Senator the Hon. Mathias Cormann
Minister for Finance and the Public Service
Leader of the Government in the Senate
Senator for Western Australia
MATT DORAN: As Dan Conifer mentioned in his story just then, this is not just a look at the Budget numbers in general, but there is no doubt that this is setting up the Government for its election battle in 2019 with Labor, trying to set the narrative that it is only the Coalition who can manage the economy appropriately. Joining me now to pour through some of these numbers is the Finance Minister Mathias Cormann. He joins us from our Sydney studios. Senator Cormann thank you for joining ABC News.
MATHIAS CORMANN: Good to be here.
MATT DORAN: A lot of the figures we have seen today have been, they are quite rosy and they have been based on things like strong commodity prices, the increase in taxation revenue, strong returns from the mining sector. How much of this good return that we have seen is based on your economic management and how much of it is just luck of the draw that we are seeing these strong conditions around the world?
MATHIAS CORMANN: Well I have to correct you there. Commodity prices are well below where they were when we came into Government. Commodity prices for our key commodity exports like iron ore and coal are well below where they were. They are higher than what we based our revenue forecasts on because we put in place prudent and cautious forecasting assumptions, unlike Labor. One of the problems with the Labor Party in Government was that they assumed high revenue, spent all the money they thought they would raise and more and of course when commodity prices went down, when the terms of trade went down, it took quite a while to stabilise the Budget. You have to remember the last 11 weeks between Labor's last Budget and the Pre-Election Economic and Fiscal Outlook in 2013, the Budget bottom-line deteriorated by $33 billion. We inherited a starting position where the iron ore price was at about $120 a tonne. The Budget assumption today is for an iron ore price of about $55 a tonne. But you are right, overall, what has come in in terms of nominal growth, in terms of our terms of trade, is better than what we had based our revenue forecasts on, but that is just a reflection of our prudent fiscal management.
MATT DORAN: If we do look at those figures and look at some of the projections you have put in place for growing surpluses and for strengthening economy, some of it can also be based on assumptions on things like wage growth, that might be better than will actually be resulting. We have seen wage growth continually statement in the economy. Is there a risk that these rosy forecasts are not actually going to amount to anything?
MATHIAS CORMANN: I do not accept that they are rosy forecasts. If you look at our track record in recent years, our Budget outcomes have been better than what had been anticipated at Budget time. The most recent actual Budget outcome for 2017-18, employment growth was forecast at 1.5 per cent, but came in at 2.7 per cent and on the back of increased personal income tax revenue and lower than anticipated welfare payments, our Budget bottom-line position improved by $19.3 billion compared to forecast, on top of a $4 billion improvement the previous year. In this Budget our assumptions are reasonable. They are broadly in line with the economic assumptions of independent organisations like the Reserve Bank, international institutions like the International Monetary Fund and the OECD. Our assumptions are prudent. They are appropriate and we stand by them.
MATT DORAN: If we look at the rhetoric that the Government has used right throughout its time in Government, through Tony Abbott, through Malcolm Turnbull, through Scott Morrison, there is a continual reference to inheriting a sorry state of affairs from Labor and improving the deficit, improving Budget surpluses. But in that same time, the debt has skyrocketed. We have gone from $159.5 billion in 2013, when you took office to this year, $351.94 billion. How can you convince the Australian public that that is good management, when those debt figures have gone through the roof?
MATHIAS CORMANN: We inherited a weakening economy, rising unemployment and a rapidly deteriorating Budget position…interrupted.
MATT DORAN: You have also had five years to turn it around.
MATHIAS CORMANN: … And we have been turning it around. It has taken us two terms to turn around the fiscal mess that Labor left behind. But you can only start to reduce and to pay off debt when you get yourself back into surplus. It has taken us all this time to get back into surplus. We are about to get back into surplus and the surplus over the forward estimates, the cumulative surplus over the forward estimates is now projected to be at about $30 billion, about double what was anticipated at Budget time seven months ago. That compares to the $123 billion worth over cumulative deficits over the forward estimates in Labor's last Budget and the $240 billion worth of cumulative deficits during Labor’s six years in Government…interrupted.
MATT DORAN: But specifically on the issue of debt though, there is no denying that that has skyrocketed under the Coalition's governance. Are you just kicking it down the road for the risk of or for the benefit of trying to present a healthier surplus number?
MATHIAS CORMANN: Firstly, Government net debt and Government debt overall is lower than it would have been if we had not changed the deteriorating trajectory that we inherited from Labor. The Government debt position would be worse now. It is better than what it would have been. Indeed, if you look at the situation that we are in now as a result of our work, Government net debt as a share of GDP peaked last financial year. It is now projected to go down to 1.5 per cent over the medium term. That is an incredibly strong performance. Instead of the $118 billion worth of Government debt at the end of the medium term was projected in the Budget time seven months ago, we are now on track to reduce Government net debt to $48.4 billion. That is just as a result of the improvements over the last seven months, let alone all of the improvements that we were able to legislate and bank to the bottom line over the last five years.
MATT DORAN: Everyone is looking at this document and scoping out the lines that say decisions made but yet to be announced. In those lines of the MYEFO document include $2.45 billion in forgone revenue in the next financial year, which many are speculating will come in a form of tax cuts. There is $420 million this financial year and $738 million next financial year in additional expenditure. In other words, a war chest for you to take to the next election, to announce measures in the lead up to that during the campaign. Labor says that having these huge figures in the document suggests that you will not stick around until the April 2 proposed Budget, that you will call an early election. Can you guarantee to the Australian people that we will be going to the polls in May?
MATHIAS CORMANN: Yes, we will go to the polls in May. Labor has been predicting an election for the last 18 months. We still have a lot of work to do. We continue to focus on making sure our economy is strong, that jobs are being created in the economy and that we continue to put the Budget on a strong and sustainable foundation and trajectory for the future. It is no secret that as a Government we are committed to keeping taxes low, that we have imposed a 23.9 per cent tax as a share of GDP cap on ourselves, as part of our fiscal discipline. These numbers that you mention are largely a reflection of that. As is always the case, in between Budget updates and Budgets, in between various updates, there will be announcements along the way in relation to all of these decisions at the appropriate time.
MATT DORAN: On one issue that has taken some of the attention away from your mid-year Budget update today, the resignation of Andrew Broad from his position of Assistant Minister to the Deputy Prime Minister. What do you know of the allegations that have been made about Mr. Broad and how much of a distraction is this when you are trying to sell your economic agenda?
MATHIAS CORMANN: I am not getting distracted. I was not aware until I have seen some reports today. But I have been entirely focused on presenting the half-yearly Budget update together with the Treasurer…interrupted.
MATT DORAN: On face value, how concerning are these allegations?
MATHIAS CORMANN: I am not going to provide commentary on face value. I am not aware of the facts. I have been focusing on my job, which today is to present alongside my good friend and valued colleague, the Treasurer, Josh Frydenberg, the half-yearly Budget update for the Australian Government.
MATT DORAN: Mathias Cormann in Sydney, thank you very much for your time.
MATHIAS CORMANN: Always good to talk to you.