem. But the problem is for that view, is that the Israeli’s don’t recognise the Palestinian sovereignty over any part of Jerusalem and that has always been one of the final status negotiations as part of the peace process. Aren’t you simply jumping the gun?

MATHIAS CORMANN: Australia supports a two-state solution. Australia recognises Israel and Australia recognises West Jerusalem as the capital of Israel. Under any final settlement it is very clear that West Jerusalem will be the capital of Israel. That is where all of its political institutions are based. It is where the Israeli Parliament, the Knesset is based. It is where ambassadors present their credentials. There is a conversation to be had in the context of not sufficient progress towards a final settlement on a two state solution over the past few decades, it is absolutely appropriate for Australia to assess whether or not there is a better way. This is in the context of our former Australian Ambassador to Israel Dave Sharma making a very persuasive argument, spelling out how this could facilitate a resolution in the way that we have been seeking to pursue for some time. There is a process underway. Ultimately these will be decisions that will be considered and made by the NSC and by the Cabinet. As the Prime Minister has indicated, we are intending to finalise this process before Christmas.

LAURA JAYES: Can I ask you about migration now. Does the Government have plans to reduce the permanent migration intake from the current levels of a 190,000 a year?

MATHIAS CORMANN: No. What is described in the media today is just business as usual. Every year there is a process where the cap for the next year is assessed based on what the needs are in the Australian community, in the Australian economy. The current cap is 190,000. I hasten to add that is a cap. It is not a target. In recent times on the back of strict enforcement of compliance arrangements in particular, the number has been somewhat below that. It is the usual process. Every year, in the normal way, there is nothing unusual about it, we make judgements including based on relevant consultations with external and internal stakeholders on what the appropriate numbers should be for the next financial year. It is just … interrupted

KIERAN GILBERT: Do you feel that there is room to change the balance though to the extent that there is more skilled migrants as opposed to others?

MATHIAS CORMANN: There are more skilled migrants now. Again, that is nothing new … interrupted

KIERAN GILBERT: Increase that?

MATHIAS CORMANN: Skilled migration is the biggest component. The other major component obviously is family reunion. So it depends on how many people get married, how many Australians get married with people from overseas. The family reunion side of it, it is literally a demand driven component as long as people comply with all of the relevant requirements. 

LAURA JAYES: Also Senator are you saying that the Government really has no capacity to reduce that cohort, what you are talking about there to get in more skilled migrants?

MATHIAS CORMANN: The cap, the 190,000 people cap is quite a bit lower than it was, including under the period of the previous Labor government. So there is of course an assessment made on a year to year basis as to what the needs and the opportunities are for the Australian economy, the Australian community. And of course we prioritise skilled migration. Our immigration program is very much a major recruitment exercise where we do try to get the best and brightest and those with the best capacity to contribute to our future success to Australia. That has been the case for some time. We are focussed on making sure that we get more migrants into regional areas where there is a need for more people, more workers. We have also got to remember Australia is not uniform when it comes to the way migration dynamics play out. In Western Australia and South Australia there is a different need for more people compared to the circumstances in Sydney and Melbourne. These are all things always that we carefully assess on how we can best calibrate our policy and program responses to take account of that. 

KIERAN GILBERT: The Prime Minister has been in Singapore this week. Had high level talks including with the Chinese Premier Li Keqiang who described Mr Morrison becoming Prime Minister as a turning point in the bilateral relationship, given the ups and downs of recent times. And Scott Morrison says that we don’t need to take sides when it comes to the US and China. Can we keep everyone happy that is the question?

MATHIAS CORMANN: That has been the position that Australia has been in for a very long time. You would remember that in the period of the Howard Government, in the course of two days, we had visits to the Parliament of the President of the United States and the President of China at the time. We clearly have a very important and long standing economic and strategic relationship and partnership and alliance with the United States. We have got an incredibly important economic and trade relationship with China. Australia’s interest is to have a good relationship with everyone. In the end, we want to sell as many Australian products and services around the world, including and in particular into China. We want to have friendly relations and ensure that we continue to protect our safety and peaceful life here in Australia. So, of course it is in our interest to have good relationships with everyone.  

LAURA JAYES: Amid good economic headlines there is a warning from the RBA this week of a protracted downturn, their words not mine, in parts of the housing market. They are pointing to specifically the shift in lending to the banks. This is something the Government pushed in terms of APRA did it not?  

MATHIAS CORMANN: Actually what I have been reading in some of the commentary from the RBA is that they welcomed the fact that some of the heat had come out of parts of the housing market and that the housing market had somewhat rebalanced. What APRA has done as an independent statutory authority is to recalibrate some of its macro prudential measures in a very well targeted fashion, focusing on investor lending, having an impact on investor demand for housing. That is certainly true. If there is less finance going into the investor market, then that is one of the factors that has an impact on demand in the housing market. It is also fair to say, that unlike what had been the case that demand is no longer outpacing supply. That is also contributing to less heat in the housing market …interrupted

LAURA JAYES: Yeah sure, but are you concerned Mathias Cormann about the effect that the Royal Commission might be having in flowing through to the housing market? I mean there are calls from many sides asking for an extension for time that might be necessary on the Royal Commission. Is there a need in your view to contain this, to make sure it does not blow out to two and three years because of the effect we have seen it have already? 

MATHIAS CORMANN: We have put the Royal Commission in place. What we have said all the way through is that initially it was for a twelve month period and that it was up to the Commissioner to determine whether or not he needed more time. We will be guided by him. Now in terms of the impact of the Royal Commission into the broader financial market, well there was always going to be a level of impact. But you have got to look at this over the medium to long term. Obviously, having strong public confidence, including into the consumer protection elements of the regulatory system when it comes to the banks is important. Ultimately, moving forward, the banks are very important facilitators in our economy. We have got to ensure that they are strong and stable and competitive, but also that they treat their customers appropriately and that customers are appropriately protected in their interactions with the banks.

KIERAN GILBERT: Why is it okay to have a rebalancing of the market under this Government, but you are warning about a cataclysm if Labor wins and there is moderation of prices under their policy? 

MATHIAS CORMANN: What we have said is that we have taken very carefully calibrated measures. We have taken a scalpel to those parts of the market that were overheated. Whereas Labor taking the sledgehammer to the property market nationally, including to parts of the market where there is absolutely no overheating, would drive down property prices and increase rents in a way that is completely unwarranted. You have got to remember 70 per cent of Australians either own their own home or are paying off a mortgage on their own home. It would not be in their interests for an inappropriate increase in tax on families, which is what Labor is talking about, to further drive down property prices beyond what is happening in the market already. 

LAURA JAYES: Minister, I do not wish to verbal you, but you seem to be saying that a slight drop or at least a slowing down in the increases we have seen in the Sydney and Melbourne market are a good thing. We have seen a seven per cent decline in the Sydney market in the last year. What number is good? Is seven per cent about right, would you like to see that go further to ten or 15 per cent? Which is it? 

MATHIAS CORMANN: In the end it is about balance and what we are saying is…interrupted

LAURA JAYES: Where is the balance, that is what I am asking?

MATHIAS CORMANN: We believe that we have the appropriate balance and we believe that going further and increase the tax burden on aspirational families across Australia through the sorts of measures that Labor is putting forward, including about $200 billion in higher taxes would harm the economy, it would have a negative impact on investment, it would put jobs at risk and it would hurt families. 

LAURA JAYES: But Mathias Cormann, but what point do you look at the market at look at using the levers available to you when the market in Sydney starts to decline by ten or 15 per cent or further? 

MATHIAS CORMANN: I am not going to put a number on it. What I am going to say you is that it is widely recognised that the property markets in Sydney and Melbourne were overheated and that the measures that have been taken, including and in particular by APRA independently, in terms of their macro-prudential standards, have had the desired effect in a carefully targeted fashion. Labor taking the sledgehammer to property prices and the value of people’s homes is not going to be in the public interest. Essentially the measures that we have taken have worked and have had the desired effects. The measures that APRA has taken have had the desired effect in a carefully calibrated fashion. People across Australia who own their own home or who are paying off their mortgage do not want Labor to further drive down the value of their property. People who are looking to rent a home do not want Labor to drive up the cost of their rents.

KIERAN GILBERT: Finance Minister thanks for your time. Appreciate it.


Senator the Hon Mathias Cormann, Minister for Finance, Perth