Senator the Hon. Mathias Cormann
Minister for Finance and the Public Service
Leader of the Government in the Senate
Senator for Western Australia
LUKE GRANT: These apparently are the welcome dividends of sound Budget management and the Government’s plan for a strong economy, so says the Treasurer and the Finance Minister. Earlier today the Mid-Year Economic and Fiscal Outlook hit and in the Government’s words it confirms the strength of the Australian economy and that the Budget will return to surplus as part of the Government’s plan to guarantee the essential services, which Australians rely on. Now the underlying cash balance, forecast to improve from a $14.5 billion deficit at Budget time to $5.2 billion in deficit for 2018-19. The Budget is now expected to reach a surplus of $4.1 billion in 2019-20. That will be the first surplus since the final Budget of the Howard Government back in 2007-08. As I said earlier, this is a pretty good day, or it should have been for the Government. Now the ALP have been unable to bring themselves to give the Government a pat on the back, no surprises there. But credit where credit is due, these numbers are pretty good.
Finance Minister is Senator Mathias Cormann and he is on the line. Senator thank you very much for your time.
MATHIAS CORMANN: Good afternoon Luke.
LUKE GRANT: Good to talk to you again. A big day for the Government, getting at least the books back in order after the other mob had a fair crack at them for six years.
MATHIAS CORMANN: When we came into Government in September 2013 we inherited a weakening economy, rising unemployment and a rapidly deteriorating Budget position. People might remember that in the final 11 weeks of Labor in Government, the Budget bottom line deteriorated by $3 billion a week, almost $33 billion over that 11 week period. So we did have a lot of work to do to turn that situation around. But today the economy is stronger. The economic growth outlook is better. Employment growth is stronger. The unemployment rate is well below where it was and where it was anticipated it would be at five per cent and our Budget is in a stronger and improving position. We are now confident that we will get the Budget back to surplus next year. Indeed over the forward estimates period for this Budget, the cumulative surpluses are now estimated at about $30 billion compared to about $15 billion at Budget time. They have just about doubled.
LUKE GRANT: Just to our listeners who hear about this good news, but do not feel it and that might be in the area of wage growth. How are we ferrying on that score and in cost of living, things like power, which I know the now Prime Minister made a bit of a noise about when he became Prime Minister, he was going to tackle that. So cost of living and in particular wages, is there any good news there for listeners of this show?
MATHIAS CORMANN: We have been very focused on making sure that Australians would either be able to keep their job or get into work. Indeed, more than 1.1 million new jobs have been created in the economy, which has really been quite extraordinary given some of the global economic headwinds we had to deal with and some of the difficult transitions in our economy in the context of the mining investment and construction boom winding down. So, the fact that people stayed in work and more people were able to get into work, that had somewhat of an impact in the past in relation to the level of wages growth. Higher wages growth in the past would have meant higher unemployment, but what we can say is that in recent times and as the unemployment rate continues to go down and the excess supply in the labour market goes down, wages growth has started to pick up and we certainly expect wages growth to continue to pick up in the years ahead. In relation to cost of living, inflation remains low, though in terms of electricity prices you are quite right, we are very focused on making sure that we do everything we can to help bring electricity prices down.
LUKE GRANT: The ALP has said this is all about what has happened elsewhere around the world and you can claim no credit. What do you say to them?
MATHIAS CORMANN: Well that is just ridiculous. When Labor was in Government we had the best Terms of Trade in 140 years. The price for iron ore peaked at about $180 dollars a tonne. When we came into Government it was at $120 a tonne and went down all the way to about the mid-forties. Currently, right now, the price of iron ore in the Budget is based on an assumption of $55 a tonne. So we are making more cautious and more prudent assumptions about what will happen to all of these key forecasting assumptions than Labor did, which is why over the last two years our Final Budget Outcome has been significantly better than what was estimated at Budget time. The problem with Labor, when they were in Government, they always assumed the best in terms of higher and higher revenues, taxed people more, spent all the money they thought they would raise and more and then of course when things turned sour they were not prepared for it. It has taken us two terms to fix the mess that Labor made to our Budget. As I say, the economy today is stronger, the outlook is better, employment growth is stronger, which means that young people in particular, have better opportunities to get a job, to build a career here in Australia and that all Australians have a better opportunity to pursue a career and achieve the best success that they can for themselves.
LUKE GRANT: I think there is something like $10billion or $15 billion set aside for commitments not yet announced. I am assuming therefore in the lead up to the next election, Minister, you will have more to say, perhaps on tax cuts?
MATHIAS CORMANN: We have already legislated significant income tax relief for hardworking families. In the Budget we announced about $144 billion worth of tax cuts for families, which we already have legislated. It is no secret that our instinct always is to lower the tax burden to strengthen economic growth, so that more jobs can be created and more Australians can get better opportunities to get ahead. Because of the way we have been able to manage the economy and the Budget, there is certainly scope for us to announce further decisions between now and the Budget.
LUKE GRANT: I assume, because it should be a good day for the Government, that when you and Josh finished what you had to say and you picked up your copy of New Idea and you read what was in there, you went back to the office and put a hole in the wall, did you?
MATHIAS CORMANN: I have to say I did not pick up a copy of New Idea. I did today hear some of the news reports, but that was the first I heard of it.
LUKE GRANT: I mean, for someone like you, we all know how much time you put into the job, how you are always available, so you take plenty of evil questions from people like me. You had a day out in the sunshine, there you were, Mathias Cormann, thinking how good is this, the world is a beautiful place again and along comes James Bond, I mean seriously, Minister, frankly it must deflate you like nothing else.
MATHIAS CORMANN: I am sad about what obviously is a complex personal circumstance. But in terms of my job, I just focus on doing the best I can, you know all of us in the Government keep focussing on the job at hand, which is to make decisions to put Australia on the strongest possible foundation for the future, to get the Budget on the strongest foundation and trajectory for the future, so we can continue to fund all of the important services Australians expect their Government to provide.
LUKE GRANT: I know you got to go, can you win the next election?
MATHIAS CORMANN: Of course we can. We know Bill Shorten thinks the election is already in the bag and a number of the senior press gallery journalists in Canberra certainly are, as they did back in 2001, already declaring the election result five months out. The truth is that between now and the election, the Australian people will look closely at the policy agenda of both major parties and they will form a judgement on what is best for the country and best for them and I am very confident that once people focus on the two competing agendas, that we will be absolutely competitive.
LUKE GRANT: Alright you are good man. Good to talk to you. If I can just say this, as I wish you a Merry Christmas, you are let down too often by people who should know better. Having said that, all the best, always good to talk.
MATHIAS CORMANN: Thank you and the same to you and your family. Best wishes for Christmas and the New Year.