Senator the Hon. Mathias Cormann
Minister for Finance and the Public Service
Leader of the Government in the Senate
Senator for Western Australia
CHRIS KENNY: Well our politicians have finally left Canberra as I mentioned earlier in the program. The final sitting week of the year is over. It has been one hell of a year. There’s been by-elections. There’s been scandals. There’s been resignations. There’s been a change of Prime Minister. There’s been a bonking ban. There has been all sorts of policy contested and all sorts of measures passed, but underlying all that it has been a pretty good year for the economy. Up until recently we have been seeing the economy out performing all the predictions. Let’s wrap up the year in politics with somebody who has been right at the heart of matters all year and in the past week. He is of course the Finance Minister, Senator Mathias Cormann. He joins me from Perth now. Thanks for speaking to us Mathias.
MATHIAS CORMANN: Good evening Chris. Good evening to your listeners.
CHRIS KENNY: You must be very pleased to have gotten out of Canberra for the rest of the year. It is done now for the year.
MATHIAS CORMANN: Not quite. We still have got our half yearly Budget update, which Josh Frydenberg and I will be delivering on 17 December. Still a bit of work to be done … interrupted
CHRIS KENNY: Oh there is plenty of work to be done. But you don’t have to sit in Parliament and deal with all the carryings on in the Senate and the House of Representatives any more. I was going to … interrupted
MATHIAS CORMANN: I love Canberra. I love Parliament.
CHRIS KENNY: I bet you do. I will go back to Parliament in a minute. But you mentioned the mid-year financial and economic outlook, that update, the Budget update that you will be delivering in a little while. Tell us what we can expect there. Is there any chance at all that it will show the Budget is already in surplus, or in balance?
MATHIAS CORMANN: I am not going to deliver the half yearly budget for you today on your show. The most recent update was at Budget time. What that showed was that we would return to balance in 2019-20 and that we would return to surplus by 2020-21 and remain in surplus all the way through the medium term. But if you look at the Monthly Financial Statements that I release every month, you can see that we are tracking about $9 billion better than projected at Budget time. There was a forecast deficit of about $14.5 billion at the time. There are always a lot of movements up and down in between Budgets and Budget updates based on what happens in the economy, based on what happens with demand for services across health, education, across the board essentially. We will update all of that. It will be released on 17 December.
CHRIS KENNY: I mentioned most of the economic news this year has been very good. Unemployment really at exceptional low levels around the country. Five per cent nationally. Jobs growth has been strong. Economic growth has been tracking well over three per cent, higher than the Budget forecast until this week. We got the National Accounts this week and they show economic growth dropping on an annual basis to below three per cent. Is this just an aberration or are you worried about this?
MATHIAS CORMANN: Our economic growth in Australia remains stronger than any of the G7 economies with the exception of the United States. We remain well above the OECD average. Australia continues to perform well. But it has got to be said that internationally in recent times, some of the downside risks that we identified at Budget time, for example in relation to global trade issues and the like, have materialised. Moving forward, we will be monitoring that very carefully. But we remain optimistic. Australia is well positioned. We have been very much pursuing a pro-growth agenda when it comes to tax, when it comes trade, when it comes to infrastructure. We will continue to press ahead with all of that.
CHRIS KENNY: Now a lot of people will tell you, a lot of economists now will say that five per cent unemployment is near enough to full employment these days. In New South Wales and Victoria unemployment is about 4.5 per cent. At the same time we have got company profits are very strong, yet we are not seeing wages growth kick in yet. When is that going to happen? When are we going to start seeing people getting real wages growth.
MATHIAS CORMANN: Wages growth has started to pick up. As excess supply in the labour market goes down and competition for the remaining labour force in the economy increases, you will see wages pick up by more. The alternative, if unemployment rises and there is less competition for workers you would expect wages to be lower than they otherwise would be. Just on the unemployment rate, I remember when I started in this job about five years ago, the Shadow Treasurer Chris Bowen gave a speech at the Press Club where he said we should be measured by whether or not we would be able to keep the unemployment rate below 6.25 per cent. I am sure that he did not give us that target because he thought it was easy to reach. The unemployment rate is at five per cent. I am still waiting for his letter … interrupted
CHRIS KENNY: Of congratulations.
MATHIAS CORMANN: … of congratulations, because we are performing so well against what he thought should be our benchmark for success or failure.
CHRIS KENNY: Look it is a great thing. As we all know there is nothing better for people in life than a job, than worthwhile employment so it is a great thing for the country to have such low unemployment. We really do underestimate how well we are doing in this country so often. But I think part of the reason we do underestimate that is because we have had such chaotic political scenes in Canberra and around the States for that matter. But let’s take you back to Canberra this week Mathias Cormann. There has been all sorts of shenanigans, all sorts of games. I would have suggested that Scott Morrison ended up at the end of the week and the Government with him doing a hell of a lot better than you expected. When you flew back from Buenos Aires with him Sunday night, into Monday morning, facing minority situation and Labor on the attack, you might have expected all sorts of things to go wrong, but you have got your encryption laws through the Parliament and also Scott Morrison has announced these new leadership rules, which I think most voters will find quite comforting.
MATHIAS CORMANN: We had a plan for this week as we have a plan for every week. You are quite right, mission accomplished at the end of this week. What we have been observing in Canberra in recent times is that Bill Shorten is getting more and more cocky. He thinks that he has already won the next election. He has been bragging about all of the things that he would be doing to us this week, but none of it has actually materialised …interrupted
CHRIS KENNY: Well look at some of the things he was talking about doing. One was he was looking to try and refer Peter Dutton off to the High Court on his eligibility issues. He failed at getting the vote to do that. He was also talking about blocking these encryption laws, these anti-terror laws. In the end he rolled over and allowed them through, which is a good thing I would have thought.
MATHIAS CORMANN: It is a very good thing. But you are right, he was playing political tactics, putting our border protection and the integrity of our borders at risk because he was lining up with the Greens to let the Greens back into writing Labor’s border protection policies, undermining our offshore processing arrangements. He held the changes to encryption laws hostage along the way. What we wanted to ensure this week is that in the lead up to Christmas, our law enforcement and intelligence agencies would be able to ensure that potential terrorists, child sex offenders and serious criminals cannot hide behind encrypted communications through Whatsapp and applications like that. They should not be able to operate beyond the reach of law enforcement and intelligence agencies. In the end, we passed amendments through the House of Representatives that were agreed on a bipartisan basis But for some reason Labor thought that they should play some more games in relation to all of that. In the end, to give them credit, they did the right thing in relation to that. The Prime Minister achieved his objective.
CHRIS KENNY: Indeed, I think the games they are playing on Nauru and medical evacuations, weakening our border protection regime are very, very risky, not just for Labor politically but more importantly, they are very risky in terms of Australia’s message on border security, on the strictness of our regime. Those laws are going to go back to Parliament next year aren’t they? There must be a strong chance that Labor and the Greens and independents might force this weakening of border security laws on the Government.
MATHIAS CORMANN: The Labor party keeps saying that is what they will do. I will just point out to everyone, the Morrison Government has been a minority Government from day one. Yet the Morrison Government continues to enjoy the confidence of the House of Representatives. The Labor party has not been able to get any of its games through the House of Representatives. We will continue to make the case to everyone in the Parliament as to why our border protection laws are important the way they are, including our offshore processing arrangements. There are a lot of lies being told about all of this. Where there are medical issues in relation to kids, those transfers happen now. There is no need for a change in legislation to deal with that. The legislation the Greens put forward with a number of crossbenchers, supported by the Labor party are very far reaching. They would be taking people from Manus, including those who have already been found not to be refugees. They would put the people smugglers back into business. The last time that the Labor party joined up with the Greens in relation to border protection policy, it had a devastating effect. 50,000 illegal arrivals, more than a thousand deaths at sea. We just do not want to go back there. We just do not want to go back there.
CHRIS KENNY: Just one final question Mathias Cormann, we are seeing new figures released this week at the climate summit in Poland showing that global carbon emissions will increase by three per cent in the coming year. In other words global emissions growth is twice the annual emissions of Australia. So why do we continue to do ourselves economic harm to reduce our emissions when it is obviously completely futile, given global emissions are rising by a much more vast amount than our cuts?
MATHIAS CORMANN: Our approach to emissions reductions in Australia is to do it in a way that is economically responsible. We have exceeded our emissions reduction target and commitments under Kyoto 1. We are on track to meet our emissions reduction target under Kyoto 2. We believe that we can meet the sensible emission reduction target that we have agreed to in Paris … interrupted
CHRIS KENNY: Please do not do any more. Please do not do any more in this space. It is costing us enough and it is not doing anything to help the planet.
MATHIAS CORMANN: …if I may. The Labor emission reduction target of 45 per cent is obviously excessive … interrupted
CHRIS KENNY: It is madness.
MATHIAS CORMANN: … pursuing things like a carbon tax. Essentially what that does it is shifting emissions from Australia to other parts of the world, where for the same amount of economic output, emissions would actually be higher. So we would be shifting jobs and economic activity overseas. The global emissions would actually grow by more than what emissions would be reduced in Australia. So we have consistently said that that is not a sensible way to go. We believe we have the balance right. That is the way that we are going to continue to approach it.
CHRIS KENNY: I look forward to hearing more about that debate in the lead up to the election as well. Thanks so much for joining us again Mathias Cormann.
MATHIAS CORMANN: Always good to talk to you Chris.